[ Back ] [ Bottom ]
91_SB1231enr
SB1231 Enrolled LRB9106284WHdv
1 AN ACT in relation to secured transactions.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Uniform Commercial Code is amended by
5 changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106,
6 9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115,
7 9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1,
8 9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305,
9 9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308,
10 9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316,
11 9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405,
12 9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504,
13 9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections
14 9-209, 9-210, 9-315.01, 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:
SB1231 Enrolled -2- LRB9106284WHdv
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
SB1231 Enrolled -3- LRB9106284WHdv
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:
SB1231 Enrolled -4- LRB9106284WHdv
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
SB1231 Enrolled -5- LRB9106284WHdv
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
SB1231 Enrolled -6- LRB9106284WHdv
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
SB1231 Enrolled -7- LRB9106284WHdv
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;
SB1231 Enrolled -8- LRB9106284WHdv
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
SB1231 Enrolled -9- LRB9106284WHdv
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
SB1231 Enrolled -10- LRB9106284WHdv
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,
SB1231 Enrolled -11- LRB9106284WHdv
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
SB1231 Enrolled -12- LRB9106284WHdv
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.
SB1231 Enrolled -13- LRB9106284WHdv
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
SB1231 Enrolled -14- LRB9106284WHdv
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
SB1231 Enrolled -15- LRB9106284WHdv
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;
SB1231 Enrolled -16- LRB9106284WHdv
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
SB1231 Enrolled -17- LRB9106284WHdv
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;
SB1231 Enrolled -18- LRB9106284WHdv
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
SB1231 Enrolled -19- LRB9106284WHdv
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.
SB1231 Enrolled -20- LRB9106284WHdv
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.
SB1231 Enrolled -21- LRB9106284WHdv
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;
SB1231 Enrolled -22- LRB9106284WHdv
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;
SB1231 Enrolled -23- LRB9106284WHdv
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
SB1231 Enrolled -24- LRB9106284WHdv
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,
SB1231 Enrolled -25- LRB9106284WHdv
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,
SB1231 Enrolled -26- LRB9106284WHdv
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).
SB1231 Enrolled -27- LRB9106284WHdv
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.
SB1231 Enrolled -28- LRB9106284WHdv
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).
SB1231 Enrolled -29- LRB9106284WHdv
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.
SB1231 Enrolled -30- LRB9106284WHdv
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
SB1231 Enrolled -31- LRB9106284WHdv
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
SB1231 Enrolled -32- LRB9106284WHdv
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
SB1231 Enrolled -33- LRB9106284WHdv
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
SB1231 Enrolled -34- LRB9106284WHdv
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;
SB1231 Enrolled -35- LRB9106284WHdv
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.
SB1231 Enrolled -36- LRB9106284WHdv
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.
SB1231 Enrolled -37- LRB9106284WHdv
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
SB1231 Enrolled -38- LRB9106284WHdv
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
SB1231 Enrolled -39- LRB9106284WHdv
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
SB1231 Enrolled -40- LRB9106284WHdv
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
SB1231 Enrolled -41- LRB9106284WHdv
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;
SB1231 Enrolled -42- LRB9106284WHdv
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;
SB1231 Enrolled -43- LRB9106284WHdv
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;
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;
10 (13) a transfer by a government or governmental
11 subdivision or agency;
12 (14) a claim or a right to receive compensation for
13 injuries or sickness as described in Section 104(a)(1) or
14 (2) of Title 26 of the United States Code, as amended
15 from time to time; or
16 (15) a claim or right to receive benefits under a
17 special needs trust as described in Section 1396p(d)(4)
18 of Title 42 of the United States Code, as amended from
19 time to time. Classification of goods; "consumer goods";
20 "equipment"; "farm products"; "inventory". Goods are
21 (1) "consumer goods" if they are used or bought for use
22 primarily for personal, family or household purposes;
23 (2) "equipment" if they are used or bought for use
24 primarily in business (including farming or a profession) or
25 by a debtor who is a non-profit organization or a
26 governmental subdivision or agency or if the goods are not
27 included in the definitions of inventory, farm products or
28 consumer goods;
29 (3) "farm products" if they are crops or livestock or
30 supplies used or produced in farming operations or if they
31 are products of crops or livestock in their unmanufactured
32 states (such as ginned cotton, wool-clip, maple syrup, milk
33 and eggs) or if they are aquatic products as defined in the
34 Aquaculture Development Act, and if they are in the
SB1231 Enrolled -44- LRB9106284WHdv
1 possession of a debtor engaged in raising, fattening, grazing
2 or other farming or aquacultural operations. If goods are
3 farm products they are neither equipment nor inventory;
4 (4) "inventory" if they are held by a person who holds
5 them for sale or lease or to be furnished under contracts of
6 service or if he has so furnished them, or if they are raw
7 materials, work in process or materials used or consumed in a
8 business. Inventory of a person is not to be classified as
9 his equipment.
10 (Source: P.A. 85-856.)
11 (810 ILCS 5/9-110) (from Ch. 26, par. 9-110)
12 Sec. 9-110. Security interests arising under Article 2
13 or 2A. A security interest arising under Section 2-401,
14 2-505, 2-711(3), or 2A-508(5) is subject to this Article.
15 However, until the debtor obtains possession of the goods:
16 (1) the security interest is enforceable, even if
17 Section 9-203(b)(3) has not been satisfied;
18 (2) filing is not required to perfect the security
19 interest;
20 (3) the rights of the secured party after default
21 by the debtor are governed by Article 2 or 2A; and
22 (4) the security interest has priority over a
23 conflicting security interest created by the debtor.
24 Sufficiency of description.
25 For the purposes of this Article any description of
26 personal property or real estate is sufficient whether or not
27 it is specific if it reasonably identifies what is described.
28 (Source: Laws 1961, p. 2101.)
29 (810 ILCS 5/9-112) (from Ch. 26, par. 9-112)
30 Sec. 9-112. (Blank). Where collateral is not owned by
31 debtor.
32 Unless otherwise agreed, when a secured party knows that
SB1231 Enrolled -45- LRB9106284WHdv
1 collateral is owned by a person who is not the debtor, the
2 owner of the collateral is entitled to receive from the
3 secured party any surplus under Section 9-- 502(2) or under
4 Section 9--504(1), and is not liable for the debt or for any
5 deficiency after resale, and he has the same right as the
6 debtor
7 (a) to receive statements under Section 9--208;
8 (b) to receive notice of and to object to a secured
9 party's proposal to retain the collateral in satisfaction of
10 the indebtedness under Section 9--505;
11 (c) to redeem the collateral under Section 9--506;
12 (d) to obtain injunctive or other relief under
13 Section 9--507(1); and
14 (e) to recover losses caused to him under Section
15 9--208(2).
16 (Source: Laws 1961, 1st S.S., p. 7.)
17 (810 ILCS 5/9-113) (from Ch. 26, par. 9-113)
18 Sec. 9-113. (Blank). Security interests arising under
19 Article on Sales or under Article on Leases.
20 A security interest arising solely under the Article on
21 Sales (Article 2) or the Article on Leases (Article 2A) is
22 subject to the provisions of this Article except that to the
23 extent that and so long as the debtor does not have or does
24 not lawfully obtain possession of the goods
25 (a) no security agreement is necessary to make the
26 security interest enforceable; and
27 (b) no filing is required to perfect the security
28 interest; and
29 (c) the rights of the secured party on default by
30 the debtor are governed (i) by the Article on Sales
31 (Article 2) in the case of a security interest arising
32 solely under such Article or (ii) by the Article on
33 Leases (Article 2A) in the case of a security interest
SB1231 Enrolled -46- LRB9106284WHdv
1 arising solely under such Article.
2 (Source: P.A. 87-493.)
3 (810 ILCS 5/9-114) (from Ch. 26, par. 9-114)
4 Sec. 9-114. (Blank). Consignment.
5 (1) A person who delivers goods under a consignment
6 which is not a security interest and who would be required to
7 file under this Article by paragraph (3) (c) of Section 2-326
8 has priority over a secured party who is or becomes a
9 creditor of the consignee and who would have a perfected
10 security interest in the goods if they were the property of
11 the consignee, and also has priority with respect to
12 identifiable cash proceeds received on or before delivery of
13 the goods to a buyer, if
14 (a) the consignor complies with the filing provision of
15 the Article on Sales with respect to consignments (paragraph
16 (3) (c) of Section 2-326 before the consignee receives
17 possession of the goods; and
18 (b) the consignor gives notification in writing to the
19 holder of the security interest if the holder has filed a
20 financing statement covering the same types of goods before
21 the date of the filing made by the consignor; and
22 (c) the holder of the security interest receives the
23 notification within 5 years before the consignee receives
24 possession of the goods; and
25 (d) the notification states that the consignor expects
26 to deliver goods on consignment to the consignee, describing
27 the goods by item or type.
28 (2) In the case of a consignment which is not a security
29 interest and in which the requirements of the preceding
30 subsection have not been met, a person who delivers goods to
31 another is subordinate to a person who would have a perfected
32 security interest in the goods if they were the property of
33 the debtor.
SB1231 Enrolled -47- LRB9106284WHdv
1 (Source: P. A. 78-238.)
2 (810 ILCS 5/9-115) (from Ch. 26, par. 9-115)
3 Sec. 9-115. (Blank). Investment property.
4 (1) In this Article:
5 (a) "Commodity account" means an account maintained
6 by a commodity intermediary in which a commodity contract
7 is carried for a commodity customer.
8 (b) "Commodity contract" means a commodity futures
9 contract, an option on a commodity futures contract, a
10 commodity option, or other contract that, in each case,
11 is:
12 (i) traded on or subject to the rules of a
13 board of trade that has been designated as a
14 contract market for such a contract pursuant to the
15 federal commodities laws; or
16 (ii) traded on a foreign commodity board of
17 trade, exchange, or market, and is carried on the
18 books of a commodity intermediary for a commodity
19 customer.
20 (c) "Commodity customer" means a person for whom a
21 commodity intermediary carries a commodity contract on
22 its books.
23 (d) "Commodity intermediary" means:
24 (i) a person who is registered as a futures
25 commission merchant under the federal commodities
26 laws; or
27 (ii) a person who in the ordinary course of
28 its business provides clearance or settlement
29 services for a board of trade that has been
30 designated as a contract market pursuant to the
31 federal commodities laws.
32 (e) "Control" with respect to a certificated
33 security, uncertificated security, or security
SB1231 Enrolled -48- LRB9106284WHdv
1 entitlement has the meaning specified in Section 8-106.
2 A secured party has control over a commodity contract if
3 by agreement among the commodity customer, the commodity
4 intermediary, and the secured party, the commodity
5 intermediary has agreed that it will apply any value
6 distributed on account of the commodity contract as
7 directed by the secured party without further consent by
8 the commodity customer. If a commodity customer grants a
9 security interest in a commodity contract to its own
10 commodity intermediary, the commodity intermediary as
11 secured party has control. A secured party has control
12 over a securities account or commodity account if the
13 secured party has control over all security entitlements
14 or commodity contracts carried in the securities account
15 or commodity account.
16 (f) "Investment property" means:
17 (i) a security, whether certificated or
18 uncertificated;
19 (ii) a security entitlement;
20 (iii) a securities account;
21 (iv) a commodity contract; or
22 (v) a commodity account.
23 (2) Attachment or perfection of a security interest in a
24 securities account is also attachment or perfection of a
25 security interest in all security entitlements carried in the
26 securities account. Attachment or perfection of a security
27 interest in a commodity account is also attachment or
28 perfection of a security interest in all commodity contracts
29 carried in the commodity account.
30 (3) A description of collateral in a security agreement
31 or financing statement is sufficient to create or perfect a
32 security interest in a certificated security, uncertificated
33 security, security entitlement, securities account, commodity
34 contract, or commodity account whether it describes the
SB1231 Enrolled -49- LRB9106284WHdv
1 collateral by those terms, or as investment property, or by
2 description of the underlying security, financial asset, or
3 commodity contract. A description of investment property
4 collateral in a security agreement or financing statement is
5 sufficient if it identifies the collateral by specific
6 listing, by category, by quantity, by a computational or
7 allocational formula or procedure, or by any other method, if
8 the identity of the collateral is objectively determinable.
9 (4) Perfection of a security interest in investment
10 property is governed by the following rules:
11 (a) A security interest in investment property may
12 be perfected by control.
13 (b) Except as otherwise provided in paragraphs (c)
14 and (d), a security interest in investment property may
15 be perfected by filing.
16 (c) If the debtor is a broker or securities
17 intermediary a security interest in investment property
18 is perfected when it attaches. The filing of a financing
19 statement with respect to a security interest in
20 investment property granted by a broker or securities
21 intermediary has no effect for purposes of perfection or
22 priority with respect to that security interest.
23 (d) If a debtor is a commodity intermediary, a
24 security interest in a commodity contract or a commodity
25 account is perfected when it attaches. The filing of a
26 financing statement with respect to a security interest
27 in a commodity contract or a commodity account granted by
28 a commodity intermediary has no effect for purposes of
29 perfection or priority with respect to that security
30 interest.
31 (5) Priority between conflicting security interests in
32 the same investment property is governed by the following
33 rules:
34 (a) A security interest of a secured party who has
SB1231 Enrolled -50- LRB9106284WHdv
1 control over investment property has priority over a
2 security interest of a secured party who does not have
3 control over the investment property.
4 (b) Except as otherwise provided in paragraphs (c)
5 and (d), conflicting security interests of secured
6 parties each of whom has control rank equally.
7 (c) Except as otherwise agreed by the securities
8 intermediary, a security interest in a security
9 entitlement or a securities account granted to the
10 debtor's own securities intermediary has priority over
11 any security interest granted by the debtor to another
12 secured party.
13 (d) Except as otherwise agreed by the commodity
14 intermediary, a security interest in a commodity contract
15 or a commodity account granted to the debtor's own
16 commodity intermediary has priority over any security
17 interest granted by the debtor to another secured party.
18 (e) Conflicting security interests granted by a
19 broker, a securities intermediary, or a commodity
20 intermediary which are perfected without control rank
21 equally.
22 (f) In all other cases, priority between
23 conflicting security interests in investment property is
24 governed by Section 9-312(5), (6), and (7). Section
25 9-312(4) does not apply to investment property.
26 (6) If a security certificate in registered form is
27 delivered to a secured party pursuant to agreement, a written
28 security agreement is not required for attachment or
29 enforceability of the security interest, delivery suffices
30 for perfection of the security interest, and the security
31 interest has priority over a conflicting security interest
32 perfected by means other than control, even if a necessary
33 indorsement is lacking.
34 (Source: P.A. 89-364, eff. 1-1-96.)
SB1231 Enrolled -51- LRB9106284WHdv
1 (810 ILCS 5/9-116)
2 Sec. 9-116. (Blank). Security interest arising in
3 purchase or delivery of financial asset.
4 (1) If a person buys a financial asset through a
5 securities intermediary in a transaction in which the buyer
6 is obligated to pay the purchase price to the securities
7 intermediary at the time of the purchase, and the securities
8 intermediary credits the financial asset to the buyer's
9 securities account before the buyer pays the securities
10 intermediary, the securities intermediary has a security
11 interest in the buyer's security entitlement securing the
12 buyer's obligation to pay. A security agreement is not
13 required for attachment or enforceability of the security
14 interest, and the security interest is automatically
15 perfected.
16 (2) If a certificated security, or other financial asset
17 represented by a writing which in the ordinary course of
18 business is transferred by delivery with any necessary
19 indorsement or assignment is delivered pursuant to an
20 agreement between persons in the business of dealing with
21 such securities or financial assets and the agreement calls
22 for delivery versus payment, the person delivering the
23 certificate or other financial asset has a security interest
24 in the certificated security or other financial asset
25 securing the seller's right to receive payment. A security
26 agreement is not required for attachment or enforceability of
27 the security interest, and the security interest is
28 automatically perfected.
29 (Source: P.A. 89-364, eff. 1-1-96.)
30 (810 ILCS 5/9-150)
31 Sec. 9-150. (Blank). Secretary of State; rules. The
32 Secretary of State, under the Illinois Administrative
33 Procedure Act, may adopt rules necessary to administer the
SB1231 Enrolled -52- LRB9106284WHdv
1 Secretary of State's responsibilities under this Article.
2 (Source: P.A. 89-364, eff. 1-1-96.)
3 (810 ILCS 5/Art. 9, Part 2 heading)
4 PART 2. EFFECTIVENESS OF SECURITY AGREEMENT;
5 ATTACHMENT OF SECURITY INTEREST;
6 RIGHTS OF PARTIES TO SECURITY AGREEMENT
7 VALIDITY OF SECURITY AGREEMENT
8 AND RIGHTS OF PARTIES THERETO
9 (810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new)
10 SUBPART 1. EFFECTIVENESS AND ATTACHMENT
11 (810 ILCS 5/9-201) (from Ch. 26, par. 9-201)
12 Sec. 9-201. General effectiveness of security agreement.
13 (a) General effectiveness. Except as otherwise provided
14 in the Uniform Commercial Code, a security agreement is
15 effective according to its terms between the parties, against
16 purchasers of the collateral, and against creditors.
17 (b) Applicable consumer laws and other law. A
18 transaction subject to this Article is subject to any
19 applicable rule of law, statute, or regulation which
20 establishes a different rule for consumers, including:
21 (1) the Retail Installment Sales Act;
22 (2) the Motor Vehicle Retail Installment Sales Act;
23 (3) Article II of Chapter 3 of the Illinois Vehicle
24 Code;
25 (4) Article IIIB of the Boat Registration and
26 Safety Act;
27 (5) the Pawnbroker Regulation Act;
28 (6) the Motor Vehicle Leasing Act;
29 (7) the Consumer Installment Loan Act; and
30 (8) the Consumer Deposit Security Act of 1987.
31 (c) Other applicable law controls. In case of conflict
SB1231 Enrolled -53- LRB9106284WHdv
1 between this Article and a rule of law, statute, or
2 regulation described in subsection (b), the rule of law,
3 statute, or regulation controls. Failure to comply with a
4 rule of law, statute, or regulation described in subsection
5 (b) has only the effect such rule of law, statute, or
6 regulation specifies.
7 (d) Further deference to other applicable law. This
8 Article does not:
9 (1) validate any rate, charge, agreement, or
10 practice that violates a rule of law, statute, or
11 regulation described in subsection (b); or
12 (2) extend the application of the rule of law,
13 statute, or regulation to a transaction not otherwise
14 subject to it. General validity of security agreement.
15 Except as otherwise provided by this Act a security
16 agreement is effective according to its terms between the
17 parties, against purchasers of the collateral and against
18 creditors. Nothing in this Article validates any charge or
19 practice illegal under any statute or regulation thereunder
20 governing usury, small loans, retail installment sales, or
21 the like, or extends the application of any such statute or
22 regulation to any transaction not otherwise subject thereto.
23 (Source: Laws 1961, p. 2101.)
24 (810 ILCS 5/9-202) (from Ch. 26, par. 9-202)
25 Sec. 9-202. Title to collateral immaterial. Except as
26 otherwise provided with respect to consignments or sales of
27 accounts, chattel paper, payment intangibles, or promissory
28 notes, the provisions of this Article with regard to rights
29 and obligations apply whether title to collateral is in the
30 secured party or the debtor.
31 Each provision of this Article with regard to rights,
32 obligations and remedies applies whether title to collateral
33 is in the secured party or in the debtor.
SB1231 Enrolled -54- LRB9106284WHdv
1 (Source: Laws 1961, p. 2101.)
2 (810 ILCS 5/9-203) (from Ch. 26, par. 9-203)
3 Sec. 9-203. Attachment and enforceability of security
4 interest; proceeds; supporting obligations; formal
5 requisites.
6 (a) Attachment. A security interest attaches to
7 collateral when it becomes enforceable against the debtor
8 with respect to the collateral, unless an agreement expressly
9 postpones the time of attachment.
10 (b) Enforceability. Except as otherwise provided in
11 subsections (c) through (i), a security interest is
12 enforceable against the debtor and third parties with respect
13 to the collateral only if:
14 (1) value has been given;
15 (2) the debtor has rights in the collateral or the
16 power to transfer rights in the collateral to a secured
17 party; and
18 (3) one of the following conditions is met:
19 (A) the debtor has authenticated a security
20 agreement that provides a description of the
21 collateral and, if the security interest covers
22 timber to be cut, a description of the land
23 concerned;
24 (B) the collateral is not a certificated
25 security and is in the possession of the secured
26 party under Section 9-313 pursuant to the debtor's
27 security agreement;
28 (C) the collateral is a certificated security
29 in registered form and the security certificate has
30 been delivered to the secured party under Section
31 8-301 pursuant to the debtor's security agreement;
32 or
33 (D) the collateral is deposit accounts,
SB1231 Enrolled -55- LRB9106284WHdv
1 electronic chattel paper, investment property, or
2 letter-of-credit rights, and the secured party has
3 control under Section 9-104, 9-105, 9-106, or 9-107
4 pursuant to the debtor's security agreement.
5 (c) Other UCC provisions. Subsection (b) is subject to
6 Section 4-210 on the security interest of a collecting bank,
7 Section 5-118 on the security interest of a letter-of-credit
8 issuer or nominated person, Section 9-110 on a security
9 interest arising under Article 2 or 2A, and Section 9-206 on
10 security interests in investment property.
11 (d) When person becomes bound by another person's
12 security agreement. A person becomes bound as debtor by a
13 security agreement entered into by another person if, by
14 operation of law other than this Article or by contract:
15 (1) the security agreement becomes effective to
16 create a security interest in the person's property; or
17 (2) the person becomes generally obligated for the
18 obligations of the other person, including the obligation
19 secured under the security agreement, and acquires or
20 succeeds to all or substantially all of the assets of the
21 other person.
22 (e) Effect of new debtor becoming bound. If a new
23 debtor becomes bound as debtor by a security agreement
24 entered into by another person:
25 (1) the agreement satisfies subsection (b)(3) with
26 respect to existing or after-acquired property of the new
27 debtor to the extent the property is described in the
28 agreement; and
29 (2) another agreement is not necessary to make a
30 security interest in the property enforceable.
31 (f) Proceeds and supporting obligations. The attachment
32 of a security interest in collateral gives the secured party
33 the rights to proceeds provided by Section 9-315 and is also
34 attachment of a security interest in a supporting obligation
SB1231 Enrolled -56- LRB9106284WHdv
1 for the collateral.
2 (g) Lien securing right to payment. The attachment of a
3 security interest in a right to payment or performance
4 secured by a security interest or other lien on personal or
5 real property is also attachment of a security interest in
6 the security interest, mortgage, or other lien.
7 (h) Security entitlement carried in securities account.
8 The attachment of a security interest in a securities account
9 is also attachment of a security interest in the security
10 entitlements carried in the securities account.
11 (i) Commodity contracts carried in commodity account.
12 The attachment of a security interest in a commodity account
13 is also attachment of a security interest in the commodity
14 contracts carried in the commodity account. Attachment and
15 Enforceability of Security Interest; Proceeds; Requisites.
16 (1) Subject to the provisions of Section 4-208 on the
17 security interest of a collecting bank, Sections 9-115 and
18 9-116 on security interests in investment property, and
19 Section 9-113 on a security interest arising under the
20 Article on Sales, a security interest is not enforceable
21 against the debtor or third parties with respect to the
22 collateral and does not attach unless:
23 (a) the collateral is in the possession of the
24 secured party pursuant to agreement, the collateral is
25 investment property and the secured party has control
26 pursuant to agreement, or the debtor has signed a
27 security agreement which contains a description of the
28 collateral and, in addition, a description of the land
29 when the security agreement covers (i) crops growing or
30 to be grown and is signed by the debtor prior to January
31 1, 1996, or (ii) timber to be cut;
32 (b) value has been given; and
33 (c) the debtor has rights in the collateral.
34 (2) A security interest attaches when it becomes
SB1231 Enrolled -57- LRB9106284WHdv
1 enforceable against the debtor with respect to the
2 collateral. Attachment occurs as soon as all of the events
3 specified in subsection (1) have taken place unless explicit
4 agreement postpones the time of attaching.
5 (3) Unless otherwise agreed a security agreement gives
6 the secured party the rights to proceeds provided by Section
7 9-306.
8 (4) A transaction, although subject to this Article, is
9 also subject to the "Consumer Finance Act", approved July 10,
10 1935, as now or hereafter amended; the "Retail Installment
11 Sales Act", approved July 28, 1967, as now or hereafter
12 amended; the "Motor Vehicle Retail Installment Sales Act",
13 approved July 28, 1967, as now or hereafter amended; Article
14 II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of
15 the "Boat Registration and Safety Act", as now or hereafter
16 amended; and "An Act for the regulation of pawnbrokers, and
17 repealing a certain act therein named", approved June 9,
18 1909, as now or hereafter amended; and in the case of
19 conflict between the provisions of this Article and any such
20 statute, the provisions of such statute control. Failure to
21 comply with any applicable statute has only the effect which
22 is specified therein.
23 (Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96;
24 89-626, eff. 8-9-96.)
25 (810 ILCS 5/9-204) (from Ch. 26, par. 9-204)
26 Sec. 9-204. After-acquired property; future advances.
27 (a) After-acquired collateral. Except as otherwise
28 provided in subsection (b), a security agreement may create
29 or provide for a security interest in after-acquired
30 collateral.
31 (b) When after-acquired property clause not effective.
32 A security interest does not attach under a term constituting
33 an after-acquired property clause to:
SB1231 Enrolled -58- LRB9106284WHdv
1 (1) consumer goods, other than an accession when
2 given as additional security, unless the debtor acquires
3 rights in them within 10 days after the secured party
4 gives value; or
5 (2) a commercial tort claim.
6 (c) Future advances and other value. A security
7 agreement may provide that collateral secures, or that
8 accounts, chattel paper, payment intangibles, or promissory
9 notes are sold in connection with, future advances or other
10 value, whether or not the advances or value are given
11 pursuant to commitment. After-acquired property; future
12 advances.
13 (1) Except as provided in Subsection (2), a security
14 agreement may provide that any obligations covered by the
15 security agreement are to be secured by after-acquired
16 collateral.
17 (2) No security interest attaches under an
18 after-acquired property clause to consumer goods other than
19 accessions (Section 9-314) when given as additional security
20 unless the debtor acquires rights in them within 10 days
21 after the secured party gives value.
22 (3) Obligations covered by a security agreement may
23 include future advances or other value whether or not the
24 advances or value are given pursuant to commitment
25 (subsection (1) of Section 9-105).
26 (Source: P. A. 77-2810.)
27 (810 ILCS 5/9-205) (from Ch. 26, par. 9-205)
28 Sec. 9-205. Use or disposition of collateral
29 permissible.
30 (a) When security interest not invalid or fraudulent. A
31 security interest is not invalid or fraudulent against
32 creditors solely because:
33 (1) the debtor has the right or ability to:
SB1231 Enrolled -59- LRB9106284WHdv
1 (A) use, commingle, or dispose of all or part
2 of the collateral, including returned or repossessed
3 goods;
4 (B) collect, compromise, enforce, or otherwise
5 deal with collateral;
6 (C) accept the return of collateral or make
7 repossessions; or
8 (D) use, commingle, or dispose of proceeds; or
9 (2) the secured party fails to require the debtor
10 to account for proceeds or replace collateral.
11 (b) Requirements of possession not relaxed. This
12 Section does not relax the requirements of possession if
13 attachment, perfection, or enforcement of a security interest
14 depends upon possession of the collateral by the secured
15 party. Use or Disposition of Collateral Without Accounting
16 Permissible.
17 A security interest is not invalid or fraudulent against
18 creditors by reason of liberty in the debtor to use,
19 commingle or dispose of all or part of the collateral
20 (including returned or repossessed goods) or to collect or
21 compromise accounts or chattel paper, or to accept the return
22 of goods or make repossessions, or to use, commingle or
23 dispose of proceeds, or by reason of the failure of the
24 secured party to require the debtor to account for proceeds
25 or replace collateral. This Section does not relax the
26 requirements of possession where perfection of a security
27 interest depends upon possession of the collateral by the
28 secured party or by a bailee.
29 (Source: P.A. 77-2810.)
30 (810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1)
31 Sec. 9-205.1. Listing by debtor of purchasers or
32 receivers of collateral. A secured party may require that
33 the debtor include as part of the security agreement a list
SB1231 Enrolled -60- LRB9106284WHdv
1 of persons to whom the debtor desires to sell or otherwise
2 dispose of the collateral. The debtor shall not sell or
3 otherwise dispose of the collateral to a person not included
4 in that list unless the debtor has notified the secured party
5 of his desire to sell or otherwise dispose of the collateral
6 to such person at least 7 days prior to the sale or other
7 disposition.
8 (Source: P.A. 83-69.)
9 (810 ILCS 5/9-206) (from Ch. 26, par. 9-206)
10 Sec. 9-206. Security interest arising in purchase or
11 delivery of financial asset.
12 (a) Security interest when person buys through
13 securities intermediary. A security interest in favor of a
14 securities intermediary attaches to a person's security
15 entitlement if:
16 (1) the person buys a financial asset through the
17 securities intermediary in a transaction in which the
18 person is obligated to pay the purchase price to the
19 securities intermediary at the time of the purchase; and
20 (2) the securities intermediary credits the
21 financial asset to the buyer's securities account before
22 the buyer pays the securities intermediary.
23 (b) Security interest secures obligation to pay for
24 financial asset. The security interest described in
25 subsection (a) secures the person's obligation to pay for the
26 financial asset.
27 (c) Security interest in payment against delivery
28 transaction. A security interest in favor of a person that
29 delivers a certificated security or other financial asset
30 represented by a writing attaches to the security or other
31 financial asset if:
32 (1) the security or other financial asset:
33 (A) in the ordinary course of business is
SB1231 Enrolled -61- LRB9106284WHdv
1 transferred by delivery with any necessary
2 indorsement or assignment; and
3 (B) is delivered under an agreement between
4 persons in the business of dealing with such
5 securities or financial assets; and
6 (2) the agreement calls for delivery against
7 payment.
8 (d) Security interest secures obligation to pay for
9 delivery. The security interest described in subsection (c)
10 secures the obligation to make payment for the delivery.
11 Agreement not to assert defenses against assignee;
12 modification of sales warranties where security agreement
13 exists.
14 (1) Subject to any statute or decision which establishes
15 a different rule for buyers or lessees of consumer goods, an
16 agreement by a buyer or lessee that he will not assert
17 against an assignee any claim or defense which he may have
18 against the seller or lessor is enforceable by an assignee
19 who takes his assignment for value, in good faith and without
20 notice of a claim or defense, except as to defenses of a type
21 which may be asserted against a holder in due course of a
22 negotiable instrument under the Article on Commercial Paper
23 (Article 3). A buyer who as part of one transaction signs
24 both a negotiable instrument and a security agreement makes
25 such an agreement.
26 (2) When a seller retains a purchase money security
27 interest in goods the Article on Sales (Article 2) governs
28 the sale and any disclaimer, limitation or modification of
29 the seller's warranties.
30 (Source: Laws 1965, p. 803.)
31 (810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new)
32 SUBPART 2. RIGHTS AND DUTIES
SB1231 Enrolled -62- LRB9106284WHdv
1 (810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
2 Sec. 9-207. Rights and duties of secured party having
3 possession or control of collateral.
4 (a) Duty of care when secured party in possession.
5 Except as otherwise provided in subsection (d), a secured
6 party shall use reasonable care in the custody and
7 preservation of collateral in the secured party's possession.
8 In the case of chattel paper or an instrument, reasonable
9 care includes taking necessary steps to preserve rights
10 against prior parties unless otherwise agreed.
11 (b) Expenses, risks, duties, and rights when secured
12 party in possession. Except as otherwise provided in
13 subsection (d), if a secured party has possession of
14 collateral:
15 (1) reasonable expenses, including the cost of
16 insurance and payment of taxes or other charges, incurred
17 in the custody, preservation, use, or operation of the
18 collateral are chargeable to the debtor and are secured
19 by the collateral;
20 (2) the risk of accidental loss or damage is on the
21 debtor to the extent of a deficiency in any effective
22 insurance coverage;
23 (3) the secured party shall keep the collateral
24 identifiable, but fungible collateral may be commingled;
25 and
26 (4) the secured party may use or operate the
27 collateral:
28 (A) for the purpose of preserving the
29 collateral or its value;
30 (B) as permitted by an order of a court having
31 competent jurisdiction; or
32 (C) except in the case of consumer goods, in
33 the manner and to the extent agreed by the debtor.
34 (c) Duties and rights when secured party in possession
SB1231 Enrolled -63- LRB9106284WHdv
1 or control. Except as otherwise provided in subsection (d), a
2 secured party having possession of collateral or control of
3 collateral under Section 9-104, 9-105, 9-106, or 9-107:
4 (1) may hold as additional security any proceeds,
5 except money or funds, received from the collateral;
6 (2) shall apply money or funds received from the
7 collateral to reduce the secured obligation, unless
8 remitted to the debtor; and
9 (3) may create a security interest in the
10 collateral.
11 (d) Buyer of certain rights to payment. If the secured
12 party is a buyer of accounts, chattel paper, payment
13 intangibles, or promissory notes or a consignor:
14 (1) subsection (a) does not apply unless the
15 secured party is entitled under an agreement:
16 (A) to charge back uncollected collateral; or
17 (B) otherwise to full or limited recourse
18 against the debtor or a secondary obligor based on
19 the nonpayment or other default of an account debtor
20 or other obligor on the collateral; and
21 (2) subsections (b) and (c) do not apply. Rights
22 and duties when collateral is in secured party's
23 possession.
24 (1) A secured party must use reasonable care in the
25 custody and preservation of collateral in his possession. In
26 the case of an instrument or chattel paper reasonable care
27 includes taking necessary steps to preserve rights against
28 prior parties unless otherwise agreed.
29 (2) Unless otherwise agreed, when collateral is in the
30 secured party's possession
31 (a) reasonable expenses (including the cost of any
32 insurance and payment of taxes or other charges) incurred in
33 the custody, preservation, use or operation of the collateral
34 are chargeable to the debtor and are secured by the
SB1231 Enrolled -64- LRB9106284WHdv
1 collateral;
2 (b) the risk of accidental loss or damage is on the
3 debtor to the extent of any deficiency in any effective
4 insurance coverage;
5 (c) the secured party may hold as additional
6 security any increase or profits (except money) received from
7 the collateral, but money so received, unless remitted to the
8 debtor, shall be applied in reduction of the secured
9 obligation;
10 (d) the secured party must keep the collateral
11 identifiable but fungible collateral may be commingled;
12 (e) the secured party may repledge the collateral
13 upon terms which do not impair the debtor's right to redeem
14 it.
15 (3) A secured party is liable for any loss caused by his
16 failure to meet any obligation imposed by the preceding
17 subsections but does not lose his security interest.
18 (4) A secured party may use or operate the collateral
19 for the purpose of preserving the collateral or its value or
20 pursuant to the order of a court of appropriate jurisdiction
21 or, except in the case of consumer goods, in the manner and
22 to the extent provided in the security agreement.
23 (Source: Laws 1961, p. 2101.)
24 (810 ILCS 5/9-208) (from Ch. 26, par. 9-208)
25 Sec. 9-208. Additional duties of secured party having
26 control of collateral.
27 (a) Applicability of Section. This Section applies to
28 cases in which there is no outstanding secured obligation and
29 the secured party is not committed to make advances, incur
30 obligations, or otherwise give value.
31 (b) Duties of secured party after receiving demand from
32 debtor. Within 10 days after receiving an authenticated
33 demand by the debtor:
SB1231 Enrolled -65- LRB9106284WHdv
1 (1) a secured party having control of a deposit
2 account under Section 9-104(a)(2) shall send to the bank
3 with which the deposit account is maintained an
4 authenticated statement that releases the bank from any
5 further obligation to comply with instructions originated
6 by the secured party;
7 (2) a secured party having control of a deposit
8 account under Section 9-104(a)(3) shall:
9 (A) pay the debtor the balance on deposit in
10 the deposit account; or
11 (B) transfer the balance on deposit into a
12 deposit account in the debtor's name;
13 (3) a secured party, other than a buyer, having
14 control of electronic chattel paper under Section 9-105
15 shall:
16 (A) communicate the authoritative copy of the
17 electronic chattel paper to the debtor or its
18 designated custodian;
19 (B) if the debtor designates a custodian that
20 is the designated custodian with which the
21 authoritative copy of the electronic chattel paper
22 is maintained for the secured party, communicate to
23 the custodian an authenticated record releasing the
24 designated custodian from any further obligation to
25 comply with instructions originated by the secured
26 party and instructing the custodian to comply with
27 instructions originated by the debtor; and
28 (C) take appropriate action to enable the
29 debtor or its designated custodian to make copies of
30 or revisions to the authoritative copy which add or
31 change an identified assignee of the authoritative
32 copy without the consent of the secured party;
33 (4) a secured party having control of investment
34 property under Section 8-106(d)(2) or 9-106(b) shall send
SB1231 Enrolled -66- LRB9106284WHdv
1 to the securities intermediary or commodity intermediary
2 with which the security entitlement or commodity contract
3 is maintained an authenticated record that releases the
4 securities intermediary or commodity intermediary from
5 any further obligation to comply with entitlement orders
6 or directions originated by the secured party; and
7 (5) a secured party having control of a
8 letter-of-credit right under Section 9-107 shall send to
9 each person having an unfulfilled obligation to pay or
10 deliver proceeds of the letter of credit to the secured
11 party an authenticated release from any further
12 obligation to pay or deliver proceeds of the letter of
13 credit to the secured party. Request for statement of
14 account or list of collateral.
15 (1) A debtor may sign a statement indicating what he
16 believes to be the aggregate amount of unpaid indebtedness as
17 of a specified date and may send it to the secured party with
18 a request that the statement be approved or corrected and
19 returned to the debtor. When the security agreement or any
20 other record kept by the secured party identifies the
21 collateral a debtor may similarly request the secured party
22 to approve or correct a list of the collateral.
23 (2) The secured party must comply with such a request
24 within two weeks after receipt by sending a written
25 correction or approval. If the secured party claims a
26 security interest in all of a particular type of collateral
27 owned by the debtor he may indicate that fact in his reply
28 and need not approve or correct an itemized list of such
29 collateral. If the secured party without reasonable excuse
30 fails to comply he is liable for any loss caused to the
31 debtor thereby; and if the debtor has properly included in
32 his request a good faith statement of the obligation or a
33 list of the collateral or both the secured party may claim a
34 security interest only as shown in the statement against
SB1231 Enrolled -67- LRB9106284WHdv
1 persons misled by his failure to comply. If he no longer has
2 an interest in the obligation or collateral at the time the
3 request is received he must disclose the name and address of
4 any successor in interest known to him and he is liable for
5 any loss caused to the debtor as a result of failure to
6 disclose. A successor in interest is not subject to this
7 Section until a request is received by him.
8 (3) A debtor is entitled to such a statement once every
9 6 months without charge. The secured party may require
10 payment of a charge not exceeding $10 for each additional
11 statement furnished.
12 (Source: Laws 1961, p. 2101.)
13 (810 ILCS 5/9-209 new)
14 Sec. 9-209. Duties of secured party if account debtor
15 has been notified of assignment.
16 (a) Applicability of Section. Except as otherwise
17 provided in subsection (c), this Section applies if:
18 (1) there is no outstanding secured obligation; and
19 (2) the secured party is not committed to make
20 advances, incur obligations, or otherwise give value.
21 (b) Duties of secured party after receiving demand from
22 debtor. Within 10 days after receiving an authenticated
23 demand by the debtor, a secured party shall send to an
24 account debtor that has received notification of an
25 assignment to the secured party as assignee under Section
26 9-406(a) an authenticated record that releases the account
27 debtor from any further obligation to the secured party.
28 (c) Inapplicability to sales. This Section does not
29 apply to an assignment constituting the sale of an account,
30 chattel paper, or payment intangible.
31 (810 ILCS 5/9-210 new)
32 Sec. 9-210. Request for accounting; request regarding
SB1231 Enrolled -68- LRB9106284WHdv
1 list of collateral or statement of account.
2 (a) Definitions. In this Section:
3 (1) "Request" means a record of a type described in
4 paragraph (2), (3), or (4).
5 (2) "Request for an accounting" means a record
6 authenticated by a debtor requesting that the recipient
7 provide an accounting of the unpaid obligations secured
8 by collateral and reasonably identifying the transaction
9 or relationship that is the subject of the request.
10 (3) "Request regarding a list of collateral" means
11 a record authenticated by a debtor requesting that the
12 recipient approve or correct a list of what the debtor
13 believes to be the collateral securing an obligation and
14 reasonably identifying the transaction or relationship
15 that is the subject of the request.
16 (4) "Request regarding a statement of account"
17 means a record authenticated by a debtor requesting that
18 the recipient approve or correct a statement indicating
19 what the debtor believes to be the aggregate amount of
20 unpaid obligations secured by collateral as of a
21 specified date and reasonably identifying the transaction
22 or relationship that is the subject of the request.
23 (b) Duty to respond to requests. Subject to subsections
24 (c), (d), (e), and (f), a secured party, other than a buyer
25 of accounts, chattel paper, payment intangibles, or
26 promissory notes or a consignor, shall comply with a request
27 within 14 days after receipt:
28 (1) in the case of a request for an accounting, by
29 authenticating and sending to the debtor an accounting;
30 and
31 (2) in the case of a request regarding a list of
32 collateral or a request regarding a statement of account,
33 by authenticating and sending to the debtor an approval
34 or correction.
SB1231 Enrolled -69- LRB9106284WHdv
1 (c) Request regarding list of collateral; statement
2 concerning type of collateral. A secured party that claims a
3 security interest in all of a particular type of collateral
4 owned by the debtor may comply with a request regarding a
5 list of collateral by sending to the debtor an authenticated
6 record including a statement to that effect within 14 days
7 after receipt.
8 (d) Request regarding list of collateral; no interest
9 claimed. A person that receives a request regarding a list
10 of collateral, claims no interest in the collateral when it
11 receives the request, and claimed an interest in the
12 collateral at an earlier time shall comply with the request
13 within 14 days after receipt by sending to the debtor an
14 authenticated record:
15 (1) disclaiming any interest in the collateral; and
16 (2) if known to the recipient, providing the name
17 and mailing address of any assignee of or successor to
18 the recipient's interest in the collateral.
19 (e) Request for accounting or regarding statement of
20 account; no interest in obligation claimed. A person that
21 receives a request for an accounting or a request regarding a
22 statement of account, claims no interest in the obligations
23 when it receives the request, and claimed an interest in the
24 obligations at an earlier time shall comply with the request
25 within 14 days after receipt by sending to the debtor an
26 authenticated record:
27 (1) disclaiming any interest in the obligations;
28 and
29 (2) if known to the recipient, providing the name
30 and mailing address of any assignee of or successor to
31 the recipient's interest in the obligations.
32 (f) Charges for responses. A debtor is entitled without
33 charge to one response to a request under this Section during
34 any six-month period. The secured party may require payment
SB1231 Enrolled -70- LRB9106284WHdv
1 of a charge not exceeding $25 for each additional response.
2 (810 ILCS 5/Art. 9, Part 3 heading)
3 PART 3. PERFECTION AND PRIORITY
4 RIGHTS OF THIRD PARTIES;
5 PERFECTED AND UNPERFECTED SECURITY
6 INTERESTS: RULES OF PRIORITY
7 (810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new)
8 SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
9 (810 ILCS 5/9-301) (from Ch. 26, par. 9-301)
10 Sec. 9-301. Law governing perfection and priority of
11 security interests. Except as otherwise provided in Sections
12 9-303 through 9-306, the following rules determine the law
13 governing perfection, the effect of perfection or
14 nonperfection, and the priority of a security interest in
15 collateral:
16 (1) Except as otherwise provided in this Section,
17 while a debtor is located in a jurisdiction, the local
18 law of that jurisdiction governs perfection, the effect
19 of perfection or nonperfection, and the priority of a
20 security interest in collateral.
21 (2) While collateral is located in a jurisdiction,
22 the local law of that jurisdiction governs perfection,
23 the effect of perfection or nonperfection, and the
24 priority of a possessory security interest in that
25 collateral.
26 (3) Except as otherwise provided in paragraph (4),
27 while negotiable documents, goods, instruments, money, or
28 tangible chattel paper is located in a jurisdiction, the
29 local law of that jurisdiction governs:
30 (A) perfection of a security interest in the
31 goods by filing a fixture filing;
SB1231 Enrolled -71- LRB9106284WHdv
1 (B) perfection of a security interest in
2 timber to be cut; and
3 (C) the effect of perfection or nonperfection
4 and the priority of a nonpossessory security
5 interest in the collateral.
6 (4) The local law of the jurisdiction in which the
7 wellhead or minehead is located governs perfection, the
8 effect of perfection or nonperfection, and the priority
9 of a security interest in as-extracted collateral.
10 Persons Who Take Priority Over Unperfected Security
11 Interests; Rights of "Lien Creditor".
12 (1) Except as otherwise provided in subsection (2), an
13 unperfected security interest is subordinate to the rights of
14 (a) persons entitled to priority under Section
15 9-312;
16 (b) a person who becomes a lien creditor before the
17 security interest is perfected;
18 (c) in the case of goods, instruments, documents,
19 and chattel paper, a person who is not a secured party
20 and who is a transferee in bulk or other buyer not in
21 ordinary course of business or is a buyer of farm
22 products in ordinary course of business, to the extent
23 that he gives value and receives delivery of the
24 collateral without knowledge of the security interest and
25 before it is perfected;
26 (d) in the case of accounts, general intangibles,
27 and investment property, a person who is not a secured
28 party and who is a transferee to the extent that he gives
29 value without knowledge of the security interest and
30 before it is perfected;
31 provided, however, that an unperfected security interest
32 shall take priority over the rights of a lien creditor if (i)
33 the lien creditor is a trustee or receiver of a state or
34 federally chartered financial institution acting in
SB1231 Enrolled -72- LRB9106284WHdv
1 furtherance of its supervisory authority over the financial
2 institution and (ii) a security interest is granted by the
3 financial institution to secure a deposit of public funds
4 with the financial institution or a repurchase agreement with
5 the financial institution pursuant to the Government
6 Securities Act of 1986, as amended.
7 (2) If the secured party files with respect to a
8 purchase money security interest before or within 20 days
9 after the debtor receives possession of the collateral, he
10 takes priority over the rights of a transferee in bulk or of
11 a lien creditor which arise between the time the security
12 interest attaches and the time of filing.
13 (3) A "lien creditor" means a creditor who has acquired
14 a lien on the property involved by attachment, levy or the
15 like and includes an assignee for benefit of creditors from
16 the time of assignment, and a trustee in bankruptcy from the
17 date of the filing of the petition or a receiver in equity
18 from the time of appointment.
19 (4) A person who becomes a lien creditor while a
20 security interest is perfected takes subject to the security
21 interest only to the extent that it secures advances made
22 before he becomes a lien creditor or within 45 days
23 thereafter or made without knowledge of the lien or pursuant
24 to a commitment entered into without knowledge of the lien.
25 (Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.)
26 (810 ILCS 5/9-302) (from Ch. 26, par. 9-302)
27 Sec. 9-302. Law governing perfection and priority of
28 agricultural liens. While farm products are located in a
29 jurisdiction, the local law of that jurisdiction governs
30 perfection, the effect of perfection or nonperfection, and
31 the priority of an agricultural lien on the farm products.
32 When filing is required to perfect security interest;
33 security interests to which filing provisions of this Article
SB1231 Enrolled -73- LRB9106284WHdv
1 do not apply.
2 (1) A financing statement must be filed to perfect all
3 security interests except the following:
4 (a) a security interest in collateral in possession
5 of the secured party under Section 9-305;
6 (b) a security interest temporarily perfected in
7 instruments, certificated securities, or documents
8 without delivery under Section 9-304 or in proceeds for a
9 20 day period under Section 9-306;
10 (c) a security interest created by an assignment of
11 a beneficial interest in a trust or a decedent's estate;
12 (d) a purchase money security interest in consumer
13 goods; but filing is required for a motor vehicle
14 required to be registered; and fixture filing is required
15 for priority over conflicting interests in fixtures to
16 the extent provided in Section 9-313;
17 (e) an assignment of accounts which does not alone
18 or in conjunction with other assignments to the same
19 assignee transfer a significant part of the outstanding
20 accounts of the assignor;
21 (f) a security interest of a collecting bank
22 (Section 4-208) or arising under the Article on Sales
23 (see Section 9-113) or covered in subsection (3) of this
24 Section;
25 (g) an assignment for the benefit of all creditors
26 of the transferor, and subsequent transfers by the
27 assignee thereunder;
28 (h) a security interest in investment property
29 which is perfected without filing under Section 9-115 or
30 Section 9-116;
31 (i) a security interest in a deposit account. Such
32 a security interest is perfected:
33 (i) as to a deposit account maintained with
34 the secured party, when the security agreement is
SB1231 Enrolled -74- LRB9106284WHdv
1 executed;
2 (ii) as to a deposit account maintained with
3 any organization other than the secured party, when
4 notice thereof is given in writing to the
5 organization with whom the deposit account is
6 maintained and that organization provides written
7 acknowledgement of and consent to the notice of the
8 secured party.
9 (j) a security interest in an uncertificated
10 certificate of deposit. Such a security interest is
11 perfected;
12 (i) as to an uncertificated certificate of
13 deposit issued by the secured party, when the
14 security agreement is executed;
15 (ii) as to an uncertificated certificate of
16 deposit issued by any organization other than the
17 secured party, when notice thereof is given in
18 writing to the issuer of the uncertificated
19 certificate of deposit and the issuer provides
20 written acknowledgement of and consent to the notice
21 of the secured party.
22 (2) If a secured party assigns a perfected security
23 interest, no filing under this Article is required in order
24 to continue the perfected status of the security interest
25 against creditors of and transferees from the original
26 debtor.
27 (3) The filing of a financing statement otherwise
28 required by this Article is not necessary or effective to
29 perfect a security interest in property subject to
30 (a) a statute or treaty of the United States which
31 provides for a national or international registration or
32 a national or international certificate of title or which
33 specifies a place of filing different from that specified
34 in this Article for filing of the security interest; or
SB1231 Enrolled -75- LRB9106284WHdv
1 (b) the following statutes of this State: the
2 Illinois Vehicle Code; the Boat Registration and Safety
3 Act; but during any period in which collateral is
4 inventory held for sale by a person who is in the
5 business of selling goods of that kind, the filing
6 provisions of this Article (Part 4) apply to a security
7 interest in that collateral created by him as debtor; or
8 (c) a certificate of title statute of another
9 jurisdiction under the law of which indication of a
10 security interest on the certificate is required as a
11 condition of perfection (subsection (2) of Section
12 9-103).
13 (4) Compliance with a statute or treaty described in
14 subsection (3) is equivalent to the filing of a financing
15 statement under this Article, and a security interest in
16 property subject to the statute or treaty can be perfected
17 only by compliance therewith except as provided in Section
18 9-103 on multiple state transactions. Duration and renewal of
19 perfection of a security interest perfected by compliance
20 with the statute or treaty are governed by the provisions of
21 the statute or treaty; in other respects the security
22 interest is subject to this Article.
23 (Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.)
24 (810 ILCS 5/9-303) (from Ch. 26, par. 9-303)
25 Sec. 9-303. Law governing perfection and priority of
26 security interests in goods covered by a certificate of
27 title.
28 (a) Applicability of Section. This Section applies to
29 goods covered by a certificate of title, even if there is no
30 other relationship between the jurisdiction under whose
31 certificate of title the goods are covered and the goods or
32 the debtor.
33 (b) When goods covered by certificate of title. Goods
SB1231 Enrolled -76- LRB9106284WHdv
1 become covered by a certificate of title when a valid
2 application for the certificate of title and the applicable
3 fee are delivered to the appropriate authority. Goods cease
4 to be covered by a certificate of title at the earlier of the
5 time the certificate of title ceases to be effective under
6 the law of the issuing jurisdiction or the time the goods
7 become covered subsequently by a certificate of title issued
8 by another jurisdiction.
9 (c) Applicable law. The local law of the jurisdiction
10 under whose certificate of title the goods are covered
11 governs perfection, the effect of perfection or
12 nonperfection, and the priority of a security interest in
13 goods covered by a certificate of title from the time the
14 goods become covered by the certificate of title until the
15 goods cease to be covered by the certificate of title. When
16 security interest is perfected; continuity of perfection.
17 (1) A security interest is perfected when it has
18 attached and when all of the applicable steps required for
19 perfection have been taken. Such steps are specified in
20 Sections 9--302, 9--304, 9--305 and 9--306. If such steps are
21 taken before the security interest attaches, it is perfected
22 at the time when it attaches.
23 (2) If a security interest is originally perfected in
24 any way permitted under this Article and is subsequently
25 perfected in some other way under this Article, without an
26 intermediate period when it was unperfected, the security
27 interest shall be deemed to be perfected continuously for the
28 purposes of this Article.
29 (Source: Laws 1961, p. 2101.)
30 (810 ILCS 5/9-304) (from Ch. 26, par. 9-304)
31 Sec. 9-304. Law governing perfection and priority of
32 security interests in deposit accounts.
33 (a) Law of bank's jurisdiction governs. The local law
SB1231 Enrolled -77- LRB9106284WHdv
1 of a bank's jurisdiction governs perfection, the effect of
2 perfection or nonperfection, and the priority of a security
3 interest in a deposit account maintained with that bank.
4 (b) Bank's jurisdiction. The following rules determine
5 a bank's jurisdiction for purposes of this Part:
6 (1) If an agreement between the bank and the debtor
7 governing the deposit account expressly provides that a
8 particular jurisdiction is the bank's jurisdiction for
9 purposes of this Part, this Article, or the Uniform
10 Commercial Code, that jurisdiction is the bank's
11 jurisdiction.
12 (2) If paragraph (1) does not apply and an
13 agreement between the bank and its customer governing the
14 deposit account expressly provides that the agreement is
15 governed by the law of a particular jurisdiction, that
16 jurisdiction is the bank's jurisdiction.
17 (3) If neither paragraph (1) nor paragraph (2)
18 applies and an agreement between the bank and its
19 customer governing the deposit account expressly provides
20 that the deposit account is maintained at an office in a
21 particular jurisdiction, that jurisdiction is the bank's
22 jurisdiction.
23 (4) If none of the preceding paragraphs applies,
24 the bank's jurisdiction is the jurisdiction in which the
25 office identified in an account statement as the office
26 serving the customer's account is located.
27 (5) If none of the preceding paragraphs applies,
28 the bank's jurisdiction is the jurisdiction in which the
29 chief executive office of the bank is located. Perfection
30 of security interest in instruments, documents, proceeds
31 of a written letter of credit, and goods covered by
32 documents; perfection by permissive filing; temporary
33 perfection without filing or transfer of possession.
34 (1) A security interest in chattel paper or negotiable
SB1231 Enrolled -78- LRB9106284WHdv
1 documents may be perfected by filing. A security interest in
2 the rights to proceeds of a written letter of credit can be
3 perfected only by the secured party's taking possession of
4 the letter of credit. A security interest in money or
5 instruments (other than instruments which constitute part of
6 chattel paper) can be perfected only by the secured party's
7 taking possession, except as provided in subsections (4) and
8 (5) of this Section and subsections (2) and (3) of Section
9 9-306 on proceeds.
10 (2) During the period that goods are in the possession
11 of the issuer of a negotiable document therefor, a security
12 interest in the goods is perfected by perfecting a security
13 interest in the document, and any security interest in the
14 goods otherwise perfected during such period is subject
15 thereto.
16 (3) A security interest in goods in the possession of a
17 bailee other than one who has issued a negotiable document
18 therefor is perfected by issuance of a document in the name
19 of the secured party or by the bailee's receipt of
20 notification of the secured party's interest or by filing as
21 to the goods.
22 (4) A security interest in instruments, certificated
23 securities, or negotiable documents is perfected without
24 filing or the taking of possession for a period of 21 days
25 from the time it attaches to the extent that it arises for
26 new value given under a written security agreement.
27 (5) A security interest remains perfected for a period
28 of 21 days without filing where a secured party having a
29 perfected security interest in an instrument, a certificated
30 security, a negotiable document, or goods in possession of a
31 bailee other than one who has issued a negotiable document
32 therefor.
33 (a) makes available to the debtor the goods or
34 documents representing the goods for the purpose of
SB1231 Enrolled -79- LRB9106284WHdv
1 ultimate sale or exchange or for the purpose of loading,
2 unloading, storing, shipping, transshipping,
3 manufacturing, processing or otherwise dealing with them
4 in a manner preliminary to their sale or exchange, but
5 priority between conflicting security interests in the
6 goods is subject to subsection (3) of Section 9-312; or
7 (b) delivers the instrument or certificated
8 security to the debtor for the purpose of ultimate sale
9 or exchange or of presentation, collection, renewal or
10 registration of transfer.
11 (6) After the 21 day period in subsections (4) and (5)
12 perfection depends upon compliance with applicable provisions
13 of this Article.
14 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
15 (810 ILCS 5/9-305) (from Ch. 26, par. 9-305)
16 Sec. 9-305. Law governing perfection and priority of
17 security interests in investment property.
18 (a) Governing law: general rules. Except as otherwise
19 provided in subsection (c), the following rules apply:
20 (1) While a security certificate is located in a
21 jurisdiction, the local law of that jurisdiction governs
22 perfection, the effect of perfection or nonperfection,
23 and the priority of a security interest in the
24 certificated security represented thereby.
25 (2) The local law of the issuer's jurisdiction as
26 specified in Section 8-110(d) governs perfection, the
27 effect of perfection or nonperfection, and the priority
28 of a security interest in an uncertificated security.
29 (3) The local law of the securities intermediary's
30 jurisdiction as specified in Section 8-110(e) governs
31 perfection, the effect of perfection or nonperfection,
32 and the priority of a security interest in a security
33 entitlement or securities account.
SB1231 Enrolled -80- LRB9106284WHdv
1 (4) The local law of the commodity intermediary's
2 jurisdiction governs perfection, the effect of perfection
3 or nonperfection, and the priority of a security interest
4 in a commodity contract or commodity account.
5 (b) Commodity intermediary's jurisdiction. The
6 following rules determine a commodity intermediary's
7 jurisdiction for purposes of this Part:
8 (1) If an agreement between the commodity
9 intermediary and commodity customer governing the
10 commodity account expressly provides that a particular
11 jurisdiction is the commodity intermediary's jurisdiction
12 for purposes of this Part, this Article, or the Uniform
13 Commercial Code, that jurisdiction is the commodity
14 intermediary's jurisdiction.
15 (2) If paragraph (1) does not apply and an
16 agreement between the commodity intermediary and
17 commodity customer governing the commodity account
18 expressly provides that the agreement is governed by the
19 law of a particular jurisdiction, that jurisdiction is
20 the commodity intermediary's jurisdiction.
21 (3) If neither paragraph (1) nor paragraph (2)
22 applies and an agreement between the commodity
23 intermediary and commodity customer governing the
24 commodity account expressly provides that the commodity
25 account is maintained at an office in a particular
26 jurisdiction, that jurisdiction is the commodity
27 intermediary's jurisdiction.
28 (4) If none of the preceding paragraphs applies,
29 the commodity intermediary's jurisdiction is the
30 jurisdiction in which the office identified in an account
31 statement as the office serving the commodity customer's
32 account is located.
33 (5) If none of the preceding paragraphs applies,
34 the commodity intermediary's jurisdiction is the
SB1231 Enrolled -81- LRB9106284WHdv
1 jurisdiction in which the chief executive office of the
2 commodity intermediary is located.
3 (c) When perfection governed by law of jurisdiction
4 where debtor located. The local law of the jurisdiction in
5 which the debtor is located governs:
6 (1) perfection of a security interest in investment
7 property by filing;
8 (2) automatic perfection of a security interest in
9 investment property created by a broker or securities
10 intermediary; and
11 (3) automatic perfection of a security interest in
12 a commodity contract or commodity account created by a
13 commodity intermediary. When possession by secured party
14 perfects security interest without filing. A security
15 interest in goods, instruments, money, negotiable
16 documents, or chattel paper may be perfected by the
17 secured party's taking possession of the collateral. A
18 security interest in the right to proceeds of a written
19 letter of credit may be perfected by the secured party's
20 taking possession of the letter of credit. If such
21 collateral other than goods covered by a negotiable
22 document is held by a bailee, the secured party is deemed
23 to have possession from the time the bailee receives
24 notification of the secured party's interest. A security
25 interest is perfected by possession from the time
26 possession is taken without relation back and continues
27 only so long as possession is retained, unless otherwise
28 specified in this Article. The security interest may be
29 otherwise perfected as provided in this Article before or
30 after the period of possession by the secured party.
31 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
32 (810 ILCS 5/9-306) (from Ch. 26, par. 9-306)
33 Sec. 9-306. Law governing perfection and priority of
SB1231 Enrolled -82- LRB9106284WHdv
1 security interests in letter-of-credit rights.
2 (a) Governing law: issuer's or nominated person's
3 jurisdiction. Subject to subsection (c), the local law of the
4 issuer's jurisdiction or a nominated person's jurisdiction
5 governs perfection, the effect of perfection or
6 nonperfection, and the priority of a security interest in a
7 letter-of-credit right if the issuer's jurisdiction or
8 nominated person's jurisdiction is a State.
9 (b) Issuer's or nominated person's jurisdiction. For
10 purposes of this Part, an issuer's jurisdiction or nominated
11 person's jurisdiction is the jurisdiction whose law governs
12 the liability of the issuer or nominated person with respect
13 to the letter-of-credit right as provided in Section 5-116.
14 (c) When Section not applicable. This Section does not
15 apply to a security interest that is perfected only under
16 Section 9-308(d). "Proceeds"; Secured Party's Rights on
17 Disposition of Collateral.
18 (1) "Proceeds" includes whatever is received upon the
19 sale, exchange, collection or other disposition of collateral
20 or proceeds. Insurance payable by reason of loss or damage to
21 the collateral is proceeds, except to the extent that it is
22 payable to a person other than a party to the security
23 agreement. Any payments or distributions made with respect to
24 investment property collateral are proceeds. Money, checks,
25 deposit accounts, and the like are "cash proceeds". All other
26 proceeds are "non-cash proceeds".
27 (2) Except where this Article otherwise provides, a
28 security interest continues in collateral notwithstanding
29 sale, exchange or other disposition thereof unless the
30 disposition was authorized by the secured party in the
31 security agreement or otherwise, and also continues in any
32 identifiable proceeds including collections received by the
33 debtor.
34 (3) The security interest in proceeds is a continuously
SB1231 Enrolled -83- LRB9106284WHdv
1 perfected security interest if the interest in the original
2 collateral was perfected but it ceases to be a perfected
3 security interest and becomes unperfected 20 days after
4 receipt of the proceeds by the debtor unless
5 (a) a filed financing statement covers the original
6 collateral and the proceeds are collateral in which a
7 security interest may be perfected by filing in the
8 office or offices where the financing statement has been
9 filed and, if the proceeds are acquired with cash
10 proceeds, the description of collateral in the financing
11 statement indicates the types of property constituting
12 the proceeds; or
13 (b) a filed financing statement covers the original
14 collateral and the proceeds are identifiable cash
15 proceeds;
16 (c) the original collateral was investment property
17 and the proceeds are identifiable cash proceeds; or
18 (d) the security interest in the proceeds is
19 perfected before the expiration of the 20 day period.
20 Except as provided in this Section, a security interest
21 in proceeds can be perfected only by the methods or under the
22 circumstances permitted in this Article for original
23 collateral of the same type.
24 (4) In the event of insolvency proceedings instituted by
25 or against a debtor, a secured party with a perfected
26 security interest in proceeds has a perfected security
27 interest only in the following proceeds:
28 (a) in identifiable non-cash proceeds and in
29 separate deposit accounts containing only proceeds;
30 (b) in identifiable cash proceeds in the form of
31 money which is neither commingled with other money nor
32 deposited in a deposit account prior to the insolvency
33 proceedings;
34 (c) in identifiable cash proceeds in the form of
SB1231 Enrolled -84- LRB9106284WHdv
1 checks and the like which are not deposited in a deposit
2 account prior to the insolvency proceedings; and
3 (d) in all cash and deposit accounts of the debtor
4 in which proceeds have been commingled with other funds,
5 but the perfected security interest under this paragraph
6 (d) is
7 (i) subject to any right to set-off; and
8 (ii) limited to an amount not greater than the
9 amount of any cash proceeds received by the debtor
10 within 20 days before the institution of the
11 insolvency proceedings less the sum of (I) the
12 payments to the secured party on account of cash
13 proceeds received by the debtor during such period
14 and (II) the cash proceeds received by the debtor
15 during such period to which the secured party is
16 entitled under paragraphs (a) through (c) of this
17 subsection (4).
18 (5) If a sale of goods results in an account or chattel
19 paper which is transferred by the seller to a secured party,
20 and if the goods are returned to or are repossessed by the
21 seller or the secured party, the following rules determine
22 priorities:
23 (a) If the goods were collateral at the time of
24 sale, for an indebtedness of the seller which is still
25 unpaid, the original security interest attaches again to
26 the goods and continues as a perfected security interest
27 if it was perfected at the time when the goods were sold.
28 If the security interest was originally perfected by a
29 filing which is still effective, nothing further is
30 required to continue the perfected status; in any other
31 case, the secured party must take possession of the
32 returned or repossessed goods or must file.
33 (b) An unpaid transferee of the chattel paper has a
34 security interest in the goods against the transferor.
SB1231 Enrolled -85- LRB9106284WHdv
1 Such security interest is prior to a security interest
2 asserted under paragraph (a) to the extent that the
3 transferee of the chattel paper was entitled to priority
4 under Section 9-308.
5 (c) An unpaid transferee of the account has a
6 security interest in the goods against the transferor.
7 Such security interest is subordinate to a security
8 interest asserted under paragraph (a).
9 (d) A security interest of an unpaid transferee
10 asserted under paragraph (b) or (c) must be perfected for
11 protection against creditors of the transferor and
12 purchasers of the returned or repossessed goods.
13 (Source: P.A. 89-364, eff. 1-1-96.)
14 (810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01)
15 Sec. 9-306.01. (Blank). Debtor disposing of collateral
16 and failing to pay secured party amount due under security
17 agreement; penalties for violation.
18 (1) It is unlawful for a debtor under the terms of a
19 security agreement (a) who has no right of sale or other
20 disposition of the collateral or (b) who has a right of sale
21 or other disposition of the collateral and is to account to
22 the secured party for the proceeds of any sale or other
23 disposition of the collateral, to sell or otherwise dispose
24 of the collateral and willfully and wrongfully to fail to pay
25 the secured party the amount of said proceeds due under the
26 security agreement. Failure to pay such proceeds to the
27 secured party within 10 days after the sale or other
28 disposition of the collateral is prima facie evidence of a
29 willful and wanton failure to pay.
30 (2) An individual convicted of a violation of this
31 Section shall be guilty of a Class 3 felony.
32 (3) A corporation convicted of a violation of this
33 Section shall be guilty of a business offense and shall be
SB1231 Enrolled -86- LRB9106284WHdv
1 fined not less than two thousand dollars nor more than ten
2 thousand dollars.
3 (4) In the event the debtor under the terms of a
4 security agreement is a corporation or a partnership, any
5 officer, director, manager, or managerial agent of the debtor
6 who violates this Section or causes the debtor to violate
7 this Section shall be guilty of a Class 3 felony.
8 (Source: P.A. 83-69.)
9 (810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02)
10 Sec. 9-306.02. (Blank). (1) Where, pursuant to Section
11 9-205.1, a secured party has required that before the debtor
12 sells or otherwise disposes of collateral in the debtor's
13 possession he disclose to the secured party the persons to
14 whom he desires to sell or otherwise dispose of such
15 collateral, it is unlawful for the debtor to sell or
16 otherwise dispose of the collateral to a person other than a
17 person so disclosed to the secured party.
18 (2) An individual convicted of a violation of this
19 Section shall be guilty of a Class A misdemeanor.
20 (3) A corporation convicted of a violation of this
21 Section shall be guilty of a business offense and shall be
22 fined not less than $2,000 nor more than $10,000.
23 (4) In the event the debtor under the terms of a
24 security agreement is a corporation or a partnership, any
25 officer, director, manager or managerial agent of the debtor
26 who violates this Section or causes the debtor to violate
27 this Section shall be guilty of a Class A misdemeanor.
28 (5) It is an affirmative defense to a prosecution for
29 the violation of this Section that the debtor has paid to the
30 secured party the proceeds from the sale or other disposition
31 of the collateral within 10 days after such sale or
32 disposition.
33 (Source: P.A. 84-1372.)
SB1231 Enrolled -87- LRB9106284WHdv
1 (810 ILCS 5/9-307) (from Ch. 26, par. 9-307)
2 Sec. 9-307. Location of debtor.
3 (a) "Place of business." In this Section, "place of
4 business" means a place where a debtor conducts its affairs.
5 (b) Debtor's location: general rules. Except as
6 otherwise provided in this Section, the following rules
7 determine a debtor's location:
8 (1) A debtor who is an individual is located at the
9 individual's principal residence.
10 (2) A debtor that is an organization and has only
11 one place of business is located at its place of
12 business.
13 (3) A debtor that is an organization and has more
14 than one place of business is located at its chief
15 executive office.
16 (c) Limitation of applicability of subsection (b).
17 Subsection (b) applies only if a debtor's residence, place of
18 business, or chief executive office, as applicable, is
19 located in a jurisdiction whose law generally requires
20 information concerning the existence of a nonpossessory
21 security interest to be made generally available in a filing,
22 recording, or registration system as a condition or result of
23 the security interest's obtaining priority over the rights of
24 a lien creditor with respect to the collateral. If
25 subsection (b) does not apply, the debtor is located in the
26 District of Columbia.
27 (d) Continuation of location: cessation of existence,
28 etc. A person that ceases to exist, have a residence, or
29 have a place of business continues to be located in the
30 jurisdiction specified by subsections (b) and (c).
31 (e) Location of registered organization organized under
32 State law. A registered organization that is organized under
33 the law of a State is located in that State.
34 (f) Location of registered organization organized under
SB1231 Enrolled -88- LRB9106284WHdv
1 federal law; bank branches and agencies. Except as otherwise
2 provided in subsection (i), a registered organization that is
3 organized under the law of the United States and a branch or
4 agency of a bank that is not organized under the law of the
5 United States or a State are located:
6 (1) in the State that the law of the United States
7 designates, if the law designates a State of location;
8 (2) in the State that the registered organization,
9 branch, or agency designates, if the law of the United
10 States authorizes the registered organization, branch, or
11 agency to designate its State of location; or
12 (3) in the District of Columbia, if neither
13 paragraph (1) nor paragraph (2) applies.
14 (g) Continuation of location: change in status of
15 registered organization. A registered organization continues
16 to be located in the jurisdiction specified by subsection (e)
17 or (f) notwithstanding:
18 (1) the suspension, revocation, forfeiture, or
19 lapse of the registered organization's status as such in
20 its jurisdiction of organization; or
21 (2) the dissolution, winding up, or cancellation of
22 the existence of the registered organization.
23 (h) Location of United States. The United States is
24 located in the District of Columbia.
25 (i) Location of foreign bank branch or agency if
26 licensed in only one State. A branch or agency of a bank
27 that is not organized under the law of the United States or a
28 State is located in the State in which the branch or agency
29 is licensed, if all branches and agencies of the bank are
30 licensed in only one State.
31 (j) Location of foreign air carrier. A foreign air
32 carrier under the Federal Aviation Act of 1958, as amended,
33 is located at the designated office of the agent upon which
34 service of process may be made on behalf of the carrier.
SB1231 Enrolled -89- LRB9106284WHdv
1 (k) Section applies only to this Part. This Section
2 applies only for purposes of this Part. Protection of Buyers
3 of Goods.
4 (1) Except as provided in subsection (4), a buyer in the
5 ordinary course of business, as defined in subsection (9) of
6 Section 1-201, takes free of a security interest created by
7 his seller even though the security interest is perfected and
8 even though the buyer knows of its existence.
9 (2) In the case of consumer goods, a buyer takes free of
10 a security interest even though perfected if he buys without
11 knowledge of the security interest, for value and for his own
12 personal, family or household purposes unless prior to the
13 purchase the secured party has filed a financing statement
14 covering such goods.
15 (3) A buyer other than a buyer in ordinary course of
16 business (subsection (1) of this Section) takes free of a
17 security interest to the extent that it secures future
18 advances made after the secured party acquires knowledge of
19 the purchase, or more than 45 days after the purchase,
20 whichever first occurs, unless made pursuant to a commitment
21 entered into without knowledge of the purchase and before the
22 expiration of the 45 day period.
23 (4) A buyer of farm products takes subject to a security
24 interest created by the seller if:
25 (a) within one year before the sale of the farm
26 products, the buyer has received from the secured party
27 or the seller written notice of the security interest
28 organized according to farm products that:
29 (i) is an original or reproduced copy thereof;
30 (ii) contains,
31 (I) the name and address of the secured
32 party;
33 (II) the name and address of the person
34 indebted to the secured party;
SB1231 Enrolled -90- LRB9106284WHdv
1 (III) the social security number of the
2 debtor or, in the case of a debtor doing
3 business other than as an individual, the
4 Internal Revenue Service taxpayer
5 identification number of such debtor;
6 (IV) a description of the farm products
7 subject to the security interest created by the
8 debtor, including the amount of such products
9 where applicable, crop year, county, and a
10 reasonable description of the property;
11 (iii) must be amended in writing, within 3
12 months, similarly signed and transmitted, to reflect
13 material changes;
14 (iv) will lapse on either the expiration
15 period of the statement or the transmission of a
16 notice signed by the secured party that the
17 statement has lapsed, whichever occurs first; and
18 (v) sets forth any payment obligations imposed
19 on the buyer by the secured party as conditions for
20 waiver or release of the security interest; and
21 (b) the buyer has failed to perform the payment
22 obligations.
23 For the purposes of this subsection (4), a buyer of farm
24 products has received notice from the secured party or seller
25 when written notice of the security interest is sent to the
26 buyer by registered or certified mail.
27 (Source: P.A. 84-1372; revised 10-31-98.)
28 (810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1)
29 Sec. 9-307.1. (Blank). A commission merchant or selling
30 agent who sells a farm product for others shall be subject to
31 a security interest created by the seller in such farm
32 product if-
33 (a) within one year before the sale of the farm
SB1231 Enrolled -91- LRB9106284WHdv
1 products, the buyer has received from the secured party or
2 the seller written notice of the security interest organized
3 according to farm products that:
4 (i) is an original or reproduced copy thereof;
5 (ii) contains,
6 (I) the name and address of the secured party;
7 (II) the name and address of the person indebted to the
8 secured party;
9 (III) the social security number of the debtor or, in
10 the case of a debtor doing business other than as an
11 individual, the Internal Revenue Service taxpayer
12 identification number of such debtor;
13 (IV) a description of the farm products subject to the
14 security interest created by the debtor, including the amount
15 of such products where applicable, crop year, county, and a
16 reasonable description of the property;
17 (iii) must be amended in writing, within 3 months,
18 similarly signed and transmitted, to reflect material
19 changes;
20 (iv) will lapse on either the expiration period of the
21 statement or the transmission of a notice signed by the
22 secured party that the statement has lapsed, whichever occurs
23 first; and
24 (v) sets forth any payment obligations imposed on the
25 buyer by the secured party as conditions for waiver or
26 release of the security interest; and
27 (b) the commission merchant or selling agent has failed
28 to perform the payment obligations.
29 For the purposes of this Section, a commission merchant
30 or selling agent has received notice from the secured party
31 or seller when written notice of the security interest is
32 sent to the commission merchant or selling agent by
33 registered or certified mail.
34 (Source: P.A. 84-1372.)
SB1231 Enrolled -92- LRB9106284WHdv
1 (810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2)
2 Sec. 9-307.2. (Blank). A commission merchant or
3 selling agent who sells farm products for others, and
4 any person buying farm products in the ordinary course
5 of business from a person engaged in farming operations,
6 shall post at each licensed location where said
7 merchant, agent or person buying farm products in the
8 ordinary course of business does business a notice
9 which shall read as follows:
10 "NOTICE TO SELLERS OF FARM PRODUCTS
11 It is a criminal offense to sell farm products subject to
12 a security interest without making payment to the secured
13 party. You should notify the purchaser if there is a security
14 interest in the farm products you are selling."
15 Such notice shall be posted in a conspicuous manner and
16 shall be in contrasting type, large enough to be read from a
17 distance of 10 feet.
18 (Source: P.A. 83-69.)
19 (810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new)
20 SUBPART 2. PERFECTION
21 (810 ILCS 5/9-308) (from Ch. 26, par. 9-308)
22 Sec. 9-308. When security interest or agricultural lien
23 is perfected; continuity of perfection.
24 (a) Perfection of security interest. Except as
25 otherwise provided in this Section and Section 9-309, a
26 security interest is perfected if it has attached and all of
27 the applicable requirements for perfection in Sections 9-310
28 through 9-316 have been satisfied. A security interest is
29 perfected when it attaches if the applicable requirements are
30 satisfied before the security interest attaches.
31 (b) Perfection of agricultural lien. An agricultural
32 lien is perfected if it has become effective and all of the
SB1231 Enrolled -93- LRB9106284WHdv
1 applicable requirements for perfection in Section 9-310 have
2 been satisfied. An agricultural lien is perfected when it
3 becomes effective if the applicable requirements are
4 satisfied before the agricultural lien becomes effective.
5 (c) Continuous perfection; perfection by different
6 methods. A security interest or agricultural lien is
7 perfected continuously if it is originally perfected by one
8 method under this Article and is later perfected by another
9 method under this Article, without an intermediate period
10 when it was unperfected.
11 (d) Supporting obligation. Perfection of a security
12 interest in collateral also perfects a security interest in a
13 supporting obligation for the collateral.
14 (e) Lien securing right to payment. Perfection of a
15 security interest in a right to payment or performance also
16 perfects a security interest in a security interest,
17 mortgage, or other lien on personal or real property securing
18 the right.
19 (f) Security entitlement carried in securities account.
20 Perfection of a security interest in a securities account
21 also perfects a security interest in the security
22 entitlements carried in the securities account.
23 (g) Commodity contract carried in commodity account.
24 Perfection of a security interest in a commodity account also
25 perfects a security interest in the commodity contracts
26 carried in the commodity account. Purchase of Chattel Paper
27 and Instruments.
28 A purchaser of chattel paper or an instrument who gives
29 new value and takes possession of it in the ordinary course
30 of his business has priority over a security interest in the
31 chattel paper or instrument
32 (a) which is perfected under Section 9-304 (permissive
33 filing and temporary perfection) or under Section 9-306
34 (perfection as to proceeds) if he acts without knowledge that
SB1231 Enrolled -94- LRB9106284WHdv
1 the specific paper or instrument is subject to a security
2 interest; or
3 (b) which is claimed merely as proceeds of inventory
4 subject to a security interest (Section 9-306) even though he
5 knows that the specific paper or instrument is subject to the
6 security interest.
7 (Source: P. A. 77-2810.)
8 (810 ILCS 5/9-309) (from Ch. 26, par. 9-309)
9 Sec. 9-309. Security interest perfected upon attachment.
10 The following security interests are perfected when they
11 attach:
12 (1) a purchase-money security interest in consumer
13 goods, except as otherwise provided in Section 9-311(b)
14 with respect to consumer goods that are subject to a
15 statute or treaty described in Section 9-311(a);
16 (2) an assignment of accounts or payment
17 intangibles which does not by itself or in conjunction
18 with other assignments to the same assignee transfer a
19 significant part of the assignor's outstanding accounts
20 or payment intangibles;
21 (3) a sale of a payment intangible;
22 (4) a sale of a promissory note;
23 (5) a security interest created by the assignment
24 of a health-care-insurance receivable to the provider of
25 the health-care goods or services;
26 (6) a security interest arising under Section
27 2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor
28 obtains possession of the collateral;
29 (7) a security interest of a collecting bank
30 arising under Section 4-210;
31 (8) a security interest of an issuer or nominated
32 person arising under Section 5-118;
33 (9) a security interest arising in the delivery of
SB1231 Enrolled -95- LRB9106284WHdv
1 a financial asset under Section 9-206(c);
2 (10) a security interest in investment property
3 created by a broker or securities intermediary;
4 (11) a security interest in a commodity contract or
5 a commodity account created by a commodity intermediary;
6 (12) an assignment for the benefit of all creditors
7 of the transferor and subsequent transfers by the
8 assignee thereunder; and
9 (13) a security interest created by an assignment
10 of a beneficial interest in a decedent's estate.
11 Protection of purchasers of instruments, documents and
12 securities. Nothing in this Article limits the rights of
13 a holder in due course of a negotiable instrument
14 (Section 3-302) or a holder to whom a negotiable document
15 of title has been duly negotiated (Section 7-501) or a
16 protected purchaser of a security (Section 8-303) and
17 such holders or purchasers take priority over an earlier
18 security interest even though perfected. Filing under
19 this Article does not constitute notice of the security
20 interest to such holders or purchasers.
21 (Source: P.A. 89-364, eff. 1-1-96.)
22 (810 ILCS 5/9-310) (from Ch. 26, par. 9-310)
23 Sec. 9-310. When filing required to perfect security
24 interest or agricultural lien; security interests and
25 agricultural liens to which filing provisions do not apply.
26 (a) General rule: perfection by filing. Except as
27 otherwise provided in subsection (b) and Section 9-312(b), a
28 financing statement must be filed to perfect all security
29 interests and agricultural liens.
30 (b) Exceptions: filing not necessary. The filing of a
31 financing statement is not necessary to perfect a security
32 interest:
33 (1) that is perfected under Section 9-308(d), (e),
SB1231 Enrolled -96- LRB9106284WHdv
1 (f), or (g);
2 (2) that is perfected under Section 9-309 when it
3 attaches;
4 (3) in property subject to a statute, regulation,
5 or treaty described in Section 9-311(a);
6 (4) in goods in possession of a bailee which is
7 perfected under Section 9-312(d)(1) or (2);
8 (5) in certificated securities, documents, goods,
9 or instruments which is perfected without filing or
10 possession under Section 9-312(e), (f), or (g);
11 (6) in collateral in the secured party's possession
12 under Section 9-313;
13 (7) in a certificated security which is perfected
14 by delivery of the security certificate to the secured
15 party under Section 9-313;
16 (8) in deposit accounts, electronic chattel paper,
17 investment property, or letter-of-credit rights which is
18 perfected by control under Section 9-314;
19 (9) in proceeds which is perfected under Section
20 9-315; or
21 (10) that is perfected under Section 9-316.
22 (c) Assignment of perfected security interest. If a
23 secured party assigns a perfected security interest or
24 agricultural lien, a filing under this Article is not
25 required to continue the perfected status of the security
26 interest against creditors of and transferees from the
27 original debtor. Priority of certain liens arising by
28 operation of law.
29 When a person in the ordinary course of his business
30 furnishes services or materials with respect to goods subject
31 to a security interest, a lien upon goods in the possession
32 of such person given by statute or rule of law for such
33 materials or services takes priority over a perfected
34 security interest unless the lien is statutory and the
SB1231 Enrolled -97- LRB9106284WHdv
1 statute expressly provides otherwise.
2 (Source: Laws 1961, p. 2101.)
3 (810 ILCS 5/9-311) (from Ch. 26, par. 9-311)
4 Sec. 9-311. Perfection of security interests in property
5 subject to certain statutes, regulations, and treaties.
6 (a) Security interest subject to other law. Except as
7 otherwise provided in subsection (d), the filing of a
8 financing statement is not necessary or effective to perfect
9 a security interest in property subject to:
10 (1) a statute, regulation, or treaty of the United
11 States whose requirements for a security interest's
12 obtaining priority over the rights of a lien creditor
13 with respect to the property preempt Section 9-310(a);
14 (2) the Illinois Vehicle Code or the Boat
15 Registration and Safety Act; or
16 (3) a certificate-of-title statute of another
17 jurisdiction which provides for a security interest to be
18 indicated on the certificate as a condition or result of
19 the security interest's obtaining priority over the
20 rights of a lien creditor with respect to the property.
21 (b) Compliance with other law. Compliance with the
22 requirements of a statute, regulation, or treaty described in
23 subsection (a) for obtaining priority over the rights of a
24 lien creditor is equivalent to the filing of a financing
25 statement under this Article. Except as otherwise provided
26 in subsection (d) and Sections 9-313 and 9-316(d) and (e) for
27 goods covered by a certificate of title, a security interest
28 in property subject to a statute, regulation, or treaty
29 described in subsection (a) may be perfected only by
30 compliance with those requirements, and a security interest
31 so perfected remains perfected notwithstanding a change in
32 the use or transfer of possession of the collateral.
33 (c) Duration and renewal of perfection. Except as
SB1231 Enrolled -98- LRB9106284WHdv
1 otherwise provided in subsection (d) and Section 9-316(d) and
2 (e), duration and renewal of perfection of a security
3 interest perfected by compliance with the requirements
4 prescribed by a statute, regulation, or treaty described in
5 subsection (a) are governed by the statute, regulation, or
6 treaty. In other respects, the security interest is subject
7 to this Article.
8 (d) Inapplicability to certain inventory. During any
9 period in which collateral subject to a statute specified in
10 subsection (a)(2) is inventory held for sale or lease by a
11 person or leased by that person as lessor and that person is
12 in the business of selling or leasing goods of that kind,
13 this Section does not apply to a security interest in that
14 collateral created by that person as debtor. Alienability of
15 debtor's rights: judicial process.
16 The debtor's rights in collateral may be voluntarily or
17 involuntarily transferred (by way of sale, creation of a
18 security interest, attachment, levy, garnishment or other
19 judicial process) notwithstanding a provision in the security
20 agreement prohibiting any transfer or making the transfer
21 constitute a default.
22 (Source: Laws 1961, p. 2101.)
23 (810 ILCS 5/9-312) (from Ch. 26, par. 9-312)
24 Sec. 9-312. Perfection of security interests in chattel
25 paper, deposit accounts, documents, goods covered by
26 documents, instruments, investment property, letter-of-credit
27 rights, and money; perfection by permissive filing; temporary
28 perfection without filing or transfer of possession.
29 (a) Perfection by filing permitted. A security interest
30 in chattel paper, negotiable documents, instruments, or
31 investment property may be perfected by filing.
32 (b) Control or possession of certain collateral. Except
33 as otherwise provided in Section 9-315(c) and (d) for
SB1231 Enrolled -99- LRB9106284WHdv
1 proceeds:
2 (1) a security interest in a deposit account may be
3 perfected only by control under Section 9-314;
4 (2) and except as otherwise provided in Section
5 9-308(d), a security interest in a letter-of-credit right
6 may be perfected only by control under Section 9-314; and
7 (3) a security interest in money may be perfected
8 only by the secured party's taking possession under
9 Section 9-313.
10 (c) Goods covered by negotiable document. While goods
11 are in the possession of a bailee that has issued a
12 negotiable document covering the goods:
13 (1) a security interest in the goods may be
14 perfected by perfecting a security interest in the
15 document; and
16 (2) a security interest perfected in the document
17 has priority over any security interest that becomes
18 perfected in the goods by another method during that
19 time.
20 (d) Goods covered by nonnegotiable document. While
21 goods are in the possession of a bailee that has issued a
22 nonnegotiable document covering the goods, a security
23 interest in the goods may be perfected by:
24 (1) issuance of a document in the name of the
25 secured party;
26 (2) the bailee's receipt of notification of the
27 secured party's interest; or
28 (3) filing as to the goods.
29 (e) Temporary perfection: new value. A security
30 interest in certificated securities, negotiable documents, or
31 instruments is perfected without filing or the taking of
32 possession for a period of 20 days from the time it attaches
33 to the extent that it arises for new value given under an
34 authenticated security agreement.
SB1231 Enrolled -100- LRB9106284WHdv
1 (f) Temporary perfection: goods or documents made
2 available to debtor. A perfected security interest in a
3 negotiable document or goods in possession of a bailee, other
4 than one that has issued a negotiable document for the goods,
5 remains perfected for 20 days without filing if the secured
6 party makes available to the debtor the goods or documents
7 representing the goods for the purpose of:
8 (1) ultimate sale or exchange; or
9 (2) loading, unloading, storing, shipping,
10 transshipping, manufacturing, processing, or otherwise
11 dealing with them in a manner preliminary to their sale
12 or exchange.
13 (g) Temporary perfection: delivery of security
14 certificate or instrument to debtor. A perfected security
15 interest in a certificated security or instrument remains
16 perfected for 20 days without filing if the secured party
17 delivers the security certificate or instrument to the debtor
18 for the purpose of:
19 (1) ultimate sale or exchange; or
20 (2) presentation, collection, enforcement, renewal,
21 or registration of transfer.
22 (h) Expiration of temporary perfection. After the
23 20-day period specified in subsection (e), (f), or (g)
24 expires, perfection depends upon compliance with this
25 Article. Priorities Among Conflicting Security Interests in
26 the Same Collateral.
27 (1) The rules of priority stated in other Sections of
28 this Part and in the following Sections shall govern when
29 applicable: Section 4-210 with respect to the security
30 interests of collecting banks in items being collected,
31 accompanying documents and proceeds; Section 9-103 on
32 security interests related to other jurisdictions; Section
33 9-114 on consignments; Section 9-115 on security interests in
34 investment property.
SB1231 Enrolled -101- LRB9106284WHdv
1 (2) A perfected security interest in crops for new value
2 given to enable the debtor to produce the crops during the
3 production season and given not more than three months before
4 the crops become growing crops by planting or otherwise takes
5 priority over an earlier perfected security interest to the
6 extent that such earlier interest secures obligations due
7 more than six months before the crops become growing crops by
8 planting or otherwise, even though the person giving new
9 value had knowledge of the earlier security interest.
10 (3) A perfected purchase money security interest in
11 inventory has priority over a conflicting security interest
12 in the same inventory and also has priority in identifiable
13 cash proceeds received on or before the delivery of the
14 inventory to a buyer if
15 (a) the purchase money security interest is
16 perfected at the time the debtor receives possession of
17 the inventory; and
18 (b) the purchase money secured party gives
19 notification in writing to the holder of the conflicting
20 security interest if the holder had filed a financing
21 statement covering the same types of inventory (i) before
22 the date of the filing made by the purchase money secured
23 party, or (ii) before the beginning of the 21 day period
24 where the purchase money security interest is temporarily
25 perfected without filing or possession (subsection (5) of
26 Section 9-304); and
27 (c) the holder of the conflicting security interest
28 receives the notification within 5 years before the
29 debtor receives possession of the inventory; and
30 (d) the notification states that the person giving
31 the notice has or expects to acquire a purchase money
32 security interest in inventory of the debtor, describing
33 such inventory by item or type.
34 (4) A purchase money security interest in collateral
SB1231 Enrolled -102- LRB9106284WHdv
1 other than inventory has priority over a conflicting security
2 interest in the same collateral or its proceeds if the
3 purchase money security interest is perfected at the time the
4 debtor receives possession of the collateral or within 20
5 days thereafter.
6 (5) In all cases not governed by other rules stated in
7 this Section (including cases of purchase money security
8 interests which do not qualify for the special priorities set
9 forth in subsections (3) and (4) of this Section), priority
10 between conflicting security interests in the same collateral
11 shall be determined according to the following rules:
12 (a) Conflicting security interests rank according
13 to priority in time of filing or perfection. Priority
14 dates from the time a filing is first made covering the
15 collateral or the time the security interest is first
16 perfected, whichever is earlier, provided that there is
17 no period thereafter when there is neither filing nor
18 perfection.
19 (b) So long as conflicting security interests are
20 unperfected, the first to attach has priority.
21 (6) For the purposes of subsection (5) a date of filing
22 or perfection as to collateral is also a date of filing or
23 perfection as to proceeds.
24 (7) If future advances are made while a security
25 interest is perfected by filing, the taking of possession or
26 under Section 9-115 or 9-116 on investment property, the
27 security interest has the same priority for the purposes of
28 subsection (5) with respect to the future advances as it does
29 with respect to the first advance. If a commitment is made
30 before or while the security interest is so perfected, the
31 security interest has the same priority with respect to
32 advances made pursuant thereto. In other cases a perfected
33 security interest has priority from the date the advance is
34 made.
SB1231 Enrolled -103- LRB9106284WHdv
1 (Source: P.A. 89-364, eff. 1-1-96.)
2 (810 ILCS 5/9-313) (from Ch. 26, par. 9-313)
3 Sec. 9-313. When possession by or delivery to secured
4 party perfects security interest without filing.
5 (a) Perfection by possession or delivery. Except as
6 otherwise provided in subsection (b), a secured party may
7 perfect a security interest in negotiable documents, goods,
8 instruments, money, or tangible chattel paper by taking
9 possession of the collateral. A secured party may perfect a
10 security interest in certificated securities by taking
11 delivery of the certificated securities under Section 8-301.
12 (b) Goods covered by certificate of title. With respect
13 to goods covered by a certificate of title issued by this
14 State, a secured party may perfect a security interest in the
15 goods by taking possession of the goods only in the
16 circumstances described in Section 9-316(d).
17 (c) Collateral in possession of person other than
18 debtor. With respect to collateral other than certificated
19 securities and goods covered by a document, a secured party
20 takes possession of collateral in the possession of a person
21 other than the debtor, the secured party, or a lessee of the
22 collateral from the debtor in the ordinary course of the
23 debtor's business, when:
24 (1) the person in possession authenticates a record
25 acknowledging that it holds possession of the collateral
26 for the secured party's benefit; or
27 (2) the person takes possession of the collateral
28 after having authenticated a record acknowledging that it
29 will hold possession of collateral for the secured
30 party's benefit.
31 (d) Time of perfection by possession; continuation of
32 perfection. If perfection of a security interest depends upon
33 possession of the collateral by a secured party, perfection
SB1231 Enrolled -104- LRB9106284WHdv
1 occurs no earlier than the time the secured party takes
2 possession and continues only while the secured party retains
3 possession.
4 (e) Time of perfection by delivery; continuation of
5 perfection. A security interest in a certificated security in
6 registered form is perfected by delivery when delivery of the
7 certificated security occurs under Section 8-301 and remains
8 perfected by delivery until the debtor obtains possession of
9 the security certificate.
10 (f) Acknowledgment not required. A person in possession
11 of collateral is not required to acknowledge that it holds
12 possession for a secured party's benefit.
13 (g) Effectiveness of acknowledgment; no duties or
14 confirmation. If a person acknowledges that it holds
15 possession for the secured party's benefit:
16 (1) the acknowledgment is effective under
17 subsection (c) or Section 8-301(a), even if the
18 acknowledgment violates the rights of a debtor; and
19 (2) unless the person otherwise agrees or law other
20 than this Article otherwise provides, the person does not
21 owe any duty to the secured party and is not required to
22 confirm the acknowledgment to another person.
23 (h) Secured party's delivery to person other than
24 debtor. A secured party having possession of collateral does
25 not relinquish possession by delivering the collateral to a
26 person other than the debtor or a lessee of the collateral
27 from the debtor in the ordinary course of the debtor's
28 business if the person was instructed before the delivery or
29 is instructed contemporaneously with the delivery:
30 (1) to hold possession of the collateral for the
31 secured party's benefit; or
32 (2) to redeliver the collateral to the secured
33 party.
34 (i) Effect of delivery under subsection (h); no duties
SB1231 Enrolled -105- LRB9106284WHdv
1 or confirmation. A secured party does not relinquish
2 possession, even if a delivery under subsection (h) violates
3 the rights of a debtor. A person to which collateral is
4 delivered under subsection (h) does not owe any duty to the
5 secured party and is not required to confirm the delivery to
6 another person unless the person otherwise agrees or law
7 other than this Article otherwise provides.
8 Priority of Security Interests in Fixtures.
9 (1) In this Section and in the provisions of Part 4 of
10 this Article referring to fixture filing, unless the context
11 otherwise requires
12 (a) Goods are "fixtures" when they become so
13 related to particular real estate that an interest in
14 them arises under real estate law
15 (b) A "fixture filing" is the filing in the office
16 where a mortgage on the real estate would be filed or
17 recorded of a financing statement covering goods which
18 are or are to become fixtures and conforming to the
19 requirements of subsection (5) of Section 9-402
20 (c) A mortgage is a "construction mortgage" to the
21 extent that it secures an obligation incurred for the
22 construction of an improvement on land including the
23 acquisition cost of the land, if the recorded writing so
24 indicates.
25 (2) A security interest under this Article may be
26 created in goods which are fixtures or may continue in goods
27 which become fixtures, but no security interest exists under
28 this Article in ordinary building materials incorporated into
29 an improvement on land.
30 (3) This Article does not prevent creation of an
31 encumbrance upon fixtures pursuant to real estate law.
32 (4) A perfected security interest in fixtures has
33 priority over the conflicting interest of an encumbrancer or
34 owner of the real estate where
SB1231 Enrolled -106- LRB9106284WHdv
1 (a) the security interest is a purchase money
2 security interest, the interest of the encumbrancer or
3 owner arises before the goods become fixtures, the
4 security interest is perfected by a fixture filing before
5 the goods become fixtures or within 10 days thereafter,
6 and the debtor has an interest of record in the real
7 estate or is in possession of the real estate; or
8 (b) the security interest is perfected by a fixture
9 filing before the interest of the encumbrancer or owner
10 is of record, the security interest has priority over any
11 conflicting interest of a predecessor in title of the
12 encumbrancer or owner, and the debtor has an interest of
13 record in the real estate or is in possession of the real
14 estate; or
15 (c) the fixtures are readily removable factory or
16 office machines or readily removable replacements of
17 domestic appliances which are consumer goods, and before
18 the goods become fixtures the security interest is
19 perfected by any method permitted by this Article; or
20 (d) the conflicting interest is a lien on the real
21 estate obtained by legal or equitable proceedings after
22 the security interest was perfected by any method
23 permitted by this Article.
24 (5) A security interest in fixtures, whether or not
25 perfected, has priority over the conflicting interest of an
26 encumbrancer or owner of the real estate where
27 (a) the encumbrancer or owner has consented in
28 writing to the security interest or has disclaimed an
29 interest in the goods as fixtures; or
30 (b) the debtor has a right to remove the goods as
31 against the encumbrancer or owner. If the debtor's right
32 terminates, the priority of the security interest
33 continues for a reasonable time.
34 (6) Notwithstanding paragraph (a) of subsection (4) but
SB1231 Enrolled -107- LRB9106284WHdv
1 otherwise subject to subsections (4) and (5), a security
2 interest in fixtures is subordinate to a construction
3 mortgage recorded before the goods become fixtures if the
4 goods become fixtures before the completion of the
5 construction. To the extent that it is given to refinance a
6 construction mortgage, a mortgage has this priority to the
7 same extent as the construction mortgage.
8 (7) In cases not within the preceding subsections, a
9 security interest in fixtures is subordinate to the
10 conflicting interest of an encumbrancer or owner of the
11 related real estate who is not the debtor.
12 (8) When the secured party has priority over all owners
13 and encumbrancers of the real estate, he may, on default,
14 subject to the provisions of Part 5, remove his collateral
15 from the real estate but he must reimburse any encumbrancer
16 or owner of the real estate who is not the debtor and who has
17 not otherwise agreed for the cost of repair of any physical
18 injury, but not for any diminution in value of the real
19 estate caused by the absence of the goods removed or by any
20 necessity of replacing them. A person entitled to
21 reimbursement may refuse permission to remove until the
22 secured party gives adequate security for the performance of
23 this obligation.
24 (Source: P. A. 78-238; revised 10-31-98.)
25 (810 ILCS 5/9-314) (from Ch. 26, par. 9-314)
26 Sec. 9-314. Perfection by control.
27 (a) Perfection by control. A security interest in
28 investment property, deposit accounts, letter-of-credit
29 rights, or electronic chattel paper may be perfected by
30 control of the collateral under Section 9-104, 9-105, 9-106,
31 or 9-107.
32 (b) Specified collateral: time of perfection by
33 control; continuation of perfection. A security interest in
SB1231 Enrolled -108- LRB9106284WHdv
1 deposit accounts, electronic chattel paper, or
2 letter-of-credit rights is perfected by control under Section
3 9-104, 9-105, or 9-107 when the secured party obtains control
4 and remains perfected by control only while the secured party
5 retains control.
6 (c) Investment property: time of perfection by control;
7 continuation of perfection. A security interest in
8 investment property is perfected by control under Section
9 9-106 from the time the secured party obtains control and
10 remains perfected by control until:
11 (1) the secured party does not have control; and
12 (2) one of the following occurs:
13 (A) if the collateral is a certificated
14 security, the debtor has or acquires possession of
15 the security certificate;
16 (B) if the collateral is an uncertificated
17 security, the issuer has registered or registers the
18 debtor as the registered owner; or
19 (C) if the collateral is a security
20 entitlement, the debtor is or becomes the
21 entitlement holder. Accessions.
22 (1) A security interest in goods which attaches before
23 they are installed in or affixed to other goods takes
24 priority as to the goods installed or affixed (called in this
25 section "accessions") over the claims of all persons to the
26 whole except as stated in subsection (3) and subject to
27 Section 9--315(1).
28 (2) A security interest which attaches to goods after
29 they become part of a whole is valid against all persons
30 subsequently acquiring interests in the whole except as
31 stated in subsection (3) but is invalid against any person
32 with an interest in the whole at the time the security
33 interest attaches to the goods who has not in writing
34 consented to the security interest or disclaimed an interest
SB1231 Enrolled -109- LRB9106284WHdv
1 in the goods as part of the whole.
2 (3) The security interests described in subsections (1)
3 and (2) do not take priority over
4 (a) a subsequent purchaser for value of any
5 interest in the whole; or
6 (b) a creditor with a lien on the whole
7 subsequently obtained by judicial proceedings; or
8 (c) a creditor with a prior perfected security
9 interest in the whole to the extent that he makes subsequent
10 advances if the subsequent purchase is made, the lien by
11 judicial proceedings obtained or the subsequent advance under
12 the prior perfected security interest is made or contracted
13 for without knowledge of the security interest and before it
14 is perfected. A purchaser of the whole at a foreclosure sale
15 other than the holder of a perfected security interest
16 purchasing at his own foreclosure sale is a subsequent
17 purchaser within this Section.
18 (4) When under subsections (1) or (2) and (3) a secured
19 party has an interest in accessions which has priority over
20 the claims of all persons who have interests in the whole, he
21 may on default subject to the provisions of Part 5 remove his
22 collateral from the whole but he must reimburse any
23 encumbrancer or owner of the whole who is not the debtor and
24 who has not otherwise agreed for the cost of repair of any
25 physical injury but not for any diminution in value of the
26 whole caused by the absence of the goods removed or by any
27 necessity for replacing them. A person entitled to
28 reimbursement may refuse permission to remove until the
29 secured party gives adequate security for the performance of
30 this obligation.
31 (Source: Laws 1961, p. 2101.)
32 (810 ILCS 5/9-315) (from Ch. 26, par. 9-315)
33 Sec. 9-315. Secured party's rights on disposition of
SB1231 Enrolled -110- LRB9106284WHdv
1 collateral and in proceeds.
2 (a) Disposition of collateral: continuation of security
3 interest or agricultural lien; proceeds. Except as otherwise
4 provided in this Article and in Section 2-403(2):
5 (1) a security interest or agricultural lien
6 continues in collateral notwithstanding sale, lease,
7 license, exchange, or other disposition thereof unless
8 the secured party authorized the disposition free of the
9 security interest or agricultural lien; and
10 (2) a security interest attaches to any
11 identifiable proceeds of collateral.
12 (b) When commingled proceeds identifiable. Proceeds
13 that are commingled with other property are identifiable
14 proceeds:
15 (1) if the proceeds are goods, to the extent
16 provided by Section 9-336; and
17 (2) if the proceeds are not goods, to the extent
18 that the secured party identifies the proceeds by a
19 method of tracing, including application of equitable
20 principles, that is permitted under law other than this
21 Article with respect to commingled property of the type
22 involved.
23 (c) Perfection of security interest in proceeds. A
24 security interest in proceeds is a perfected security
25 interest if the security interest in the original collateral
26 was perfected.
27 (d) Continuation of perfection. A perfected security
28 interest in proceeds becomes unperfected on the 21st day
29 after the security interest attaches to the proceeds unless:
30 (1) the following conditions are satisfied:
31 (A) a filed financing statement covers the
32 original collateral;
33 (B) the proceeds are collateral in which a
34 security interest may be perfected by filing in the
SB1231 Enrolled -111- LRB9106284WHdv
1 office in which the financing statement has been
2 filed; and
3 (C) the proceeds are not acquired with cash
4 proceeds;
5 (2) the proceeds are identifiable cash proceeds; or
6 (3) the security interest in the proceeds is
7 perfected other than under subsection (c) when the
8 security interest attaches to the proceeds or within 20
9 days thereafter.
10 (e) When perfected security interest in proceeds becomes
11 unperfected. If a filed financing statement covers the
12 original collateral, a security interest in proceeds which
13 remains perfected under subsection (d)(1) becomes unperfected
14 at the later of:
15 (1) when the effectiveness of the filed financing
16 statement lapses under Section 9-515 or is terminated
17 under Section 9-513; or
18 (2) the 21st day after the security interest
19 attaches to the proceeds. Priority when goods are
20 commingled or processed.
21 (1) If a security interest in goods was perfected and
22 subsequently the goods or a part thereof have become part of
23 a product or mass, the security interest continues in the
24 product or mass if
25 (a) the goods are so manufactured, processed,
26 assembled or commingled that their identity is lost in the
27 product or mass; or
28 (b) a financing statement covering the original
29 goods also covers the product into which the goods have been
30 manufactured, processed or assembled. In a case to which
31 paragraph (b) applies, no separate security interest in that
32 part of the original goods which has been manufactured,
33 processed or assembled into the product may be claimed under
34 Section 9--314.
SB1231 Enrolled -112- LRB9106284WHdv
1 (2) When under subsection (1) more than one security
2 interest attaches to the product or mass, they rank equally
3 according to the ratio that the cost of the goods to which
4 each interest originally attached bears to the cost of the
5 total product or mass.
6 (Source: Laws 1961, p. 2101.)
7 (810 ILCS 5/9-315.01 new)
8 Sec. 9-315.01. Debtor disposing of collateral and
9 failing to pay secured party amount due under security
10 agreement; penalties for violation.
11 (1) It is unlawful for a debtor under the terms of a
12 security agreement (a) who has no right of sale or other
13 disposition of the collateral or (b) who has a right of sale
14 or other disposition of the collateral and is to account to
15 the secured party for the proceeds of any sale or other
16 disposition of the collateral, to sell or otherwise dispose
17 of the collateral and willfully and wrongfully to fail to pay
18 the secured party the amount of said proceeds due under the
19 security agreement. Failure to pay such proceeds to the
20 secured party within 10 days after the sale or other
21 disposition of the collateral is prima facie evidence of a
22 willful and wanton failure to pay.
23 (2) An individual convicted of a violation of this
24 Section shall be guilty of a Class 3 felony.
25 (3) A corporation convicted of a violation of this
26 Section shall be guilty of a business offense and shall be
27 fined not less than $2,000 nor more than $10,000.
28 (4) In the event the debtor under the terms of a
29 security agreement is a corporation or a partnership, any
30 officer, director, manager, or managerial agent of the debtor
31 who violates this Section or causes the debtor to violate
32 this Section shall be guilty of a Class 3 felony.
SB1231 Enrolled -113- LRB9106284WHdv
1 (810 ILCS 5/9-315.02 new)
2 Sec. 315.02. Disposal of collateral by debtor to persons
3 other than those previously disclosed to secured
4 party-penalties for violation-defense.
5 (1) Where, pursuant to Section 9-205.1, a secured party
6 has required that before the debtor sells or otherwise
7 disposes of collateral in the debtor's possession he disclose
8 to the secured party the persons to whom he desires to sell
9 or otherwise dispose of such collateral, it is unlawful for
10 the debtor to sell or otherwise dispose of the collateral to
11 a person other than a person so disclosed to the secured
12 party.
13 (2) An individual convicted of a violation of this
14 Section shall be guilty of a Class A misdemeanor.
15 (3) A corporation convicted of a violation of this
16 Section shall be guilty of a business offense and shall be
17 fined not less than $2,000 nor more than $10,000.
18 (4) In the event the debtor under the terms of a
19 security agreement is a corporation or a partnership, any
20 officer, director, manager, or managerial agent of the debtor
21 who violates this Section or causes the debtor to violate
22 this Section shall be guilty of a Class A misdemeanor.
23 (5) It is an affirmative defense to a prosecution for
24 the violation of this Section that the debtor has paid to the
25 secured party the proceeds from the sale or other disposition
26 of the collateral within 10 days after such sale or
27 disposition.
28 (810 ILCS 5/9-316) (from Ch. 26, par. 9-316)
29 Sec. 9-316. Continued perfection of security interest
30 following change in governing law.
31 (a) General rule: effect on perfection of change in
32 governing law. A security interest perfected pursuant to the
33 law of the jurisdiction designated in Section 9-301(1) or
SB1231 Enrolled -114- LRB9106284WHdv
1 9-305(c) remains perfected until the earliest of:
2 (1) the time perfection would have ceased under the
3 law of that jurisdiction;
4 (2) the expiration of four months after a change of
5 the debtor's location to another jurisdiction; or
6 (3) the expiration of one year after a transfer of
7 collateral to a person that thereby becomes a debtor and
8 is located in another jurisdiction.
9 (b) Security interest perfected or unperfected under law
10 of new jurisdiction. If a security interest described in
11 subsection (a) becomes perfected under the law of the other
12 jurisdiction before the earliest time or event described in
13 that subsection, it remains perfected thereafter. If the
14 security interest does not become perfected under the law of
15 the other jurisdiction before the earliest time or event, it
16 becomes unperfected and is deemed never to have been
17 perfected as against a purchaser of the collateral for value.
18 (c) Possessory security interest in collateral moved to
19 new jurisdiction. A possessory security interest in
20 collateral, other than goods covered by a certificate of
21 title and as-extracted collateral consisting of goods,
22 remains continuously perfected if:
23 (1) the collateral is located in one jurisdiction
24 and subject to a security interest perfected under the
25 law of that jurisdiction;
26 (2) thereafter the collateral is brought into
27 another jurisdiction; and
28 (3) upon entry into the other jurisdiction, the
29 security interest is perfected under the law of the other
30 jurisdiction.
31 (d) Goods covered by certificate of title from this
32 State. Except as otherwise provided in subsection (e), a
33 security interest in goods covered by a certificate of title
34 which is perfected by any method under the law of another
SB1231 Enrolled -115- LRB9106284WHdv
1 jurisdiction when the goods become covered by a certificate
2 of title from this State remains perfected until the security
3 interest would have become unperfected under the law of the
4 other jurisdiction had the goods not become so covered.
5 (e) When subsection (d) security interest becomes
6 unperfected against purchasers. A security interest
7 described in subsection (d) becomes unperfected as against a
8 purchaser of the goods for value and is deemed never to have
9 been perfected as against a purchaser of the goods for value
10 if the applicable requirements for perfection under Section
11 9-311(b) or 9-313 are not satisfied before the earlier of:
12 (1) the time the security interest would have
13 become unperfected under the law of the other
14 jurisdiction had the goods not become covered by a
15 certificate of title from this State; or
16 (2) the expiration of four months after the goods
17 had become so covered.
18 (f) Change in jurisdiction of bank, issuer, nominated
19 person, securities intermediary, or commodity intermediary.
20 A security interest in deposit accounts, letter-of-credit
21 rights, or investment property which is perfected under the
22 law of the bank's jurisdiction, the issuer's jurisdiction, a
23 nominated person's jurisdiction, the securities
24 intermediary's jurisdiction, or the commodity intermediary's
25 jurisdiction, as applicable, remains perfected until the
26 earlier of:
27 (1) the time the security interest would have
28 become unperfected under the law of that jurisdiction; or
29 (2) the expiration of four months after a change of
30 the applicable jurisdiction to another jurisdiction.
31 (g) Subsection (f) security interest perfected or
32 unperfected under law of new jurisdiction. If a security
33 interest described in subsection (f) becomes perfected under
34 the law of the other jurisdiction before the earlier of the
SB1231 Enrolled -116- LRB9106284WHdv
1 time or the end of the period described in that subsection,
2 it remains perfected thereafter. If the security interest
3 does not become perfected under the law of the other
4 jurisdiction before the earlier of that time or the end of
5 that period, it becomes unperfected and is deemed never to
6 have been perfected as against a purchaser of the collateral
7 for value. Priority subject to subordination.
8 Nothing in this Article prevents subordination by
9 agreement by any person entitled to priority.
10 (Source: Laws 1961, p. 2101.)
11 (810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new)
12 SUBPART 3. PRIORITY
13 (810 ILCS 5/9-317) (from Ch. 26, par. 9-317)
14 Sec. 9-317. Interests that take priority over or take
15 free of security interest or agricultural lien.
16 (a) Conflicting security interests and rights of lien
17 creditors. A security interest or agricultural lien is
18 subordinate to the rights of:
19 (1) a person entitled to priority under Section
20 9-322; and
21 (2) except as otherwise provided in subsection (e)
22 or (f), a person that becomes a lien creditor before the
23 earlier of the time:
24 (A) the security interest or agricultural lien
25 is perfected; or
26 (B) one of the conditions specified in Section
27 9-203(b)(3) is met and a financing statement
28 covering the collateral is filed.
29 (b) Buyers that receive delivery. Except as otherwise
30 provided in subsection (e), a buyer, other than a secured
31 party, of tangible chattel paper, documents, goods,
32 instruments, or a security certificate takes free of a
SB1231 Enrolled -117- LRB9106284WHdv
1 security interest or agricultural lien if the buyer gives
2 value and receives delivery of the collateral without
3 knowledge of the security interest or agricultural lien and
4 before it is perfected.
5 (c) Lessees that receive delivery. Except as otherwise
6 provided in subsection (e), a lessee of goods takes free of a
7 security interest or agricultural lien if the lessee gives
8 value and receives delivery of the collateral without
9 knowledge of the security interest or agricultural lien and
10 before it is perfected.
11 (d) Licensees and buyers of certain collateral. A
12 licensee of a general intangible or a buyer, other than a
13 secured party, of accounts, electronic chattel paper, general
14 intangibles, or investment property other than a certificated
15 security takes free of a security interest if the licensee or
16 buyer gives value without knowledge of the security interest
17 and before it is perfected.
18 (e) Purchase-money security interest. Except as
19 otherwise provided in Sections 9-320 and 9-321, if a person
20 files a financing statement with respect to a purchase-money
21 security interest before or within 20 days after the debtor
22 receives delivery of the collateral, the security interest
23 takes priority over the rights of a buyer, lessee, or lien
24 creditor which arise between the time the security interest
25 attaches and the time of filing.
26 (f) Public deposits. An unperfected security interest
27 shall take priority over the rights of a lien creditor if (i)
28 the lien creditor is a trustee or receiver of a bank or
29 acting in furtherance of its supervisory authority over such
30 bank and (ii) a security interest is granted by the bank to
31 secure a deposit of public funds with the bank or a
32 repurchase agreement with the bank pursuant to the Government
33 Securities Act of 1986, as amended. Secured party not
34 obligated on contract of debtor.
SB1231 Enrolled -118- LRB9106284WHdv
1 The mere existence of a security interest or authority
2 given to the debtor to dispose of or use collateral does not
3 impose contract or tort liability upon the secured party for
4 the debtor's acts or omissions.
5 (Source: Laws 1961, p. 2101.)
6 (810 ILCS 5/9-318) (from Ch. 26, par. 9-318)
7 Sec. 9-318. No interest retained in right to payment
8 that is sold; rights and title of seller of account or
9 chattel paper with respect to creditors and purchasers.
10 (a) Seller retains no interest. A debtor that has sold
11 an account, chattel paper, payment intangible, or promissory
12 note does not retain a legal or equitable interest in the
13 collateral sold.
14 (b) Deemed rights of debtor if buyer's security interest
15 unperfected. For purposes of determining the rights of
16 creditors of, and purchasers for value of an account or
17 chattel paper from, a debtor that has sold an account or
18 chattel paper, while the buyer's security interest is
19 unperfected, the debtor is deemed to have rights and title to
20 the account or chattel paper identical to those the debtor
21 sold. Defenses Against Assignee; Modification of Contract
22 After Notification of Assignment; Term Prohibiting Assignment
23 Ineffective; Identification and Proof of Assignment.
24 (1) Unless an account debtor has made an enforceable
25 agreement not to assert defenses or claims arising out of a
26 sale as provided in Section 9-- 206 the rights of an assignee
27 are subject to
28 (a) all the terms of the contract between the
29 account debtor and assignor and any defense or claim arising
30 therefrom; and
31 (b) any other defense or claim of the account
32 debtor against the assignor which accrues before the account
33 debtor receives notification of the assignment.
SB1231 Enrolled -119- LRB9106284WHdv
1 (2) So far as the right to payment or a part thereof
2 under an assigned contract has not been fully earned by
3 performance, and notwithstanding notification of the
4 assignment, any modification of or substitution for the
5 contract made in good faith and in accordance with reasonable
6 commercial standards is effective against an assignee unless
7 the account debtor has otherwise agreed but the assignee
8 acquires corresponding rights under the modified or
9 substituted contract. The assignment may provide that such
10 modification or substitution is a breach by the assignor.
11 (3) The account debtor is authorized to pay the assignor
12 until the account debtor receives notification that the
13 amount due or to become due has been assigned and that
14 payment is to be made to the assignee. A notification which
15 does not reasonably identify the rights assigned is
16 ineffective. If requested by the account debtor, the assignee
17 must seasonably furnish reasonable proof that the assignment
18 has been made and unless he does so the account debtor may
19 pay the assignor.
20 (4) A term in any contract between an account debtor and
21 an assignor is ineffective if it prohibits assignment of an
22 account or prohibits creation of a security interest in a
23 general intangible for money due or to become due or requires
24 the account debtor's consent to such assignment or security
25 interest.
26 (Source: P. A. 77-2810.)
27 (810 ILCS 5/9-319 new)
28 Sec. 9-319. Rights and title of consignee with respect
29 to creditors and purchasers.
30 (a) Consignee has consignor's rights. Except as
31 otherwise provided in subsection (b), for purposes of
32 determining the rights of creditors of, and purchasers for
33 value of goods from, a consignee, while the goods are in the
SB1231 Enrolled -120- LRB9106284WHdv
1 possession of the consignee, the consignee is deemed to have
2 rights and title to the goods identical to those the
3 consignor had or had power to transfer.
4 (b) Applicability of other law. For purposes of
5 determining the rights of a creditor of a consignee, law
6 other than this Article determines the rights and title of a
7 consignee while goods are in the consignee's possession if,
8 under this Part, a perfected security interest held by the
9 consignor would have priority over the rights of the
10 creditor.
11 (810 ILCS 5/9-320 new)
12 Sec. 9-320. Buyer of goods and farm products.
13 (a) Buyer in ordinary course of business. Except as
14 otherwise provided in subsections (e) and (f), a buyer in the
15 ordinary course of business takes free of a security interest
16 created by the buyer's seller, even if the security interest
17 is perfected and the buyer knows of its existence.
18 (b) Buyer of consumer goods. Except as otherwise
19 provided in subsection (e), a buyer of goods from a person
20 who used or bought the goods for use primarily for personal,
21 family, or household purposes takes free of a security
22 interest, even if perfected, if the buyer buys:
23 (1) without knowledge of the security interest;
24 (2) for value;
25 (3) primarily for the buyer's personal, family, or
26 household purposes; and
27 (4) before the filing of a financing statement
28 covering the goods.
29 (c) Effectiveness of filing for subsection (b). To the
30 extent that it affects the priority of a security interest
31 over a buyer of goods under subsection (b), the period of
32 effectiveness of a filing made in the jurisdiction in which
33 the seller is located is governed by Section 9-316(a) and
SB1231 Enrolled -121- LRB9106284WHdv
1 (b).
2 (d) Buyer in ordinary course of business at wellhead or
3 minehead. A buyer in ordinary course of business buying oil,
4 gas, or other minerals at the wellhead or minehead or after
5 extraction takes free of an interest arising out of an
6 encumbrance.
7 (e) Possessory security interest not affected.
8 Subsections (a) and (b) do not affect a security interest in
9 goods in the possession of the secured party under Section
10 9-313.
11 (f) Buyer of farm products.
12 (1) A buyer of farm products takes subject to a
13 security interest created by the seller if:
14 (A) within one year before the sale of the
15 farm products, the buyer has received from the
16 secured party or the seller written notice of the
17 security interest organized according to farm
18 products that:
19 (i) is an original or reproduced copy
20 thereof;
21 (ii) contains: (a) the name and address
22 of the secured party; (b) the name and address
23 of the person indebted to the secured party;
24 (c) the social security number of the debtor
25 or, in the case of a debtor doing business
26 other than as an individual, the Internal
27 Revenue Service taxpayer identification number
28 of such debtor; (d) a description of the farm
29 products subject to the security interest
30 created by the debtor, including the amount of
31 such products where applicable, crop year,
32 county, and a reasonable description of the
33 property;
34 (iii) must be amended in writing, within
SB1231 Enrolled -122- LRB9106284WHdv
1 3 months, similarly signed and transmitted, to
2 reflect material changes;
3 (iv) will lapse on either the expiration
4 period of the statement or the transmission of
5 a notice signed by the secured party that the
6 statement has lapsed, whichever occurs first;
7 and
8 (v) sets forth any payment obligations
9 imposed on the buyer by the secured party as
10 conditions for waiver or release of the
11 security interest; and
12 (B) the buyer has failed to perform the
13 payment obligations.
14 (2) For the purposes of this subsection (f), a
15 buyer of farm products has received notice from the
16 secured party or seller when written notice of the
17 security interest is sent to the buyer by registered or
18 certified mail.
19 (810 ILCS 5/9-320.1 new)
20 Sec. 9-320.1. Liability of commission merchant or
21 selling agent engaged in sale of livestock or other farm
22 products to holder of security interest.
23 (a) A commission merchant or selling agent who sells a
24 farm product for others shall be subject to a security
25 interest created by the seller in such farm product if:
26 (1) within one year before the sale of the farm
27 products, the buyer has received from the secured party
28 or the seller written notice of the security interest
29 organized according to farm products that:
30 (A) is an original or reproduced copy thereof;
31 (B) contains: (i) the name and address of the
32 secured party; (ii) the name and address of the
33 person indebted to the secured party; (iii) the
SB1231 Enrolled -123- LRB9106284WHdv
1 social security number of the debtor or, in case of
2 a debtor doing business other than as an individual,
3 the Internal Revenue Service taxpayer identification
4 number of such debtor; (iv) a description of the
5 farm products subject to the security interest
6 created by the debtor, including the amount of such
7 products where applicable, crop year, county, and a
8 reasonable description of the property;
9 (C) must be amended in writing, within 3
10 months, similarly signed and transmitted, to reflect
11 material changes;
12 (D) will lapse on either the expiration period
13 of the statement or the transmission of a notice
14 signed by the secured party that the statement has
15 lapsed, whichever occurs first; and
16 (E) sets forth any payment obligations imposed
17 on the buyer by the secured party as conditions for
18 waiver or release of the security interest; and
19 (2) the commission merchant or selling agent has
20 failed to perform the payment obligations.
21 (b) For the purposes of this Section, a commission
22 merchant or selling agent has received notice from the
23 secured party or seller when written notice of the security
24 interest is sent to the commission merchant or selling agent
25 by registered or certified mail.
26 (810 ILCS 5/9-320.2 new)
27 Sec. 9-320.2. Notice to seller of farm products. A
28 commission merchant or selling agent who sells farm products
29 for others, and any person buying farm products in the
30 ordinary course of business from a person engaged in farming
31 operations, shall post at each licensed location where the
32 merchant, agent, or person buying farm products in the
33 ordinary course of business does business a notice that shall
SB1231 Enrolled -124- LRB9106284WHdv
1 read as follows:
2 "NOTICE TO SELLERS OF FARM PRODUCTS
3 It is a criminal offense to sell farm products subject to
4 a security interest without making payment to the secured
5 party. You should notify the purchaser if there is a
6 security interest in the farm products you are selling.".
7 The notice shall be posted in a conspicuous manner and
8 shall be in contrasting type, large enough to be read from a
9 distance of 10 feet.
10 (810 ILCS 5/9-321 new)
11 Sec. 9-321. Licensee of general intangible and lessee of
12 goods in ordinary course of business.
13 (a) "Licensee in ordinary course of business." In this
14 Section, "licensee in ordinary course of business" means a
15 person that becomes a licensee of a general intangible in
16 good faith, without knowledge that the license violates the
17 rights of another person in the general intangible, and in
18 the ordinary course from a person in the business of
19 licensing general intangibles of that kind. A person becomes
20 a licensee in the ordinary course if the license to the
21 person comports with the usual or customary practices in the
22 kind of business in which the licensor is engaged or with the
23 licensor's own usual or customary practices.
24 (b) Rights of licensee in ordinary course of business.
25 A licensee in ordinary course of business takes its rights
26 under a nonexclusive license free of a security interest in
27 the general intangible created by the licensor, even if the
28 security interest is perfected and the licensee knows of its
29 existence.
30 (c) Rights of lessee in ordinary course of business. A
31 lessee in ordinary course of business takes its leasehold
32 interest free of a security interest in the goods created by
33 the lessor, even if the security interest is perfected and
SB1231 Enrolled -125- LRB9106284WHdv
1 the lessee knows of its existence.
2 (810 ILCS 5/9-322 new)
3 Sec. 9-322. Priorities among conflicting security
4 interests in and agricultural liens on same collateral.
5 (a) General priority rules. Except as otherwise
6 provided in this Section, priority among conflicting security
7 interests and agricultural liens in the same collateral is
8 determined according to the following rules:
9 (1) Conflicting perfected security interests and
10 agricultural liens rank according to priority in time of
11 filing or perfection. Priority dates from the earlier of
12 the time a filing covering the collateral is first made
13 or the security interest or agricultural lien is first
14 perfected, if there is no period thereafter when there is
15 neither filing nor perfection.
16 (2) A perfected security interest or agricultural
17 lien has priority over a conflicting unperfected security
18 interest or agricultural lien.
19 (3) The first security interest or agricultural
20 lien to attach or become effective has priority if
21 conflicting security interests and agricultural liens are
22 unperfected.
23 (b) Time of perfection: proceeds and supporting
24 obligations. For the purposes of subsection (a)(1):
25 (1) the time of filing or perfection as to a
26 security interest in collateral is also the time of
27 filing or perfection as to a security interest in
28 proceeds; and
29 (2) the time of filing or perfection as to a
30 security interest in collateral supported by a supporting
31 obligation is also the time of filing or perfection as to
32 a security interest in the supporting obligation.
33 (c) Special priority rules: proceeds and supporting
SB1231 Enrolled -126- LRB9106284WHdv
1 obligations. Except as otherwise provided in subsection (f),
2 a security interest in collateral which qualifies for
3 priority over a conflicting security interest under Section
4 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a
5 conflicting security interest in:
6 (1) any supporting obligation for the collateral;
7 and
8 (2) proceeds of the collateral if:
9 (A) the security interest in proceeds is
10 perfected;
11 (B) the proceeds are cash proceeds or of the
12 same type as the collateral; and
13 (C) in the case of proceeds that are proceeds
14 of proceeds, all intervening proceeds are cash
15 proceeds, proceeds of the same type as the
16 collateral, or an account relating to the
17 collateral.
18 (d) First-to-file priority rule for certain collateral.
19 Subject to subsection (e) and except as otherwise provided in
20 subsection (f), if a security interest in chattel paper,
21 deposit accounts, negotiable documents, instruments,
22 investment property, or letter-of-credit rights is perfected
23 by a method other than filing, conflicting perfected security
24 interests in proceeds of the collateral rank according to
25 priority in time of filing.
26 (e) Applicability of subsection (d). Subsection (d)
27 applies only if the proceeds of the collateral are not cash
28 proceeds, chattel paper, negotiable documents, instruments,
29 investment property, or letter-of-credit rights.
30 (f) Limitations on subsections (a) through (e).
31 Subsections (a) through (e) are subject to:
32 (1) subsection (g) and the other provisions of this
33 Part;
34 (2) Section 4-210 with respect to a security
SB1231 Enrolled -127- LRB9106284WHdv
1 interest of a collecting bank;
2 (3) Section 5-118 with respect to a security
3 interest of an issuer or nominated person; and
4 (4) Section 9-110 with respect to a security
5 interest arising under Article 2 or 2A.
6 (g) Priority under agricultural lien statute. A
7 perfected agricultural lien on collateral has priority over a
8 conflicting security interest in or agricultural lien on the
9 same collateral if the statute creating the agricultural lien
10 so provides.
11 (810 ILCS 5/9-323 new)
12 Sec. 9-323. Future advances.
13 (a) When priority based on time of advance. Except as
14 otherwise provided in subsection (c), for purposes of
15 determining the priority of a perfected security interest
16 under Section 9-322(a)(1), perfection of the security
17 interest dates from the time an advance is made to the extent
18 that the security interest secures an advance that:
19 (1) is made while the security interest is
20 perfected only:
21 (A) under Section 9-309 when it attaches; or
22 (B) temporarily under Section 9-312(e), (f),
23 or (g); and
24 (2) is not made pursuant to a commitment entered
25 into before or while the security interest is perfected
26 by a method other than under Section 9-309 or 9-312(e),
27 (f), or (g).
28 (b) Lien creditor. Except as otherwise provided in
29 subsection (c), a security interest is subordinate to the
30 rights of a person that becomes a lien creditor to the extent
31 that the security interest secures an advance made more than
32 45 days after the person becomes a lien creditor unless the
33 advance is made:
SB1231 Enrolled -128- LRB9106284WHdv
1 (1) without knowledge of the lien; or
2 (2) pursuant to a commitment entered into without
3 knowledge of the lien.
4 (c) Buyer of receivables. Subsections (a) and (b) do
5 not apply to a security interest held by a secured party that
6 is a buyer of accounts, chattel paper, payment intangibles,
7 or promissory notes or a consignor.
8 (d) Buyer of goods. Except as otherwise provided in
9 subsection (e), a buyer of goods other than a buyer in
10 ordinary course of business takes free of a security interest
11 to the extent that it secures advances made after the earlier
12 of:
13 (1) the time the secured party acquires knowledge
14 of the buyer's purchase; or
15 (2) 45 days after the purchase.
16 (e) Advances made pursuant to commitment: priority of
17 buyer of goods. Subsection (d) does not apply if the advance
18 is made pursuant to a commitment entered into without
19 knowledge of the buyer's purchase and before the expiration
20 of the 45-day period.
21 (f) Lessee of goods. Except as otherwise provided in
22 subsection (g), a lessee of goods, other than a lessee in
23 ordinary course of business, takes the leasehold interest
24 free of a security interest to the extent that it secures
25 advances made after the earlier of:
26 (1) the time the secured party acquires knowledge
27 of the lease; or
28 (2) 45 days after the lease contract becomes
29 enforceable.
30 (g) Advances made pursuant to commitment: priority of
31 lessee of goods. Subsection (f) does not apply if the
32 advance is made pursuant to a commitment entered into without
33 knowledge of the lease and before the expiration of the
34 45-day period.
SB1231 Enrolled -129- LRB9106284WHdv
1 (810 ILCS 5/9-324 new)
2 Sec. 9-324. Priority of purchase-money security
3 interests.
4 (a) General rule: purchase-money priority. Except as
5 otherwise provided in subsection (g), a perfected
6 purchase-money security interest in goods other than
7 inventory or livestock has priority over a conflicting
8 security interest in the same goods, and, except as otherwise
9 provided in Section 9-327, a perfected security interest in
10 its identifiable proceeds also has priority, if the
11 purchase-money security interest is perfected when the debtor
12 receives possession of the collateral or within 20 days
13 thereafter.
14 (b) Inventory purchase-money priority. Subject to
15 subsection (c) and except as otherwise provided in subsection
16 (g), a perfected purchase-money security interest in
17 inventory has priority over a conflicting security interest
18 in the same inventory, has priority over a conflicting
19 security interest in chattel paper or an instrument
20 constituting proceeds of the inventory and in proceeds of the
21 chattel paper, if so provided in Section 9-330, and, except
22 as otherwise provided in Section 9-327, also has priority in
23 identifiable cash proceeds of the inventory to the extent the
24 identifiable cash proceeds are received on or before the
25 delivery of the inventory to a buyer, if:
26 (1) the purchase-money security interest is
27 perfected when the debtor receives possession of the
28 inventory;
29 (2) the purchase-money secured party sends an
30 authenticated notification to the holder of the
31 conflicting security interest;
32 (3) the holder of the conflicting security interest
33 receives the notification within five years before the
34 debtor receives possession of the inventory; and
SB1231 Enrolled -130- LRB9106284WHdv
1 (4) the notification states that the person sending
2 the notification has or expects to acquire a
3 purchase-money security interest in inventory of the
4 debtor and describes the inventory.
5 (c) Holders of conflicting inventory security interests
6 to be notified. Subsections (b)(2) through (4) apply only if
7 the holder of the conflicting security interest had filed a
8 financing statement covering the same types of inventory:
9 (1) if the purchase-money security interest is
10 perfected by filing, before the date of the filing; or
11 (2) if the purchase-money security interest is
12 temporarily perfected without filing or possession under
13 Section 9-312(f), before the beginning of the 20-day
14 period thereunder.
15 (d) Livestock purchase-money priority. Subject to
16 subsection (e) and except as otherwise provided in subsection
17 (g), a perfected purchase-money security interest in
18 livestock that are farm products has priority over a
19 conflicting security interest in the same livestock, and,
20 except as otherwise provided in Section 9-327, a perfected
21 security interest in their identifiable proceeds and
22 identifiable products in their unmanufactured states also has
23 priority, if:
24 (1) the purchase-money security interest is
25 perfected when the debtor receives possession of the
26 livestock;
27 (2) the purchase-money secured party sends an
28 authenticated notification to the holder of the
29 conflicting security interest;
30 (3) the holder of the conflicting security interest
31 receives the notification within six months before the
32 debtor receives possession of the livestock; and
33 (4) the notification states that the person sending
34 the notification has or expects to acquire a
SB1231 Enrolled -131- LRB9106284WHdv
1 purchase-money security interest in livestock of the
2 debtor and describes the livestock.
3 (e) Holders of conflicting livestock security interests
4 to be notified. Subsections (d)(2) through (4) apply only if
5 the holder of the conflicting security interest had filed a
6 financing statement covering the same types of livestock:
7 (1) if the purchase-money security interest is
8 perfected by filing, before the date of the filing; or
9 (2) if the purchase-money security interest is
10 temporarily perfected without filing or possession under
11 Section 9-312(f), before the beginning of the 20-day
12 period thereunder.
13 (f) Software purchase-money priority. Except as
14 otherwise provided in subsection (g), a perfected
15 purchase-money security interest in software has priority
16 over a conflicting security interest in the same collateral,
17 and, except as otherwise provided in Section 9-327, a
18 perfected security interest in its identifiable proceeds also
19 has priority, to the extent that the purchase-money security
20 interest in the goods in which the software was acquired for
21 use has priority in the goods and proceeds of the goods under
22 this Section.
23 (g) Conflicting purchase-money security interests. If
24 more than one security interest qualifies for priority in the
25 same collateral under subsection (a), (b), (d), or (f):
26 (1) a security interest securing an obligation
27 incurred as all or part of the price of the collateral
28 has priority over a security interest securing an
29 obligation incurred for value given to enable the debtor
30 to acquire rights in or the use of collateral; and
31 (2) in all other cases, Section 9-322(a) applies to
32 the qualifying security interests.
33 (810 ILCS 5/9-325 new)
SB1231 Enrolled -132- LRB9106284WHdv
1 Sec. 9-325. Priority of security interests in
2 transferred collateral.
3 (a) Subordination of security interest in transferred
4 collateral. Except as otherwise provided in subsection (b), a
5 security interest created by a debtor is subordinate to a
6 security interest in the same collateral created by another
7 person if:
8 (1) the debtor acquired the collateral subject to
9 the security interest created by the other person;
10 (2) the security interest created by the other
11 person was perfected when the debtor acquired the
12 collateral; and
13 (3) there is no period thereafter when the security
14 interest is unperfected.
15 (b) Limitation of subsection (a) subordination.
16 Subsection (a) subordinates a security interest only if the
17 security interest:
18 (1) otherwise would have priority solely under
19 Section 9-322(a) or 9-324; or
20 (2) arose solely under Section 2-711(3) or
21 2A-508(5).
22 (810 ILCS 5/9-326 new)
23 Sec. 9-326. Priority of security interests created by
24 new debtor.
25 (a) Subordination of security interest created by new
26 debtor. Subject to subsection (b), a security interest
27 created by a new debtor which is perfected by a filed
28 financing statement that is effective solely under Section
29 9-508 in collateral in which a new debtor has or acquires
30 rights is subordinate to a security interest in the same
31 collateral which is perfected other than by a filed financing
32 statement that is effective solely under Section 9-508.
33 (b) Priority under other provisions; multiple original
SB1231 Enrolled -133- LRB9106284WHdv
1 debtors. The other provisions of this Part determine the
2 priority among conflicting security interests in the same
3 collateral perfected by filed financing statements that are
4 effective solely under Section 9-508. However, if the
5 security agreements to which a new debtor became bound as
6 debtor were not entered into by the same original debtor, the
7 conflicting security interests rank according to priority in
8 time of the new debtor's having become bound.
9 (810 ILCS 5/9-327 new)
10 Sec. 9-327. Priority of security interests in deposit
11 account. The following rules govern priority among
12 conflicting security interests in the same deposit account:
13 (1) A security interest held by a secured party having
14 control of the deposit account under Section 9-104 has
15 priority over a conflicting security interest held by a
16 secured party that does not have control.
17 (2) Except as otherwise provided in paragraphs (3) and
18 (4), security interests perfected by control under Section
19 9-314 rank according to priority in time of obtaining
20 control.
21 (3) Except as otherwise provided in paragraph (4), a
22 security interest held by the bank with which the deposit
23 account is maintained has priority over a conflicting
24 security interest held by another secured party.
25 (4) A security interest perfected by control under
26 Section 9-104(a)(3) has priority over a security interest
27 held by the bank with which the deposit account is
28 maintained.
29 (810 ILCS 5/9-328 new)
30 Sec. 9-328. Priority of security interests in investment
31 property. The following rules govern priority among
32 conflicting security interests in the same investment
SB1231 Enrolled -134- LRB9106284WHdv
1 property:
2 (1) A security interest held by a secured party having
3 control of investment property under Section 9-106 has
4 priority over a security interest held by a secured party
5 that does not have control of the investment property.
6 (2) Except as otherwise provided in paragraphs (3) and
7 (4), conflicting security interests held by secured parties
8 each of which has control under Section 9-106 rank according
9 to priority in time of:
10 (A) if the collateral is a security, obtaining
11 control;
12 (B) if the collateral is a security entitlement
13 carried in a securities account and:
14 (i) if the secured party obtained control
15 under Section 8-106(d)(1), the secured party's
16 becoming the person for which the securities account
17 is maintained;
18 (ii) if the secured party obtained control
19 under Section 8-106(d)(2), the securities
20 intermediary's agreement to comply with the secured
21 party's entitlement orders with respect to security
22 entitlements carried or to be carried in the
23 securities account; or
24 (iii) if the secured party obtained control
25 through another person under Section 8-106(d)(3),
26 the time on which priority would be based under this
27 paragraph if the other person were the secured
28 party; or
29 (C) if the collateral is a commodity contract
30 carried with a commodity intermediary, the satisfaction
31 of the requirement for control specified in Section
32 9-106(b)(2) with respect to commodity contracts carried
33 or to be carried with the commodity intermediary.
34 (3) A security interest held by a securities
SB1231 Enrolled -135- LRB9106284WHdv
1 intermediary in a security entitlement or a securities
2 account maintained with the securities intermediary has
3 priority over a conflicting security interest held by another
4 secured party.
5 (4) A security interest held by a commodity intermediary
6 in a commodity contract or a commodity account maintained
7 with the commodity intermediary has priority over a
8 conflicting security interest held by another secured party.
9 (5) A security interest in a certificated security in
10 registered form which is perfected by taking delivery under
11 Section 9-313(a) and not by control under Section 9-314 has
12 priority over a conflicting security interest perfected by a
13 method other than control.
14 (6) Conflicting security interests created by a broker,
15 securities intermediary, or commodity intermediary which are
16 perfected without control under Section 9-106 rank equally.
17 (7) In all other cases, priority among conflicting
18 security interests in investment property is governed by
19 Sections 9-322 and 9-323.
20 (810 ILCS 5/9-329 new)
21 Sec. 9-329. Priority of security interests in
22 letter-of-credit right. The following rules govern priority
23 among conflicting security interests in the same
24 letter-of-credit right:
25 (1) A security interest held by a secured party
26 having control of the letter-of-credit right under
27 Section 9-107 has priority to the extent of its control
28 over a conflicting security interest held by a secured
29 party that does not have control.
30 (2) Security interests perfected by control under
31 Section 9-314 rank according to priority in time of
32 obtaining control.
SB1231 Enrolled -136- LRB9106284WHdv
1 (810 ILCS 5/9-330 new)
2 Sec. 9-330. Priority of purchaser of chattel paper or
3 instrument.
4 (a) Purchaser's priority: security interest claimed
5 merely as proceeds. A purchaser of chattel paper has
6 priority over a security interest in the chattel paper which
7 is claimed merely as proceeds of inventory subject to a
8 security interest if:
9 (1) in good faith and in the ordinary course of the
10 purchaser's business, the purchaser gives new value and
11 takes possession of the chattel paper or obtains control
12 of the chattel paper under Section 9-105; and
13 (2) the chattel paper does not indicate that it has
14 been assigned to an identified assignee other than the
15 purchaser.
16 (b) Purchaser's priority: other security interests. A
17 purchaser of chattel paper has priority over a security
18 interest in the chattel paper which is claimed other than
19 merely as proceeds of inventory subject to a security
20 interest if the purchaser gives new value and takes
21 possession of the chattel paper or obtains control of the
22 chattel paper under Section 9-105 in good faith, in the
23 ordinary course of the purchaser's business, and without
24 knowledge that the purchase violates the rights of the
25 secured party.
26 (c) Chattel paper purchaser's priority in proceeds.
27 Except as otherwise provided in Section 9-327, a purchaser
28 having priority in chattel paper under subsection (a) or (b)
29 also has priority in proceeds of the chattel paper to the
30 extent that:
31 (1) Section 9-322 provides for priority in the
32 proceeds; or
33 (2) the proceeds consist of the specific goods
34 covered by the chattel paper or cash proceeds of the
SB1231 Enrolled -137- LRB9106284WHdv
1 specific goods, even if the purchaser's security interest
2 in the proceeds is unperfected.
3 (d) Instrument purchaser's priority. Except as
4 otherwise provided in Section 9-331(a), a purchaser of an
5 instrument has priority over a security interest in the
6 instrument perfected by a method other than possession if the
7 purchaser gives value and takes possession of the instrument
8 in good faith and without knowledge that the purchase
9 violates the rights of the secured party.
10 (e) Holder of purchase-money security interest gives new
11 value. For purposes of subsections (a) and (b), the holder of
12 a purchase-money security interest in inventory gives new
13 value for chattel paper constituting proceeds of the
14 inventory.
15 (f) Indication of assignment gives knowledge. For
16 purposes of subsections (b) and (d), if chattel paper or an
17 instrument indicates that it has been assigned to an
18 identified secured party other than the purchaser, a
19 purchaser of the chattel paper or instrument has knowledge
20 that the purchase violates the rights of the secured party.
21 (810 ILCS 5/9-331 new)
22 Sec. 9-331. Priority of rights of purchasers of
23 instruments, documents, and securities under other Articles;
24 priority of interests in financial assets and security
25 entitlements under Article 8.
26 (a) Rights under Articles 3, 7, and 8 not limited. This
27 Article does not limit the rights of a holder in due course
28 of a negotiable instrument, a holder to which a negotiable
29 document of title has been duly negotiated, or a protected
30 purchaser of a security. These holders or purchasers take
31 priority over an earlier security interest, even if
32 perfected, to the extent provided in Articles 3, 7, and 8.
33 (b) Protection under Article 8. This Article does not
SB1231 Enrolled -138- LRB9106284WHdv
1 limit the rights of or impose liability on a person to the
2 extent that the person is protected against the assertion of
3 a claim under Article 8.
4 (c) Filing not notice. Filing under this Article does
5 not constitute notice of a claim or defense to the holders,
6 or purchasers, or persons described in subsections (a) and
7 (b).
8 (810 ILCS 5/9-332 new)
9 Sec. 9-332. Transfer of money; transfer of funds from
10 deposit account.
11 (a) Transferee of money. A transferee of money takes
12 the money free of a security interest unless the transferee
13 acts in collusion with the debtor in violating the rights of
14 the secured party.
15 (b) Transferee of funds from deposit account. A
16 transferee of funds from a deposit account takes the funds
17 free of a security interest in the deposit account unless the
18 transferee acts in collusion with the debtor in violating the
19 rights of the secured party.
20 (810 ILCS 5/9-333 new)
21 Sec. 9-333. Priority of certain liens arising by
22 operation of law.
23 (a) "Possessory lien." In this Section, "possessory
24 lien" means an interest, other than a security interest or an
25 agricultural lien:
26 (1) which secures payment or performance of an
27 obligation for services or materials furnished with
28 respect to goods by a person in the ordinary course of
29 the person's business;
30 (2) which is created by statute or rule of law in
31 favor of the person; and
32 (3) whose effectiveness depends on the person's
SB1231 Enrolled -139- LRB9106284WHdv
1 possession of the goods.
2 (b) Priority of possessory lien. A possessory lien on
3 goods has priority over a security interest in the goods
4 unless the lien is created by a statute that expressly
5 provides otherwise.
6 (810 ILCS 5/9-334 new)
7 Sec. 9-334. Priority of security interests in fixtures
8 and crops.
9 (a) Security interest in fixtures under this Article. A
10 security interest under this Article may be created in goods
11 that are fixtures or may continue in goods that become
12 fixtures. A security interest does not exist under this
13 Article in ordinary building materials incorporated into an
14 improvement on land.
15 (b) Security interest in fixtures under real-property
16 law. This Article does not prevent creation of an
17 encumbrance upon fixtures under real property law.
18 (c) General rule: subordination of security interest in
19 fixtures. In cases not governed by subsections (d) through
20 (h), a security interest in fixtures is subordinate to a
21 conflicting interest of an encumbrancer or owner of the
22 related real property other than the debtor.
23 (d) Fixtures purchase-money priority. Except as
24 otherwise provided in subsection (h), a perfected security
25 interest in fixtures has priority over a conflicting interest
26 of an encumbrancer or owner of the real property if the
27 debtor has an interest of record in or is in possession of
28 the real property and:
29 (1) the security interest is a purchase-money
30 security interest;
31 (2) the interest of the encumbrancer or owner
32 arises before the goods become fixtures; and
33 (3) the security interest is perfected by a fixture
SB1231 Enrolled -140- LRB9106284WHdv
1 filing before the goods become fixtures or within 20 days
2 thereafter.
3 (e) Priority of security interest in fixtures over
4 interests in real property. A perfected security interest in
5 fixtures has priority over a conflicting interest of an
6 encumbrancer or owner of the real property if:
7 (1) the debtor has an interest of record in the
8 real property or is in possession of the real property
9 and the security interest:
10 (A) is perfected by a fixture filing before
11 the interest of the encumbrancer or owner is of
12 record; and
13 (B) has priority over any conflicting interest
14 of a predecessor in title of the encumbrancer or
15 owner;
16 (2) before the goods become fixtures, the security
17 interest is perfected by any method permitted by this
18 Article and the fixtures are readily removable:
19 (A) factory or office machines;
20 (B) equipment that is not primarily used or
21 leased for use in the operation of the real
22 property; or
23 (C) replacements of domestic appliances that
24 are consumer goods;
25 (3) the conflicting interest is a lien on the real
26 property obtained by legal or equitable proceedings after
27 the security interest was perfected by any method
28 permitted by this Article; or
29 (4) the security interest is:
30 (A) created in a manufactured home in a
31 manufactured-home transaction; and
32 (B) perfected pursuant to a statute described
33 in Section 9-311(a)(2).
34 (f) Priority based on consent, disclaimer, or right to
SB1231 Enrolled -141- LRB9106284WHdv
1 remove. A security interest in fixtures, whether or not
2 perfected, has priority over a conflicting interest of an
3 encumbrancer or owner of the real property if:
4 (1) the encumbrancer or owner has, in an
5 authenticated record, consented to the security interest
6 or disclaimed an interest in the goods as fixtures; or
7 (2) the debtor has a right to remove the goods as
8 against the encumbrancer or owner.
9 (g) Continuation of subsection (f)(2) priority. The
10 priority of the security interest under subsection (f)(2)
11 continues for a reasonable time if the debtor's right to
12 remove the goods as against the encumbrancer or owner
13 terminates.
14 (h) Priority of construction mortgage. A mortgage is a
15 construction mortgage to the extent that it secures an
16 obligation incurred for the construction of an improvement on
17 land, including the acquisition cost of the land, if a
18 recorded record of the mortgage so indicates. Except as
19 otherwise provided in subsections (e) and (f), a security
20 interest in fixtures is subordinate to a construction
21 mortgage if a record of the mortgage is recorded before the
22 goods become fixtures and the goods become fixtures before
23 the completion of the construction. A mortgage has this
24 priority to the same extent as a construction mortgage to the
25 extent that it is given to refinance a construction mortgage.
26 (i) Priority of security interest in crops.
27 (1) Subject to Section 9-322(g), a perfected
28 security interest in crops growing on real property has
29 priority over:
30 (A) a conflicting interest of an encumbrancer
31 or owner of the real property; and
32 (B) the rights of a holder of an obligation
33 secured by a collateral assignment of beneficial
34 interest in a land trust, including rights by virtue
SB1231 Enrolled -142- LRB9106284WHdv
1 of an equitable lien.
2 (2) For purposes of this subsection:
3 (A) "Collateral assignment of beneficial
4 interest" means any pledge or assignment of the
5 beneficial interest in a land trust to a person to
6 secure a debt to other obligation.
7 (B) "Land trust" means any trust arrangement
8 under which the legal and equitable title to real
9 estate is held by a trustee, the interest of the
10 beneficiary of the trust is personal property, and
11 the beneficiary or any person designated in writing
12 by the beneficiary has (i) the exclusive power to
13 direct or control the trustee in dealing with the
14 title to the trust property, (ii) the exclusive
15 control of the management, operation, renting, and
16 selling of the trust property, and (iii) the
17 exclusive right to the earnings, avails, and
18 proceeds of trust property.
19 (810 ILCS 5/9-335 new)
20 Sec. 9-335. Accessions.
21 (a) Creation of security interest in accession. A
22 security interest may be created in an accession and
23 continues in collateral that becomes an accession.
24 (b) Perfection of security interest. If a security
25 interest is perfected when the collateral becomes an
26 accession, the security interest remains perfected in the
27 collateral.
28 (c) Priority of security interest. Except as otherwise
29 provided in subsection (d), the other provisions of this Part
30 determine the priority of a security interest in an
31 accession.
32 (d) Compliance with certificate-of-title statute. A
33 security interest in an accession is subordinate to a
SB1231 Enrolled -143- LRB9106284WHdv
1 security interest in the whole which is perfected by
2 compliance with the requirements of a certificate-of-title
3 statute under Section 9-311(b).
4 (e) Removal of accession after default. After default,
5 subject to Part 6, a secured party may remove an accession
6 from other goods if the security interest in the accession
7 has priority over the claims of every person having an
8 interest in the whole.
9 (f) Reimbursement following removal. A secured party
10 that removes an accession from other goods under subsection
11 (e) shall promptly reimburse any holder of a security
12 interest or other lien on, or owner of, the whole or of the
13 other goods, other than the debtor, for the cost of repair of
14 any physical injury to the whole or the other goods. The
15 secured party need not reimburse the holder or owner for any
16 diminution in value of the whole or the other goods caused by
17 the absence of the accession removed or by any necessity for
18 replacing it. A person entitled to reimbursement may refuse
19 permission to remove until the secured party gives adequate
20 assurance for the performance of the obligation to reimburse.
21 (810 ILCS 5/9-336 new)
22 Sec. 9-336. Commingled goods.
23 (a) "Commingled goods." In this Section, "commingled
24 goods" means goods that are physically united with other
25 goods in such a manner that their identity is lost in a
26 product or mass.
27 (b) No security interest in commingled goods as such. A
28 security interest does not exist in commingled goods as such.
29 However, a security interest may attach to a product or mass
30 that results when goods become commingled goods.
31 (c) Attachment of security interest to product or mass.
32 If collateral becomes commingled goods, a security interest
33 attaches to the product or mass.
SB1231 Enrolled -144- LRB9106284WHdv
1 (d) Perfection of security interest. If a security
2 interest in collateral is perfected before the collateral
3 becomes commingled goods, the security interest that attaches
4 to the product or mass under subsection (c) is perfected.
5 (e) Priority of security interest. Except as otherwise
6 provided in subsection (f), the other provisions of this Part
7 determine the priority of a security interest that attaches
8 to the product or mass under subsection (c).
9 (f) Conflicting security interests in product or mass
10 If more than one security interest attaches to the product or
11 mass under subsection (c), the following rules determine
12 priority:
13 (1) A security interest that is perfected under
14 subsection (d) has priority over a security interest that
15 is unperfected at the time the collateral becomes
16 commingled goods.
17 (2) If more than one security interest is perfected
18 under subsection (d), the security interests rank equally
19 in proportion to the value of the collateral at the time
20 it became commingled goods.
21 (810 ILCS 5/9-337 new)
22 Sec. 9-337. Priority of security interests in goods
23 covered by certificate of title. If, while a security
24 interest in goods is perfected by any method under the law of
25 another jurisdiction, this State issues a certificate of
26 title that does not show that the goods are subject to the
27 security interest or contain a statement that they may be
28 subject to security interests not shown on the certificate:
29 (1) a buyer of the goods, other than a person in
30 the business of selling goods of that kind, takes free of
31 the security interest if the buyer gives value and
32 receives delivery of the goods after issuance of the
33 certificate and without knowledge of the security
SB1231 Enrolled -145- LRB9106284WHdv
1 interest; and
2 (2) the security interest is subordinate to a
3 conflicting security interest in the goods that attaches,
4 and is perfected under Section 9-311(b), after issuance
5 of the certificate and without the conflicting secured
6 party's knowledge of the security interest.
7 (810 ILCS 5/9-338 new)
8 Sec. 9-338. Priority of security interest or
9 agricultural lien perfected by filed financing statement
10 providing certain incorrect information. If a security
11 interest or agricultural lien is perfected by a filed
12 financing statement providing information described in
13 Section 9-516(b)(5) which is incorrect at the time the
14 financing statement is filed:
15 (1) the security interest or agricultural lien is
16 subordinate to a conflicting perfected security interest
17 in the collateral to the extent that the holder of the
18 conflicting security interest gives value in reasonable
19 reliance upon the incorrect information; and
20 (2) a purchaser, other than a secured party, of the
21 collateral takes free of the security interest or
22 agricultural lien to the extent that, in reasonable
23 reliance upon the incorrect information, the purchaser
24 gives value and, in the case of chattel paper, documents,
25 goods, instruments, or a security certificate, receives
26 delivery of the collateral.
27 (810 ILCS 5/9-339 new)
28 Sec. 9-339. Priority subject to subordination. This
29 Article does not preclude subordination by agreement by a
30 person entitled to priority.
31 (810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new)
SB1231 Enrolled -146- LRB9106284WHdv
1 SUBPART 4. RIGHTS OF BANK
2 (810 ILCS 5/9-340 new)
3 Sec. 9-340. Effectiveness of right of recoupment or
4 set-off against deposit account.
5 (a) Exercise of recoupment or set-off. Except as
6 otherwise provided in subsection (c), a bank with which a
7 deposit account is maintained may exercise any right of
8 recoupment or set-off against a secured party that holds a
9 security interest in the deposit account.
10 (b) Recoupment or set-off not affected by security
11 interest. Except as otherwise provided in subsection (c), the
12 application of this Article to a security interest in a
13 deposit account does not affect a right of recoupment or
14 set-off of the secured party as to a deposit account
15 maintained with the secured party.
16 (c) When set-off ineffective. The exercise by a bank of
17 a set-off against a deposit account is ineffective against a
18 secured party that holds a security interest in the deposit
19 account which is perfected by control under Section
20 9-104(a)(3), if the set-off is based on a claim against the
21 debtor.
22 (810 ILCS 5/9-341 new)
23 Sec. 9-341. Bank's rights and duties with respect to
24 deposit account. Except as otherwise provided in Section
25 9-340(c), and unless the bank otherwise agrees in an
26 authenticated record, a bank's rights and duties with respect
27 to a deposit account maintained with the bank are not
28 terminated, suspended, or modified by:
29 (1) the creation, attachment, or perfection of a
30 security interest in the deposit account;
31 (2) the bank's knowledge of the security interest;
32 or
SB1231 Enrolled -147- LRB9106284WHdv
1 (3) the bank's receipt of instructions from the
2 secured party.
3 (810 ILCS 5/9-342 new)
4 Sec. 9-342. Bank's right to refuse to enter into or
5 disclose existence of control agreement. This Article does
6 not require a bank to enter into an agreement of the kind
7 described in Section 9-104(a)(2), even if its customer so
8 requests or directs. A bank that has entered into such an
9 agreement is not required to confirm the existence of the
10 agreement to another person unless requested to do so by its
11 customer.
12 (810 ILCS 5/Art. 9, Part 4 heading)
13 PART 4. RIGHTS OF THIRD PARTIES FILING
14 (810 ILCS 5/9-401) (from Ch. 26, par. 9-401)
15 Sec. 9-401. Alienability of debtor's rights.
16 (a) Other law governs alienability; exceptions. Except
17 as otherwise provided in subsection (b) and Sections 9-406,
18 9-407, 9-408, and 9-409, whether a debtor's rights in
19 collateral may be voluntarily or involuntarily transferred is
20 governed by law other than this Article.
21 (b) Agreement does not prevent transfer. An agreement
22 between the debtor and secured party which prohibits a
23 transfer of the debtor's rights in collateral or makes the
24 transfer a default does not prevent the transfer from taking
25 effect. Place of Filing; Erroneous Filing; Removal of
26 Collateral.
27 (1) The proper place to file in order to perfect a
28 security interest is as follows:
29 (a) when the collateral is consumer goods, then in
30 the office of the recorder in the county of the debtor's
31 residence or if the debtor is not a resident of this
SB1231 Enrolled -148- LRB9106284WHdv
1 State then in the office of the Recorder of Deeds in the
2 county where the goods are kept;
3 (b) when the collateral is timber to be cut or is
4 minerals or the like (including oil and gas) or accounts
5 subject to subsection (5) of Section 9-103, or when the
6 financing statement is filed as a fixture filing (Section
7 9-313) and the collateral is goods which are or are to
8 become fixtures, then in the office where a mortgage on
9 the real estate would be filed or recorded;
10 (c) in all other cases, in the office of the
11 Secretary of State.
12 (2) A filing which is made in good faith in an improper
13 place or not in all of the places required by this section is
14 nevertheless effective with regard to any collateral as to
15 which the filing complied with the requirements of this
16 Article and is also effective with regard to collateral
17 covered by the financing statement against any person who has
18 knowledge of the contents of such financing statement.
19 (3) A filing which is made in the proper place in this
20 State continues effective even though the debtor's residence
21 or place of business or the location of the collateral or its
22 use, whichever controlled the original filing, is thereafter
23 changed.
24 (4) The rules stated in Section 9-103 determine whether
25 filing is necessary in this State.
26 (5) Notwithstanding the preceding subsections, and
27 subject to subsection (3) of Section 9-302, the proper place
28 to file in order to perfect a security interest in
29 collateral, including fixtures, of a transmitting utility is
30 the office of the Secretary of State. This filing constitutes
31 a fixture filing (Section 9-313) as to the collateral
32 described therein which is or is to become fixtures.
33 (6) For the purposes of this Section, the residence of
34 an organization is its place of business if it has one or its
SB1231 Enrolled -149- LRB9106284WHdv
1 chief executive office if it has more than one place of
2 business.
3 (Source: P.A. 90-300, eff. 1-1-98.)
4 (810 ILCS 5/9-401A)
5 Sec. 9-401A. (Blank). Continuation of certain financing
6 statements filed before January 1, 1998. The following rules
7 apply to a financing statement or continuation statement that
8 was properly filed before January 1, 1998 in the office of a
9 county recorder, but which, if filed on or after January 1,
10 1998, is required by Section 9-401 to be filed in the office
11 of the Secretary of State:
12 (1) The financing statement shall remain effective until
13 it lapses as provided in Section 9-403.
14 (2) The effectiveness of the financing statement may be
15 continued only by filing a continuation statement in the
16 office of the Secretary of State that provides the name and
17 address of the debtor and secured party, indicates the county
18 where the financing statement is filed, complies with the
19 requirements of Section 9-403, and either:
20 (A) indicates the types or describes the items of
21 collateral included in the original financing statement
22 as modified by any releases or amendments; or
23 (B) has attached a copy of the originally filed
24 financing statement together with amendments,
25 assignments, and releases affecting it.
26 A continuation statement filed as provided in this item
27 (2) may be further continued by a continuation statement that
28 complies with the requirements of Section 9-403.
29 (3) The financing statement may be terminated, assigned,
30 released, or amended only by an appropriate filing in the
31 office of the county recorder where it is filed, except that
32 if the financing statement has been continued as provided in
33 item (2) of this Section, it may thereafter be terminated,
SB1231 Enrolled -150- LRB9106284WHdv
1 assigned, released, or amended only by an appropriate filing
2 in the office of the Secretary of State.
3 (Source: P.A. 90-300, eff. 1-1-98.)
4 (810 ILCS 5/9-402) (from Ch. 26, par. 9-402)
5 Sec. 9-402. Secured party not obligated on contract of
6 debtor or in tort. The existence of a security interest,
7 agricultural lien, or authority given to a debtor to dispose
8 of or use collateral, without more, does not subject a
9 secured party to liability in contract or tort for the
10 debtor's acts or omissions. Formal requisites of financing
11 statement; amendments; mortgage as financing statement.
12 (1) A financing statement is sufficient if it gives the
13 names of the debtor and the secured party, is signed by the
14 debtor, gives an address of the secured party from which
15 information concerning the security interest may be obtained,
16 gives a mailing address of the debtor and contains a
17 statement indicating the types, or describing the items, of
18 collateral. A financing statement may be filed before a
19 security agreement is made or a security interest otherwise
20 attaches. When a financing statement filed prior to January
21 1, 1996, covers crops growing or to be grown, the statement
22 must also contain a legal description of the real estate
23 concerned. If a financing statement covers crops growing or
24 to be grown and includes a description of the real estate
25 concerned, the description is sufficient if it includes the
26 quarter section, section, township and range, and the name of
27 a record owner if other than the debtor, of the real estate
28 concerned. When the financing statement covers timber to be
29 cut or covers minerals or the like (including oil and gas) or
30 accounts subject to subsection (5) of Section 9-103, or when
31 the financing statement is filed as a fixture filing (Section
32 9-313) and the collateral is goods which are or are to become
33 fixtures, the statement must also comply with subsection (5).
SB1231 Enrolled -151- LRB9106284WHdv
1 A copy of the security agreement is sufficient as a financing
2 statement if it contains the above information and is signed
3 by the debtor. A carbon, photographic or other reproduction
4 of a security agreement or a financing statement is
5 sufficient as a financing statement if the security agreement
6 so provides or if the original has been filed in this State.
7 (2) A financing statement which otherwise complies with
8 subsection (1) is sufficient when it is signed by the secured
9 party instead of the debtor if it is filed to perfect a
10 security interest in
11 (a) collateral already subject to a security
12 interest in another jurisdiction when it is brought into
13 this State, or when the debtor's location is changed to
14 this State. Such a financing statement must state that
15 the collateral was brought into this State or that the
16 debtor's location was changed to this State under such
17 circumstances; or
18 (b) proceeds under Section 9-306 if the security
19 interest in the original collateral was perfected. Such a
20 financing statement must describe the original
21 collateral; or
22 (c) collateral as to which the filing has lapsed;
23 or
24 (d) collateral acquired after a change of name,
25 identity or corporate structure of the debtor (subsection
26 (7).
27 (3) A form substantially as follows is sufficient to
28 comply with subsection (1):
29 Name of debtor (or assignor) .......................
30 Address .......................................
31 Name of secured party (or assignee) ...........
32 Address .......................................
33 1. This financing statement covers the following
34 types (or items) of property:
SB1231 Enrolled -152- LRB9106284WHdv
1 (Describe) .........................................
2 2. (Blank).
3 3. (If applicable) The above goods are to become
4 fixtures on *
5 *Where appropriate substitute either "The above
6 timber is standing on ...." or "The above minerals or the
7 like (including oil and gas) or accounts will be financed
8 at the wellhead or minehead of the well or mine located
9 on ...."
10 (Describe Real Estate) .............................
11 and this financing statement is to be filed in the real
12 estate records. (If the debtor does not have an interest
13 of record) The name of a record owner is ................
14 4. (If products of collateral are claimed) Products
15 of the collateral are also covered.
16 Signature of Debtor (or Assignor) ..................
17 Signature of Secured Party (or Assignee) ...........
18 (use whichever is applicable)
19 (4) A financing statement may be amended by filing a
20 writing signed by both the debtor and the secured party. An
21 amendment does not extend the period of effectiveness of a
22 financing statement. If any amendment adds collateral, it is
23 effective as to the added collateral only from the filing
24 date of the amendment. In this Article, unless the context
25 otherwise requires, the term "financing statement" means the
26 original financing statement and any amendments.
27 (5) A financing statement covering timber to be cut or
28 covering minerals or the like (including oil and gas) or
29 accounts subject to subsection (5) of Section 9-103, or a
30 financing statement filed as a fixture filing (Section 9-313)
31 where the debtor is not a transmitting utility, must show
32 that it covers this type of collateral, must recite that it
33 is to be filed in the real estate records, and the financing
34 statement must contain a description of the real estate. If
SB1231 Enrolled -153- LRB9106284WHdv
1 the debtor does not have an interest of record in the real
2 estate, the financing statement must show the name of a
3 record owner.
4 (6) A mortgage is effective as a financing statement
5 filed as a fixture filing from the date of its recording if
6 (a) the goods are described in the mortgage by item
7 or type,
8 (b) the goods are or are to become fixtures related
9 to the real estate described in the mortgage,
10 (c) the mortgage complies with the requirements for
11 a financing statement in this Section other than a
12 recital that it is to be filed in the real estate
13 records, and
14 (d) the mortgage is duly recorded.
15 No fee with reference to the financing statement is
16 required other than the regular recording and satisfaction
17 fees with respect to the mortgage.
18 (7) A financing statement sufficiently shows the name of
19 the debtor if it gives the individual, partnership or
20 corporate name of the debtor, whether or not it adds other
21 trade names or names of partners. Where the debtor so changes
22 his name or in the case of an organization its name, identity
23 or corporate structure that a filed financing statement
24 becomes seriously misleading, the filing is not effective to
25 perfect a security interest in collateral acquired by the
26 debtor more than 4 months after the change, unless a new
27 appropriate financing statement is filed before the
28 expiration of that time. A filed financing statement remains
29 effective with respect to collateral transferred by the
30 debtor even though the secured party knows of or consents to
31 the transfer.
32 (8) A financing statement substantially complying with
33 the requirements of this Section is effective even though it
34 contains minor errors which are not seriously misleading.
SB1231 Enrolled -154- LRB9106284WHdv
1 (Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.)
2 (810 ILCS 5/9-403) (from Ch. 26, par. 9-403)
3 Sec. 9-403. Agreement not to assert defenses against
4 assignee.
5 (a) "Value." In this Section, "value" has the meaning
6 provided in Section 3-303(a).
7 (b) Agreement not to assert claim or defense. Except as
8 otherwise provided in this Section, an agreement between an
9 account debtor and an assignor not to assert against an
10 assignee any claim or defense that the account debtor may
11 have against the assignor is enforceable by an assignee that
12 takes an assignment:
13 (1) for value;
14 (2) in good faith;
15 (3) without notice of a claim of a property or
16 possessory right to the property assigned; and
17 (4) without notice of a defense or claim in
18 recoupment of the type that may be asserted against a
19 person entitled to enforce a negotiable instrument under
20 Section 3-305(a).
21 (c) When subsection (b) not applicable. Subsection (b)
22 does not apply to defenses of a type that may be asserted
23 against a holder in due course of a negotiable instrument
24 under Section 3-305(b).
25 (d) Omission of required statement in consumer
26 transaction. In a consumer transaction, if a record
27 evidences the account debtor's obligation, law other than
28 this Article requires that the record include a statement to
29 the effect that the rights of an assignee are subject to
30 claims or defenses that the account debtor could assert
31 against the original obligee, and the record does not include
32 such a statement:
33 (1) the record has the same effect as if the record
SB1231 Enrolled -155- LRB9106284WHdv
1 included such a statement; and
2 (2) the account debtor may assert against an
3 assignee those claims and defenses that would have been
4 available if the record included such a statement.
5 (e) Rule for individual under other law. This Section
6 is subject to law other than this Article which establishes a
7 different rule for an account debtor who is an individual and
8 who incurred the obligation primarily for personal, family,
9 or household purposes.
10 (f) Other law not displaced. Except as otherwise
11 provided in subsection (d), this Section does not displace
12 law other than this Article which gives effect to an
13 agreement by an account debtor not to assert a claim or
14 defense against an assignee. What constitutes filing;
15 duration of filing; effect of lapsed filing; duties of filing
16 officer; fees.
17 (1) Presentation for filing of a financing statement and
18 tender of the filing fee or acceptance of the statement by
19 the filing officer constitutes filing under this Article.
20 (2) Except as provided in subsection (6) a filed
21 financing statement is effective for a period of 5 years from
22 the date of filing. The effectiveness of a filed financing
23 statement lapses on the expiration of the 5 year period
24 unless a continuation statement is filed prior to the lapse.
25 If a security interest perfected by filing exists at the time
26 insolvency proceedings are commenced by or against the
27 debtor, the security interest remains perfected until
28 termination of the insolvency proceedings and thereafter for
29 a period of 60 days or until expiration of the 5 year period,
30 whichever occurs later. Upon lapse the security interest
31 becomes unperfected, unless it is perfected without filing.
32 If the security interest becomes unperfected upon lapse, it
33 is deemed to have been unperfected as against a person who
34 became a purchaser or lien creditor before lapse.
SB1231 Enrolled -156- LRB9106284WHdv
1 (3) A continuation statement may be filed by the secured
2 party within 6 months prior to the expiration of the 5 year
3 period specified in subsection (2). Any such continuation
4 statement must be signed by the secured party, identify the
5 original statement by file number and state that the original
6 statement is still effective. A continuation statement signed
7 by a person other than the secured party of record must be
8 accompanied by a separate written statement of assignment
9 signed by the secured party of record and complying with
10 subsection (2) of Section 9-405, including payment of the
11 required fee. Upon timely filing of the continuation
12 statement, the effectiveness of the original statement is
13 continued for 5 years after the last date to which the filing
14 was effective whereupon it lapses in the same manner as
15 provided in subsection (2) unless another continuation
16 statement is filed prior to such lapse. Succeeding
17 continuation statements may be filed in the same manner to
18 continue the effectiveness of the original statement. Unless
19 a statute on disposition of public records provides
20 otherwise, the filing officer may remove a lapsed statement
21 from the files and destroy it immediately if he has retained
22 a microfilm or other photographic record, or in other cases
23 after one year after the lapse. The filing officer shall so
24 arrange matters by physical annexation of financing
25 statements to continuation statements or other related
26 filings, or by other means, that if he physically destroys
27 the financing statements of a period more than 5 years past,
28 those which have been continued by a continuation statement
29 or which are still effective under subsection (6) shall be
30 retained.
31 (4) Except as provided in subsection (7) a filing
32 officer shall mark each statement with a file number and with
33 the date and hour of filing and shall hold the statement or a
34 microfilm or other photographic copy thereof for public
SB1231 Enrolled -157- LRB9106284WHdv
1 inspection. In addition the filing officer shall index the
2 statement according to the name of the debtor and shall note
3 in the index the file number and the address of the debtor
4 given in the statement.
5 (5) The uniform fee for filing and indexing and for
6 stamping a copy furnished by the secured party to show the
7 date and place of filing for an original financing statement,
8 amended statement, or for a continuation statement shall be
9 $20.
10 (6) If the debtor is a transmitting utility (subsection
11 (5) of Section 9-401 and a filed financing statement so
12 states, it is effective until a termination statement is
13 filed. A real estate mortgage which is effective as a fixture
14 filing under subsection (6) of Section 9-402 remains
15 effective as a fixture filing until the mortgage is released
16 or satisfied of record or its effectiveness otherwise
17 terminates as to the real estate.
18 (7) When a financing statement covers timber to be cut
19 or covers minerals or the like (including oil and gas) or
20 accounts subject to subsection (5) of Section 9-103, or is
21 filed as a fixture filing, the filing officer shall index it
22 under the names of the debtor and any owner of record shown
23 on the financing statement in the same fashion as if they
24 were the mortgagors in a mortgage of the real estate
25 described, and, to the extent that the law of this State
26 provides for indexing of mortgages under the name of the
27 mortgagee, under the name of the secured party as if he were
28 the mortgagee thereunder, or where indexing is by description
29 in the same fashion as if the financing statement were a
30 mortgage of the real estate described.
31 (8) For financing statements filed on or after January
32 1, 1998 as to a debtor who is a resident of the State of
33 Illinois, if the collateral is equipment used in farming
34 operations, farm products, or accounts or general intangibles
SB1231 Enrolled -158- LRB9106284WHdv
1 arising from the sale of farm products by a farmer, the
2 secured party shall, within 30 days after filing with the
3 office of the Secretary of State, remit to the office of the
4 recorder in the county of the debtor's residence a fee of $10
5 together with a copy of the financing statement filed in the
6 office of the Secretary of State. This fee is in addition to
7 payment of the fee provided in subsection (5) of this Section
8 and is imposed to defray the cost of converting the county
9 recorder's document storage system to computers or
10 micrographics. The copy of the financing statement provided
11 to the office of the recorder shall be for informational
12 purposes only and shall not be for filing with the office of
13 the recorder nor shall the provision of the informational
14 copy be subject to imposition of any filing fee under Section
15 3-5018 of the Counties Code or otherwise. The provisions of
16 this subsection (8) other than this sentence, are inoperative
17 after the earlier of (i) July 1, 1999 or (ii) the effective
18 date of a change to the Illinois Uniform Commercial Code
19 which adopts a recommendation by the National Conference of
20 Commissioners on Uniform State Laws to amend Section 9-401 of
21 this Code to make the office of the Secretary of State the
22 proper place to file a financing statement described in this
23 subsection (8).
24 (9) The failure to send an informational copy of a
25 financing statement to the appropriate office of the recorder
26 or to pay the fee as set forth in subsection (8) shall not in
27 any manner affect the existence, validity, perfection,
28 priority, or enforceability of the security interest of the
29 secured party.
30 (Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98;
31 revised 10-31-98.)
32 (810 ILCS 5/9-404) (from Ch. 26, par. 9-404)
33 Sec. 9-404. Rights acquired by assignee; claims and
SB1231 Enrolled -159- LRB9106284WHdv
1 defenses against assignee.
2 (a) Assignee's rights subject to terms, claims, and
3 defenses; exceptions. Unless an account debtor has made an
4 enforceable agreement not to assert defenses or claims, and
5 subject to subsections (b) through (e), the rights of an
6 assignee are subject to:
7 (1) all terms of the agreement between the account
8 debtor and assignor and any defense or claim in
9 recoupment arising from the transaction that gave rise to
10 the contract; and
11 (2) any other defense or claim of the account
12 debtor against the assignor which accrues before the
13 account debtor receives a notification of the assignment
14 authenticated by the assignor or the assignee.
15 (b) Account debtor's claim reduces amount owed to
16 assignee. Subject to subsection (c) and except as otherwise
17 provided in subsection (d), the claim of an account debtor
18 against an assignor may be asserted against an assignee under
19 subsection (a) only to reduce the amount the account debtor
20 owes.
21 (c) Rule for individual under other law. This Section
22 is subject to law other than this Article which establishes a
23 different rule for an account debtor who is an individual and
24 who incurred the obligation primarily for personal, family,
25 or household purposes.
26 (d) Omission of required statement in consumer
27 transaction. In a consumer transaction, if a record
28 evidences the account debtor's obligation, law other than
29 this Article requires that the record include a statement to
30 the effect that the account debtor's recovery against an
31 assignee with respect to claims and defenses against the
32 assignor may not exceed amounts paid by the account debtor
33 under the record, and the record does not include such a
34 statement, the extent to which a claim of an account debtor
SB1231 Enrolled -160- LRB9106284WHdv
1 against the assignor may be asserted against an assignee is
2 determined as if the record included such a statement.
3 (e) Inapplicability to health-care-insurance receivable.
4 This Section does not apply to an assignment of a
5 health-care-insurance receivable. Termination Statement;
6 Duties of Filing Officer.
7 (1) If a financing statement covering consumer goods is
8 filed on or after the effective date of this amendatory Act
9 of 1972, then within one month or within 10 days following
10 written demand by the debtor after there is no outstanding
11 secured obligation and no commitment to make advances, incur
12 obligations or otherwise give value, the secured party must
13 file with each filing officer with whom the financing
14 statement was filed, a termination statement to the effect
15 that he no longer claims a security interest under the
16 financing statement, which shall be identified by file
17 number. In other cases whenever there is no outstanding
18 secured obligation and no commitment to make advances, incur
19 obligations or otherwise give value, the secured party must
20 on written demand by the debtor send the debtor, for each
21 filing officer with whom the financing statement was filed, a
22 termination statement to the effect that he no longer claims
23 a security interest under the financing statement, which
24 shall be identified by file number. A termination statement
25 signed by a person other than the secured party of record
26 must be accompanied by a separate written statement of
27 assignment signed by the secured party of record and
28 complying with subsection (2) of Section 9-405, including
29 payment of the required fee. If the affected secured party
30 fails to file such a termination statement as required by
31 this subsection, or to send such a termination statement
32 within 10 days after proper demand therefor, he shall be
33 liable to the debtor for $100 and in addition for any loss
34 caused to the debtor by such failure.
SB1231 Enrolled -161- LRB9106284WHdv
1 (2) On presentation to the filing officer of such a
2 termination statement he must note it in the index. If he has
3 received the termination statement in duplicate, he shall
4 return one copy of the termination statement to the secured
5 party stamped to show the time of receipt thereof. If the
6 filing officer has a microfilm or other photographic record
7 of the financing statement, and of any related continuation
8 statement, statement of assignment and statement of release,
9 he may remove the originals from the files at any time after
10 receipt of the termination statement, or if he has no such
11 record, he may remove them from the files at any time after
12 one year after receipt of the termination statement.
13 (Source: P.A. 89-503, eff. 1-1-97.)
14 (810 ILCS 5/9-405) (from Ch. 26, par. 9-405)
15 Sec. 9-405. Modification of assigned contract.
16 (a) Effect of modification on assignee. A modification
17 of or substitution for an assigned contract is effective
18 against an assignee if made in good faith. The assignee
19 acquires corresponding rights under the modified or
20 substituted contract. The assignment may provide that the
21 modification or substitution is a breach of contract by the
22 assignor. This subsection is subject to subsections (b)
23 through (d).
24 (b) Applicability of subsection (a). Subsection (a)
25 applies to the extent that:
26 (1) the right to payment or a part thereof under an
27 assigned contract has not been fully earned by
28 performance; or
29 (2) the right to payment or a part thereof has been
30 fully earned by performance and the account debtor has
31 not received notification of the assignment under Section
32 9-406(a).
33 (c) Rule for individual under other law. This Section
SB1231 Enrolled -162- LRB9106284WHdv
1 is subject to law other than this Article which establishes a
2 different rule for an account debtor who is an individual and
3 who incurred the obligation primarily for personal, family,
4 or household purposes.
5 (d) Inapplicability to health-care-insurance receivable.
6 This Section does not apply to an assignment of a
7 health-care-insurance receivable. Assignment of Security
8 Interest; Duties of Filing Officer; Fees.
9 (1) A financing statement may disclose an assignment of
10 a security interest in the collateral described in the
11 financing statement by indication in the financing statement
12 of the name and address of the assignee or by an assignment
13 itself or a copy thereof on the face or back of the
14 statement. On presentation to the filing officer of such a
15 financing statement the filing officer shall mark the same as
16 provided in Section 9-403 (4). The uniform fee for filing,
17 indexing and furnishing filing data for a financing statement
18 so indicating an assignment shall be $20.
19 (2) A secured party may assign of record all or a part
20 of his rights under a financing statement by the filing in
21 the place where the original financing statement was filed of
22 a separate written statement of assignment signed by the
23 secured party of record and setting forth the name of the
24 secured party of record and the debtor, the file number and
25 the date of filing of the financing statement and the name
26 and address of the assignee and containing a description of
27 the collateral assigned. A copy of the assignment is
28 sufficient as a separate statement if it complies with the
29 preceding sentence. On presentation to the filing officer of
30 such a separate statement, the filing officer shall mark such
31 separate statement with the date and hour of the filing. He
32 shall note the assignment on the index of the financing
33 statement, or in the case of a fixture filing, or a filing
34 covering timber to be cut, or covering minerals or the like
SB1231 Enrolled -163- LRB9106284WHdv
1 (including oil and gas) or accounts subject to subsection (5)
2 of Section 9-103, he shall index the assignment under the
3 name of the assignor as grantor and, to the extent that the
4 law of this State provides for indexing the assignment of a
5 mortgage under the name of the assignee, he shall index the
6 assignment of the financing statement under the name of the
7 assignee. The uniform fee for filing, indexing and furnishing
8 filing data about such a separate statement of assignment
9 shall be $20. Notwithstanding the provisions of this
10 subsection, an assignment of record of a security interest in
11 a fixture contained in a mortgage effective as a fixture
12 filing (subsection (6) of Section 9-402 may be made only by
13 an assignment of the mortgage in the manner provided by the
14 law of this State other than this Act.
15 (3) After the disclosure or filing of an assignment
16 under this Section, the assignee is the secured party of
17 record.
18 (Source: P.A. 89-503, eff. 1-1-97.)
19 (810 ILCS 5/9-406) (from Ch. 26, par. 9-406)
20 Sec. 9-406. Discharge of account debtor; notification of
21 assignment; identification and proof of assignment;
22 restrictions on assignment of accounts, chattel paper,
23 payment intangibles, and promissory notes ineffective.
24 (a) Discharge of account debtor; effect of notification.
25 Subject to subsections (b) through (i), an account debtor on
26 an account, chattel paper, or a payment intangible may
27 discharge its obligation by paying the assignor until, but
28 not after, the account debtor receives a notification,
29 authenticated by the assignor or the assignee, that the
30 amount due or to become due has been assigned and that
31 payment is to be made to the assignee. After receipt of the
32 notification, the account debtor may discharge its obligation
33 by paying the assignee and may not discharge the obligation
SB1231 Enrolled -164- LRB9106284WHdv
1 by paying the assignor.
2 (b) When notification ineffective. Subject to
3 subsection (h), notification is ineffective under subsection
4 (a):
5 (1) if it does not reasonably identify the rights
6 assigned;
7 (2) to the extent that an agreement between an
8 account debtor and a seller of a payment intangible
9 limits the account debtor's duty to pay a person other
10 than the seller and the limitation is effective under law
11 other than this Article; or
12 (3) at the option of an account debtor, if the
13 notification notifies the account debtor to make less
14 than the full amount of any installment or other periodic
15 payment to the assignee, even if:
16 (A) only a portion of the account, chattel
17 paper, or payment intangible has been assigned to
18 that assignee;
19 (B) a portion has been assigned to another
20 assignee; or
21 (C) the account debtor knows that the
22 assignment to that assignee is limited.
23 (c) Proof of assignment. Subject to subsection (h), if
24 requested by the account debtor, an assignee shall seasonably
25 furnish reasonable proof that the assignment has been made.
26 Unless the assignee complies, the account debtor may
27 discharge its obligation by paying the assignor, even if the
28 account debtor has received a notification under subsection
29 (a).
30 (d) Term restricting assignment generally ineffective.
31 Except as otherwise provided in subsection (e) and Sections
32 2A-303 and 9-407, and subject to subsection (h), a term in an
33 agreement between an account debtor and an assignor or in a
34 promissory note is ineffective to the extent that it:
SB1231 Enrolled -165- LRB9106284WHdv
1 (1) prohibits, restricts, or requires the consent
2 of the account debtor or person obligated on the
3 promissory note to the assignment or transfer of, or the
4 creation, attachment, perfection, or enforcement of a
5 security interest in, the account, chattel paper, payment
6 intangible, or promissory note; or
7 (2) provides that the assignment or transfer or the
8 creation, attachment, perfection, or enforcement of the
9 security interest may give rise to a default, breach,
10 right of recoupment, claim, defense, termination, right
11 of termination, or remedy under the account, chattel
12 paper, payment intangible, or promissory note.
13 (e) Inapplicability of subsection (d) to certain sales.
14 Subsection (d) does not apply to the sale of a payment
15 intangible or promissory note.
16 (f) Legal restrictions on assignment generally
17 ineffective. Except as otherwise provided in Sections 2A-303
18 and 9-407 and subject to subsections (h) and (i), a rule of
19 law, statute, or regulation that prohibits, restricts, or
20 requires the consent of a government, governmental body or
21 official, or account debtor to the assignment or transfer of,
22 or creation of a security interest in, an account or chattel
23 paper is ineffective to the extent that the rule of law,
24 statute, or regulation:
25 (1) prohibits, restricts, or requires the consent
26 of the government, governmental body or official, or
27 account debtor to the assignment or transfer of, or the
28 creation, attachment, perfection, or enforcement of a
29 security interest in the account or chattel paper; or
30 (2) provides that the assignment or transfer or the
31 creation, attachment, perfection, or enforcement of the
32 security interest may give rise to a default, breach,
33 right of recoupment, claim, defense, termination, right
34 of termination, or remedy under the account or chattel
SB1231 Enrolled -166- LRB9106284WHdv
1 paper.
2 (g) Subsection (b)(3) not waivable. Subject to
3 subsection (h), an account debtor may not waive or vary its
4 option under subsection (b)(3).
5 (h) Rule for individual under other law. This Section
6 is subject to law other than this Article which establishes a
7 different rule for an account debtor who is an individual and
8 who incurred the obligation primarily for personal, family,
9 or household purposes.
10 (i) Inapplicability to health-care-insurance receivable.
11 This Section does not apply to an assignment of a
12 health-care-insurance receivable.
13 Release of Collateral; Duties of Filing Officer; Fees. A
14 secured party of record may by his signed statement release
15 all or a part of any collateral described in a filed
16 financing statement. The statement of release is sufficient
17 if it contains a description of the collateral being
18 released, the name and address of the debtor, the name and
19 address of the secured party, and the file number of the
20 financing statement. A statement of release signed by a
21 person other than the secured party of record must be
22 accompanied by a separate written statement of assignment
23 signed by the secured party of record and complying with
24 subsection (2) of Section 9-405, including payment of the
25 required fee. Upon presentation of such a statement of
26 release to the filing officer he shall mark the statement
27 with the hour and date of filing and shall note the same upon
28 the margin of the index of the filing of the financing
29 statement. The uniform fee for filing and noting such a
30 statement of release shall be $20.
31 (Source: P.A. 89-503, eff. 1-1-97.)
32 (810 ILCS 5/9-407) (from Ch. 26, par. 9-407)
33 Sec. 9-407. Restrictions on creation or enforcement of
SB1231 Enrolled -167- LRB9106284WHdv
1 security interest in leasehold interest or in lessor's
2 residual interest.
3 (a) Term restricting assignment generally ineffective.
4 Except as otherwise provided in subsection (b), a term in a
5 lease agreement is ineffective to the extent that it:
6 (1) prohibits, restricts, or requires the consent
7 of a party to the lease to the assignment or transfer or
8 the creation, attachment, perfection, or enforcement of a
9 security interest in an interest of a party under the
10 lease contract or in the lessor's residual interest in
11 the goods; or
12 (2) provides that the assignment or transfer or the
13 creation, attachment, perfection, or enforcement of the
14 security interest may give rise to a default, breach,
15 right of recoupment, claim, defense, termination, right
16 of termination, or remedy under the lease.
17 (b) Effectiveness of certain terms. Except as otherwise
18 provided in Section 2A-303(7), a term described in subsection
19 (a)(2) is effective to the extent that there is:
20 (1) a transfer by the lessee of the lessee's right
21 of possession or use of the goods in violation of the
22 term; or
23 (2) a delegation of a material performance of
24 either party to the lease contract in violation of the
25 term.
26 (c) Security interest not material impairment. The
27 creation, attachment, perfection, or enforcement of a
28 security interest in the lessor's interest under the lease
29 contract or the lessor's residual interest in the goods is
30 not a transfer that materially impairs the lessee's prospect
31 of obtaining return performance or materially changes the
32 duty of or materially increases the burden or risk imposed on
33 the lessee within the purview of Section 2A-303(4) unless,
34 and then only to the extent that, enforcement actually
SB1231 Enrolled -168- LRB9106284WHdv
1 results in a delegation of material performance of the
2 lessor. Information from Filing Officer; Fees.
3 (1) If the person filing any financing statement,
4 termination statement, statement of assignment, or statement
5 of release, furnishes the filing officer a copy thereof, the
6 filing officer shall upon request note upon the copy the file
7 number and date and hour of the filing of the original and
8 deliver or send the copy to such person.
9 (2) Upon request of any person, the filing officer shall
10 issue his certificate showing whether there is on file on the
11 date and hour stated therein, any presently effective
12 financing statement naming a particular debtor and any
13 statement of assignment thereof and if there is, giving the
14 date and hour of filing of each such statement and the names
15 and addresses of each secured party therein. The uniform fee
16 for such a certificate shall be $10 per name searched. Upon
17 request the filing officer shall furnish a copy of any filed
18 financing statement or statement of assignment for a uniform
19 fee of $1.00 per page.
20 (Source: P.A. 86-343.)
21 (810 ILCS 5/9-408) (from Ch. 26, par. 9-408)
22 Sec. 9-408. Restrictions on assignment of promissory
23 notes, health-care-insurance receivables, and certain general
24 intangibles ineffective.
25 (a) Term restricting assignment generally ineffective.
26 Except as otherwise provided in subsection (b), a term in a
27 promissory note or in an agreement between an account debtor
28 and a debtor which relates to a health-care-insurance
29 receivable or a general intangible, including a contract,
30 permit, license, or franchise, and which term prohibits,
31 restricts, or requires the consent of the person obligated on
32 the promissory note or the account debtor to, the assignment
33 or transfer of, or creation, attachment, or perfection of a
SB1231 Enrolled -169- LRB9106284WHdv
1 security interest in, the promissory note,
2 health-care-insurance receivable, or general intangible, is
3 ineffective to the extent that the term:
4 (1) would impair the creation, attachment, or
5 perfection of a security interest; or
6 (2) provides that the assignment or transfer or the
7 creation, attachment, or perfection of the security
8 interest may give rise to a default, breach, right of
9 recoupment, claim, defense, termination, right of
10 termination, or remedy under the promissory note,
11 health-care-insurance receivable, or general intangible.
12 (b) Applicability of subsection (a) to sales of certain
13 rights to payment. Subsection (a) applies to a security
14 interest in a payment intangible or promissory note only if
15 the security interest arises out of a sale of the payment
16 intangible or promissory note.
17 (c) Legal restrictions on assignment generally
18 ineffective. A rule of law, statute, or regulation that
19 prohibits, restricts, or requires the consent of a
20 government, governmental body or official, person obligated
21 on a promissory note, or account debtor to the assignment or
22 transfer of, or creation of a security interest in, a
23 promissory note, health-care-insurance receivable, or general
24 intangible, including a contract, permit, license, or
25 franchise between an account debtor and a debtor, is
26 ineffective to the extent that the rule of law, statute, or
27 regulation:
28 (1) would impair the creation, attachment, or
29 perfection of a security interest; or
30 (2) provides that the assignment or transfer or the
31 creation, attachment, or perfection of the security
32 interest may give rise to a default, breach, right of
33 recoupment, claim, defense, termination, right of
34 termination, or remedy under the promissory note,
SB1231 Enrolled -170- LRB9106284WHdv
1 health-care-insurance receivable, or general intangible.
2 (d) Limitation on ineffectiveness under subsections (a)
3 and (c). To the extent that a term in a promissory note or in
4 an agreement between an account debtor and a debtor which
5 relates to a health-care-insurance receivable or general
6 intangible or a rule of law, statute, or regulation described
7 in subsection (c) would be effective under law other than
8 this Article but is ineffective under subsection (a) or (c),
9 the creation, attachment, or perfection of a security
10 interest in the promissory note, health-care-insurance
11 receivable, or general intangible:
12 (1) is not enforceable against the person obligated
13 on the promissory note or the account debtor;
14 (2) does not impose a duty or obligation on the
15 person obligated on the promissory note or the account
16 debtor;
17 (3) does not require the person obligated on the
18 promissory note or the account debtor to recognize the
19 security interest, pay or render performance to the
20 secured party, or accept payment or performance from the
21 secured party;
22 (4) does not entitle the secured party to use or
23 assign the debtor's rights under the promissory note,
24 health-care-insurance receivable, or general intangible,
25 including any related information or materials furnished
26 to the debtor in the transaction giving rise to the
27 promissory note, health-care-insurance receivable, or
28 general intangible;
29 (5) does not entitle the secured party to use,
30 assign, possess, or have access to any trade secrets or
31 confidential information of the person obligated on the
32 promissory note or the account debtor; and
33 (6) does not entitle the secured party to enforce
34 the security interest in the promissory note,
SB1231 Enrolled -171- LRB9106284WHdv
1 health-care-insurance receivable, or general intangible.
2 Financing Statements Covering Consigned or Leased Goods.
3 A consignor or lessor of goods may file a financing
4 statement using the terms "consignor," "consignee," "lessor,"
5 "lessee" or the like instead of the terms specified in
6 Section 9-402. The provisions of this part shall apply as
7 appropriate to such a financing statement but its filing
8 shall not of itself be a factor in determining whether or not
9 the consignment or lease is intended as security (Section
10 1-201 (37). However, if it is determined for other reasons
11 that the consignment or lease is so intended, a security
12 interest of the consignor or lessor which attaches to the
13 consigned or leased goods is perfected by such filing.
14 (Source: P. A. 78-238.)
15 (810 ILCS 5/9-409 new)
16 Sec. 9-409. Restrictions on assignment of
17 letter-of-credit rights ineffective.
18 (a) Term or law restricting assignment generally
19 ineffective. A term in a letter of credit or a rule of law,
20 statute, regulation, custom, or practice applicable to the
21 letter of credit which prohibits, restricts, or requires the
22 consent of an applicant, issuer, or nominated person to a
23 beneficiary's assignment of or creation of a security
24 interest in a letter-of-credit right is ineffective to the
25 extent that the term or rule of law, statute, regulation,
26 custom, or practice:
27 (1) would impair the creation, attachment, or
28 perfection of a security interest in the letter-of-credit
29 right; or
30 (2) provides that the assignment or the creation,
31 attachment, or perfection of the security interest may
32 give rise to a default, breach, right of recoupment,
33 claim, defense, termination, right of termination, or
SB1231 Enrolled -172- LRB9106284WHdv
1 remedy under the letter-of-credit right.
2 (b) Limitation on ineffectiveness under subsection (a).
3 To the extent that a term in a letter of credit is
4 ineffective under subsection (a) but would be effective under
5 law other than this Article or a custom or practice
6 applicable to the letter of credit, to the transfer of a
7 right to draw or otherwise demand performance under the
8 letter of credit, or to the assignment of a right to proceeds
9 of the letter of credit, the creation, attachment, or
10 perfection of a security interest in the letter-of-credit
11 right:
12 (1) is not enforceable against the applicant,
13 issuer, nominated person, or transferee beneficiary;
14 (2) imposes no duties or obligations on the
15 applicant, issuer, nominated person, or transferee
16 beneficiary; and
17 (3) does not require the applicant, issuer,
18 nominated person, or transferee beneficiary to recognize
19 the security interest, pay or render performance to the
20 secured party, or accept payment or other performance
21 from the secured party.
22 (810 ILCS 5/9-410)
23 Sec. 9-410. (Blank). Disposition of fees. Of the total
24 money collected for each filing with the Secretary of State
25 of an original financing statement, amended statement,
26 continuation, assignment, or for a release of collateral, $12
27 of the filing fee shall be paid into the Secretary of State
28 Special Services Fund. The remaining $8 shall be deposited
29 into the General Revenue Fund in the State Treasury.
30 (Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.)
31 (810 ILCS 5/Art. 9, Part 5 heading)
32 PART 5. FILING DEFAULT
SB1231 Enrolled -173- LRB9106284WHdv
1 (810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new)
2 SUBPART 1. FILING OFFICE; CONTENTS AND
3 EFFECTIVENESS OF FINANCING STATEMENT
4 (810 ILCS 5/9-501) (from Ch. 26, par. 9-501)
5 Sec. 9-501. Filing office.
6 (a) Filing offices. Except as otherwise provided in
7 subsection (b), if the local law of this State governs
8 perfection of a security interest or agricultural lien, the
9 office in which to file a financing statement to perfect the
10 security interest or agricultural lien is:
11 (1) the office designated for the filing or
12 recording of a record of a mortgage on the related real
13 property, if:
14 (A) the collateral is as-extracted collateral
15 or timber to be cut; or
16 (B) the financing statement is filed as a
17 fixture filing and the collateral is goods that are
18 or are to become fixtures; or
19 (2) the office of the Secretary of State in all
20 other cases, including a case in which the collateral is
21 goods that are or are to become fixtures and the
22 financing statement is not filed as a fixture filing.
23 (b) Filing office for transmitting utilities. The
24 office in which to file a financing statement to perfect a
25 security interest in collateral, including fixtures, of a
26 transmitting utility is the office of the Secretary of State.
27 The financing statement also constitutes a fixture filing as
28 to the collateral indicated in the financing statement which
29 is or is to become fixtures. Default; procedure when security
30 agreement covers both real and personal property.
31 (1) When a debtor is in default under a security
32 agreement, a secured party has the rights and remedies
33 provided in this Part and except as limited by subsection (3)
SB1231 Enrolled -174- LRB9106284WHdv
1 those provided in the security agreement. He may reduce his
2 claim to judgment, foreclose or otherwise enforce the
3 security interest by any available judicial procedure. If the
4 collateral is documents the secured party may proceed either
5 as to the documents or as to the goods covered thereby. A
6 secured party in possession has the rights, remedies and
7 duties provided in Section 9-207. The rights and remedies
8 referred to in this subsection are cumulative.
9 (2) After default, the debtor has the rights and
10 remedies provided in this Part, those provided in the
11 security agreement and those provided in Section 9-207.
12 (3) To the extent that they give rights to the debtor
13 and impose duties on the secured party, the rules stated in
14 the subsections referred to below may not be waived or varied
15 except as provided with respect to compulsory disposition of
16 collateral (subsection (3) of Section 9-504 and Section 9-505
17 and with respect to redemption of collateral (Section 9-506)
18 but the parties may by agreement determine the standards by
19 which the fulfillment of these rights and duties is to be
20 measured if such standards are not manifestly unreasonable:
21 (a) subsection (2) of Section 9-502 and subsection
22 (2) of Section 9-504 insofar as they require accounting
23 for surplus proceeds of collateral;
24 (b) subsection (3) of Section 9-504 and subsection
25 (1) of Section 9-505 which deal with disposition of
26 collateral;
27 (c) subsection (2) of Section 9-505 which deals
28 with acceptance of collateral as discharge of obligation;
29 (d) Section 9-506 which deals with redemption of
30 collateral; and
31 (e) subsection (1) of Section 9-507 which deals
32 with the secured party's liability for failure to comply
33 with this Part.
34 (4) If the security agreement covers both real and
SB1231 Enrolled -175- LRB9106284WHdv
1 personal property, the secured party may proceed under this
2 Part as to the personal property or he may proceed as to both
3 the real and the personal property in accordance with his
4 rights and remedies in respect to the real property in which
5 case the provisions of this Part do not apply.
6 (5) When a secured party has reduced his claim to
7 judgment the lien of any levy which may be made upon his
8 collateral by virtue of such judgment shall relate back to
9 the date of the perfection of the security interest in such
10 collateral. A judicial sale, pursuant to such judgment, is a
11 foreclosure of the security interest by judicial procedure
12 within the meaning of this Section, and the secured party may
13 purchase at the sale and thereafter hold the collateral free
14 of any other requirements of this Article.
15 (Source: P.A. 84-546; revised 10-31-98.)
16 (810 ILCS 5/9-502) (from Ch. 26, par. 9-502)
17 Sec. 9-502. Contents of financing statement; record of
18 mortgage as financing statement; time of filing financing
19 statement.
20 (a) Sufficiency of financing statement. Subject to
21 subsection (b), a financing statement is sufficient only if
22 it:
23 (1) provides the name of the debtor;
24 (2) provides the name of the secured party or a
25 representative of the secured party; and
26 (3) indicates the collateral covered by the
27 financing statement.
28 (b) Real-property-related financing statements. Except
29 as otherwise provided in Section 9-501(b), to be sufficient,
30 a financing statement that covers as-extracted collateral or
31 timber to be cut, or which is filed as a fixture filing and
32 covers goods that are or are to become fixtures, must satisfy
33 subsection (a) and also:
SB1231 Enrolled -176- LRB9106284WHdv
1 (1) indicate that it covers this type of
2 collateral;
3 (2) indicate that it is to be filed in the real
4 property records;
5 (3) provide a description of the real property to
6 which the collateral is related sufficient to give
7 constructive notice of a mortgage under the law of this
8 State if the description were contained in a record of
9 the mortgage of the real property; and
10 (4) if the debtor does not have an interest of
11 record in the real property, provide the name of a record
12 owner.
13 (c) Record of mortgage as financing statement. A record
14 of a mortgage is effective, from the date of recording, as a
15 financing statement filed as a fixture filing or as a
16 financing statement covering as-extracted collateral or
17 timber to be cut only if:
18 (1) the record indicates the goods or accounts that
19 it covers;
20 (2) the goods are or are to become fixtures related
21 to the real property described in the record or the
22 collateral is related to the real property described in
23 the record and is as-extracted collateral or timber to be
24 cut;
25 (3) the record satisfies the requirements for a
26 financing statement in this Section other than an
27 indication that it is to be filed in the real property
28 records; and
29 (4) the record is recorded.
30 (d) Filing before security agreement or attachment. A
31 financing statement may be filed before a security agreement
32 is made or a security interest otherwise attaches. Collection
33 Rights of Secured Party.
34 (1) When so agreed and in any event on default the
SB1231 Enrolled -177- LRB9106284WHdv
1 secured party is entitled to notify an account debtor or the
2 obligor on an instrument to make payment to him whether or
3 not the assignor was theretofore making collections on the
4 collateral, and also to take control of any proceeds to which
5 he is entitled under Section 9-306.
6 (2) A secured party who by agreement is entitled to
7 charge back uncollected collateral or otherwise to full or
8 limited recourse against the debtor and who undertakes to
9 collect from the account debtors or obligors must proceed in
10 a commercially reasonable manner and may deduct his
11 reasonable expenses of realization from the collections. If
12 the security agreement secures an indebtedness, the secured
13 party must account to the debtor for any surplus, and unless
14 otherwise agreed, the debtor is liable for any deficiency.
15 But, if the underlying transaction was a sale of accounts or
16 chattel paper, the debtor is entitled to any surplus or is
17 liable for any deficiency only if the security agreement so
18 provides.
19 (Source: P.A. 77-2810.)
20 (810 ILCS 5/9-503) (from Ch. 26, par. 9-503)
21 Sec. 9-503. Name of debtor and secured party.
22 (a) Sufficiency of debtor's name. A financing statement
23 sufficiently provides the name of the debtor:
24 (1) if the debtor is a registered organization,
25 only if the financing statement provides the name of the
26 debtor indicated on the public record of the debtor's
27 jurisdiction of organization which shows the debtor to
28 have been organized;
29 (2) if the debtor is a decedent's estate, only if
30 the financing statement provides the name of the decedent
31 and indicates that the debtor is an estate;
32 (3) if the debtor is a trust or a trustee acting
33 with respect to property held in trust, only if the
SB1231 Enrolled -178- LRB9106284WHdv
1 financing statement:
2 (A) provides the name specified for the trust
3 in its organic documents or, if no name is
4 specified, provides the name of the settlor and
5 additional information sufficient to distinguish the
6 debtor from other trusts having one or more of the
7 same settlors; and
8 (B) indicates, in the debtor's name or
9 otherwise, that the debtor is a trust or is a
10 trustee acting with respect to property held in
11 trust; and
12 (4) in other cases:
13 (A) if the debtor has a name, only if it
14 provides the individual or organizational name of
15 the debtor; and
16 (B) if the debtor does not have a name, only
17 if it provides the names of the partners, members,
18 associates, or other persons comprising the debtor.
19 (b) Additional debtor-related information. A financing
20 statement that provides the name of the debtor in accordance
21 with subsection (a) is not rendered ineffective by the
22 absence of:
23 (1) a trade name or other name of the debtor; or
24 (2) unless required under subsection (a)(4)(B),
25 names of partners, members, associates, or other persons
26 comprising the debtor.
27 (c) Debtor's trade name insufficient. A financing
28 statement that provides only the debtor's trade name does not
29 sufficiently provide the name of the debtor.
30 (d) Representative capacity. Failure to indicate the
31 representative capacity of a secured party or representative
32 of a secured party does not affect the sufficiency of a
33 financing statement.
34 (e) Multiple debtors and secured parties. A financing
SB1231 Enrolled -179- LRB9106284WHdv
1 statement may provide the name of more than one debtor and
2 the name of more than one secured party. Secured party's
3 right to take possession after default.
4 Unless otherwise agreed a secured party has on default
5 the right to take possession of the collateral. In taking
6 possession a secured party may proceed without judicial
7 process if this can be done without breach of the peace or
8 may proceed by action.
9 If the security agreement so provides the secured party
10 may require the debtor to assemble the collateral and make it
11 available to the secured party at a place to be designated by
12 the secured party which is reasonably convenient to both
13 parties. Without removal a secured party may render equipment
14 unusable, and may dispose of collateral on the debtor's
15 premises under Section 9--504.
16 (Source: Laws 1961, p. 2101.)
17 (810 ILCS 5/9-504) (from Ch. 26, par. 9-504)
18 Sec. 9-504. Indication of collateral. A financing
19 statement sufficiently indicates the collateral that it
20 covers if the financing statement provides:
21 (1) a description of the collateral pursuant to
22 Section 9-108; or
23 (2) an indication that the financing statement
24 covers all assets or all personal property.
25 Secured Party's Right to Dispose of Collateral After
26 Default; Effect of Disposition.
27 (1) A secured party after default may sell, lease or
28 otherwise dispose of any or all of the collateral in its then
29 condition or following any commercially reasonable
30 preparation or processing. Any sale of goods is subject to
31 the Article on Sales (Article 2). The proceeds of disposition
32 shall be applied in the order following to
33 (a) the reasonable expenses of retaking, holding,
SB1231 Enrolled -180- LRB9106284WHdv
1 preparing for sale or lease, selling, leasing and the like
2 and, to the extent provided for in the agreement and not
3 prohibited by law, the reasonable attorneys' fees and legal
4 expenses incurred by the secured party;
5 (b) the satisfaction of indebtedness secured by the
6 security interest under which the disposition is made;
7 (c) the satisfaction of indebtedness secured by any
8 subordinate security interest in the collateral if written
9 notification of demand therefor is received before
10 distribution of the proceeds is completed. If requested by
11 the secured party, the holder of a subordinate security
12 interest must seasonably furnish reasonable proof of his
13 interest, and unless he does so, the secured party need not
14 comply with his demand.
15 (2) If the security interest secures an indebtedness,
16 the secured party must account to the debtor for any surplus,
17 and, unless otherwise agreed, the debtor is liable for any
18 deficiency. But if the underlying transaction was a sale of
19 accounts or chattel paper, the debtor is entitled to any
20 surplus or is liable for any deficiency only if the security
21 agreement so provides.
22 (3) Disposition of the collateral may be by public or
23 private proceedings and may be made by way of one or more
24 contracts. Sale or other disposition may be as a unit or in
25 parcels and at any time and place and on any terms but every
26 aspect of the disposition including the method, manner, time,
27 place and terms must be commercially reasonable. Unless
28 collateral is perishable or threatens to decline speedily in
29 value or is of a type customarily sold on a recognized
30 market, reasonable notification of the time and place of any
31 public sale or reasonable notification of the time after
32 which any private sale or other intended disposition is to be
33 made shall be sent by the secured party to the debtor, if he
34 has not signed after default a statement renouncing or
SB1231 Enrolled -181- LRB9106284WHdv
1 modifying his right to notification of sale. In the case of
2 consumer goods no other notification need be sent. In other
3 cases notification shall be sent to any other secured party
4 from whom the secured party has received (before sending his
5 notification to the debtor or before the debtor's
6 renunciation of his rights) written notice of a claim of an
7 interest in the collateral. The secured party may buy at any
8 public sale and if the collateral is of a type customarily
9 sold in a recognized market or is of a type which is the
10 subject of widely distributed standard price quotations he
11 may buy at private sale.
12 (4) When collateral is disposed of by a secured party
13 after default, the disposition transfers to a purchaser for
14 value all of the debtor's rights therein, discharges the
15 security interest under which it is made and any security
16 interest or lien subordinate thereto. The purchaser takes
17 free of all such rights and interests even though the secured
18 party fails to comply with the requirements of this Part or
19 of any judicial proceedings
20 (a) in the case of a public sale, if the purchaser
21 has no knowledge of any defects in the sale and if he does
22 not buy in collusion with the secured party, other bidders or
23 the person conducting the sale; or
24 (b) in any other case, if the purchaser acts in
25 good faith.
26 (5) A person who is liable to a secured party under a
27 guaranty, indorsement, repurchase agreement or the like and
28 who receives a transfer of collateral from the secured party
29 or is subrogated to his rights has thereafter the rights and
30 duties of the secured party. Such a transfer of collateral is
31 not a sale or disposition of the collateral under this
32 Article.
33 (Source: P. A. 78-238.)
SB1231 Enrolled -182- LRB9106284WHdv
1 (810 ILCS 5/9-505) (from Ch. 26, par. 9-505)
2 Sec. 9-505. Filing and compliance with other statutes and
3 treaties for consignments, leases, other bailments, and other
4 transactions.
5 (a) Use of terms other than "debtor" and "secured
6 party." A consignor, lessor, or other bailor of goods, a
7 licensor, or a buyer of a payment intangible or promissory
8 note may file a financing statement, or may comply with a
9 statute or treaty described in Section 9-311(a), using the
10 terms "consignor", "consignee", "lessor", "lessee", "bailor",
11 "bailee", "licensor", "licensee", "owner", "registered
12 owner", "buyer", "seller", or words of similar import,
13 instead of the terms "secured party" and "debtor".
14 (b) Effect of financing statement under subsection (a).
15 This part applies to the filing of a financing statement
16 under subsection (a) and, as appropriate, to compliance that
17 is equivalent to filing a financing statement under Section
18 9-311(b), but the filing or compliance is not of itself a
19 factor in determining whether the collateral secures an
20 obligation. If it is determined for another reason that the
21 collateral secures an obligation, a security interest held by
22 the consignor, lessor, bailor, licensor, owner, or buyer
23 which attaches to the collateral is perfected by the filing
24 or compliance. Compulsory Disposition of Collateral;
25 Acceptance of the Collateral as Discharge of Obligation.
26 (1) If the debtor has paid 60% of the cash price in the
27 case of a purchase money security interest in consumer goods
28 or 60% of the loan in the case of another security interest
29 in consumer goods, and has not signed after default a
30 statement renouncing or modifying his rights under this Part
31 a secured party who has taken possession of collateral must
32 dispose of it under Section 9--504 and if he fails to do so
33 within 90 days after he takes possession the debtor at his
34 option may recover in conversion or under Section 9--507(1)
SB1231 Enrolled -183- LRB9106284WHdv
1 on secured party's liability.
2 (2) In any other case involving consumer goods or any
3 other collateral a secured party in possession may, after
4 default, propose to retain the collateral in satisfaction of
5 the obligation. Written notice of such proposal shall be sent
6 to the debtor if he has not signed after default a statement
7 renouncing or modifying his rights under this subsection. In
8 the case of consumer goods no other notice need be given. In
9 other cases notice shall be sent to any other secured party
10 from whom the secured party has received (before sending his
11 notice to the debtor or before the debtor's renunciation of
12 his rights) written notice of a claim of an interest in the
13 collateral. If the secured party receives objection in
14 writing from a person entitled to receive notification within
15 twenty-one days after the notice was sent, the secured party
16 must dispose of the collateral under Section 9-504. In the
17 absence of such written objection the secured party may
18 retain the collateral in satisfaction of the debtor's
19 obligation.
20 (Source: P.A. 77-2810.)
21 (810 ILCS 5/9-506) (from Ch. 26, par. 9-506)
22 Sec. 9-506. Effect of errors or omissions.
23 (a) Minor errors and omissions. A financing statement
24 substantially satisfying the requirements of this Part is
25 effective, even if it has minor errors or omissions, unless
26 the errors or omissions make the financing statement
27 seriously misleading.
28 (b) Financing statement seriously misleading. Except as
29 otherwise provided in subsection (c), a financing statement
30 that fails sufficiently to provide the name of the debtor in
31 accordance with Section 9-503(a) is seriously misleading.
32 (c) Financing statement not seriously misleading. If a
33 search of the records of the filing office under the debtor's
SB1231 Enrolled -184- LRB9106284WHdv
1 correct name, using the filing office's standard search
2 logic, if any, would disclose a financing statement that
3 fails sufficiently to provide the name of the debtor in
4 accordance with Section 9-503(a), the name provided does not
5 make the financing statement seriously misleading.
6 (d) "Debtor's correct name." For purposes of Section
7 9-508(b), the "debtor's correct name" in subsection (c) means
8 the correct name of the new debtor. Debtor's right to redeem
9 collateral.
10 At any time before the secured party has disposed of
11 collateral or entered into a contract for its disposition
12 under Section 9--504 or before the obligation has been
13 discharged under Section 9--505(2) the debtor or any other
14 secured party may unless otherwise agreed in writing after
15 default redeem the collateral by tendering fulfillment of all
16 obligations secured by the collateral as well as the expenses
17 reasonably incurred by the secured party in retaking, holding
18 and preparing the collateral for disposition, in arranging
19 for the sale, and to the extent provided in the agreement and
20 not prohibited by law, his reasonable attorneys' fees and
21 legal expenses.
22 (Source: Laws 1961, p. 2101.)
23 (810 ILCS 5/9-507) (from Ch. 26, par. 9-507)
24 Sec. 9-507. Effect of certain events on effectiveness of
25 financing statement.
26 (a) Disposition. A filed financing statement remains
27 effective with respect to collateral that is sold, exchanged,
28 leased, licensed, or otherwise disposed of and in which a
29 security interest or agricultural lien continues, even if the
30 secured party knows of or consents to the disposition.
31 (b) Information becoming seriously misleading. Except
32 as otherwise provided in subsection (c) and Section 9-508, a
33 financing statement is not rendered ineffective if, after the
SB1231 Enrolled -185- LRB9106284WHdv
1 financing statement is filed, the information provided in the
2 financing statement becomes seriously misleading under
3 Section 9-506.
4 (c) Change in debtor's name. If a debtor so changes its
5 name that a filed financing statement becomes seriously
6 misleading under Section 9-506:
7 (1) the financing statement is effective to perfect
8 a security interest in collateral acquired by the debtor
9 before, or within four months after, the change; and
10 (2) the financing statement is not effective to
11 perfect a security interest in collateral acquired by the
12 debtor more than four months after the change, unless an
13 amendment to the financing statement which renders the
14 financing statement not seriously misleading is filed
15 within four months after the change. Secured party's
16 liability for failure to comply with this part.
17 (1) If it is established that the secured party is not
18 proceeding in accordance with the provisions of this Part
19 disposition may be ordered or restrained on appropriate terms
20 and conditions. If the disposition has occurred the debtor or
21 any person entitled to notification or whose security
22 interest has been made known to the secured party prior to
23 the disposition has a right to recover from the secured party
24 any loss caused by a failure to comply with the provisions of
25 this Part. If the collateral is consumer goods, the debtor in
26 an individual action has a right to recover in any event an
27 amount not less than the credit service charge plus 10% of
28 the principal amount of the debt or the time price
29 differential plus 10% of the cash price.
30 (2) The fact that a better price could have been
31 obtained by a sale at a different time or in a different
32 method from that selected by the secured party is not of
33 itself sufficient to establish that the sale was not made in
34 a commercially reasonable manner. If the secured party either
SB1231 Enrolled -186- LRB9106284WHdv
1 sells the collateral in the usual manner in any recognized
2 market therefor or if he sells at the price current in such
3 market at the time of his sale or if he has otherwise sold in
4 conformity with reasonable commercial practices among dealers
5 in the type of property sold he has sold in a commercially
6 reasonable manner. The principles stated in the two preceding
7 sentences with respect to sales also apply as may be
8 appropriate to other types of disposition. A disposition
9 which has been approved in any judicial proceeding or by any
10 bona fide creditors' committee or representative of creditors
11 shall conclusively be deemed to be commercially reasonable,
12 but this sentence does not indicate that any such approval
13 must be obtained in any case nor does it indicate that any
14 disposition not so approved is not commercially reasonable.
15 (Source: P.A. 90-214, eff. 7-25-97.)
16 (810 ILCS 5/9-508 new)
17 Sec. 9-508. Effectiveness of financing statement if new
18 debtor becomes bound by security agreement.
19 (a) Financing statement naming original debtor. Except
20 as otherwise provided in this Section, a filed financing
21 statement naming an original debtor is effective to perfect a
22 security interest in collateral in which a new debtor has or
23 acquires rights to the extent that the financing statement
24 would have been effective had the original debtor acquired
25 rights in the collateral.
26 (b) Financing statement becoming seriously misleading.
27 If the difference between the name of the original debtor and
28 that of the new debtor causes a filed financing statement
29 that is effective under subsection (a) to be 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 new
33 debtor before, and within four months after, the new
SB1231 Enrolled -187- LRB9106284WHdv
1 debtor becomes bound under Section 9-203(d); and
2 (2) the financing statement is not effective to
3 perfect a security interest in collateral acquired by the
4 new debtor more than four months after the new debtor
5 becomes bound under Section 9-203(d) unless an initial
6 financing statement providing the name of the new debtor
7 is filed before the expiration of that time.
8 (c) When Section not applicable. This Section does not
9 apply to collateral as to which a filed financing statement
10 remains effective against the new debtor under Section
11 9-507(a).
12 (810 ILCS 5/9-509 new)
13 Sec. 9-509. Persons entitled to file a record.
14 (a) Person entitled to file record. A person may file
15 an initial financing statement, amendment that adds
16 collateral covered by a financing statement, or amendment
17 that adds a debtor to a financing statement only if:
18 (1) the debtor authorizes the filing in an
19 authenticated record or pursuant to subsection (b) or
20 (c); or
21 (2) the person holds an agricultural lien that has
22 become effective at the time of filing and the financing
23 statement covers only collateral in which the person
24 holds an agricultural lien.
25 (b) Security agreement as authorization. By
26 authenticating or becoming bound as debtor by a security
27 agreement, a debtor or new debtor authorizes the filing of an
28 initial financing statement, and an amendment, covering:
29 (1) the collateral described in the security
30 agreement; and
31 (2) property that becomes collateral under Section
32 9-315(a)(2), whether or not the security agreement
33 expressly covers proceeds.
SB1231 Enrolled -188- LRB9106284WHdv
1 (c) Acquisition of collateral as authorization. By
2 acquiring collateral in which a security interest or
3 agricultural lien continues under Section 9-315(a)(1), a
4 debtor authorizes the filing of an initial financing
5 statement, and an amendment, covering the collateral and
6 property that becomes collateral under Section 9-315(a)(2).
7 (d) Person entitled to file certain amendments. A
8 person may file an amendment other than an amendment that
9 adds collateral covered by a financing statement or an
10 amendment that adds a debtor to a financing statement only
11 if:
12 (1) the secured party of record authorizes the
13 filing; or
14 (2) the amendment is a termination statement for a
15 financing statement as to which the secured party of
16 record has failed to file or send a termination statement
17 as required by Section 9-513(a) or (c), the debtor
18 authorizes the filing, and the termination statement
19 indicates that the debtor authorized it to be filed.
20 (e) Multiple secured parties of record. If there is
21 more than one secured party of record for a financing
22 statement, each secured party of record may authorize the
23 filing of an amendment under subsection (d).
24 (810 ILCS 5/9-510 new)
25 Sec. 9-510. Effectiveness of filed record.
26 (a) Filed record effective if authorized. A filed
27 record is effective only to the extent that it was filed by a
28 person that may file it under Section 9-509.
29 (b) Authorization by one secured party of record. A
30 record authorized by one secured party of record does not
31 affect the financing statement with respect to another
32 secured party of record.
33 (c) Continuation statement not timely filed. A
SB1231 Enrolled -189- LRB9106284WHdv
1 continuation statement that is not filed within the six-month
2 period prescribed by Section 9-515(d) is ineffective.
3 (810 ILCS 5/9-511 new)
4 Sec. 9-511. Secured party of record.
5 (a) Secured party of record. A secured party of record
6 with respect to a financing statement is a person whose name
7 is provided as the name of the secured party or a
8 representative of the secured party in an initial financing
9 statement that has been filed. If an initial financing
10 statement is filed under Section 9-514(a), the assignee named
11 in the initial financing statement is the secured party of
12 record with respect to the financing statement.
13 (b) Amendment naming secured party of record. If an
14 amendment of a financing statement which provides the name of
15 a person as a secured party or a representative of a secured
16 party is filed, the person named in the amendment is a
17 secured party of record. If an amendment is filed under
18 Section 9-514(b), the assignee named in the amendment is a
19 secured party of record.
20 (c) Amendment deleting secured party of record. A
21 person remains a secured party of record until the filing of
22 an amendment of the financing statement which deletes the
23 person.
24 (810 ILCS 5/9-512 new)
25 Sec. 9-512. Amendment of financing statement.
26 (a) Amendment of information in financing statement.
27 Subject to Section 9-509, a person may add or delete
28 collateral covered by, continue or terminate the
29 effectiveness of, or, subject to subsection (e), otherwise
30 amend the information provided in, a financing statement by
31 filing an amendment that:
32 (1) identifies, by its file number, the initial
SB1231 Enrolled -190- LRB9106284WHdv
1 financing statement to which the amendment relates; and
2 (2) if the amendment relates to an initial
3 financing statement filed or recorded in a filing office
4 described in Section 9-501(a)(1), provides the date and
5 time that the initial financing statement was filed and
6 the information specified in Section 9-502(b).
7 (b) Period of effectiveness not affected. Except as
8 otherwise provided in Section 9-515, the filing of an
9 amendment does not extend the period of effectiveness of the
10 financing statement.
11 (c) Effectiveness of amendment adding collateral. A
12 financing statement that is amended by an amendment that adds
13 collateral is effective as to the added collateral only from
14 the date of the filing of the amendment.
15 (d) Effectiveness of amendment adding debtor. A
16 financing statement that is amended by an amendment that adds
17 a debtor is effective as to the added debtor only from the
18 date of the filing of the amendment.
19 (e) Certain amendments ineffective. An amendment is
20 ineffective to the extent it:
21 (1) purports to delete all debtors and fails to
22 provide the name of a debtor to be covered by the
23 financing statement; or
24 (2) purports to delete all secured parties of
25 record and fails to provide the name of a new secured
26 party of record.
27 (810 ILCS 5/9-513 new)
28 Sec. 9-513. Termination statement.
29 (a) Consumer goods. A secured party shall cause the
30 secured party of record for a financing statement to file a
31 termination statement for the financing statement if the
32 financing statement covers consumer goods and:
33 (1) there is no obligation secured by the
SB1231 Enrolled -191- LRB9106284WHdv
1 collateral covered by the financing statement and no
2 commitment to make an advance, incur an obligation, or
3 otherwise give value; or
4 (2) the debtor did not authorize the filing of the
5 initial financing statement.
6 (b) Time for compliance with subsection (a). To comply
7 with subsection (a), a secured party shall cause the secured
8 party of record to file the termination statement:
9 (1) within one month after there is no obligation
10 secured by the collateral covered by the financing
11 statement and no commitment to make an advance, incur an
12 obligation, or otherwise give value; or
13 (2) if earlier, within 20 days after the secured
14 party receives an authenticated demand from a debtor.
15 (c) Other collateral. In cases not governed by
16 subsection (a), within 20 days after a secured party receives
17 an authenticated demand from a debtor, the secured party
18 shall cause the secured party of record for a financing
19 statement to send to the debtor a termination statement for
20 the financing statement or file the termination statement in
21 the filing office if:
22 (1) except in the case of a financing statement
23 covering accounts or chattel paper that has been sold or
24 goods that are the subject of a consignment, there is no
25 obligation secured by the collateral covered by the
26 financing statement and no commitment to make an advance,
27 incur an obligation, or otherwise give value;
28 (2) the financing statement covers accounts or
29 chattel paper that has been sold but as to which the
30 account debtor or other person obligated has discharged
31 its obligation;
32 (3) the financing statement covers goods that were
33 the subject of a consignment to the debtor but are not in
34 the debtor's possession; or
SB1231 Enrolled -192- LRB9106284WHdv
1 (4) the debtor did not authorize the filing of the
2 initial financing statement.
3 (d) Effect of filing termination statement. Except as
4 otherwise provided in Section 9-510, upon the filing of a
5 termination statement with the filing office, the financing
6 statement to which the termination statement relates ceases
7 to be effective. Except as otherwise provided in Section
8 9-510, for purposes of Sections 9-519(g), 9-522(a), and
9 9-523(c) the filing with the filing office of a termination
10 statement relating to a financing statement that indicates
11 that the debtor is a transmitting utility also causes the
12 effectiveness of the financing statement to lapse.
13 (810 ILCS 5/9-514 new)
14 Sec. 9-514. Assignment of powers of secured party of
15 record.
16 (a) Assignment reflected on initial financing statement.
17 Except as otherwise provided in subsection (c), an initial
18 financing statement may reflect an assignment of all of the
19 secured party's power to authorize an amendment to the
20 financing statement by providing the name and mailing address
21 of the assignee as the name and address of the secured party.
22 (b) Assignment of filed financing statement. Except as
23 otherwise provided in subsection (c), a secured party of
24 record may assign of record all or part of its power to
25 authorize an amendment to a financing statement by filing in
26 the filing office an amendment of the financing statement
27 which:
28 (1) identifies, by its file number, the initial
29 financing statement to which it relates;
30 (2) provides the name of the assignor; and
31 (3) provides the name and mailing address of the
32 assignee.
33 (c) Assignment of record of mortgage. An assignment of
SB1231 Enrolled -193- LRB9106284WHdv
1 record of a security interest in a fixture covered by a
2 record of a mortgage which is effective as a financing
3 statement filed as a fixture filing under Section 9-502(c)
4 may be made only by an assignment of record of the mortgage
5 in the manner provided by law of this State other than the
6 Uniform Commercial Code.
7 (810 ILCS 5/9-515 new)
8 Sec. 9-515. Duration and effectiveness of financing
9 statement; effect of lapsed financing statement.
10 (a) Five-year effectiveness. Except as otherwise
11 provided in subsections (b), (e), (f), and (g), a filed
12 financing statement is effective for a period of five years
13 after the date of filing.
14 (b) Public-finance or manufactured-home transaction.
15 Except as otherwise provided in subsections (e), (f), and
16 (g), an initial financing statement filed in connection with
17 a public-finance transaction or manufactured-home transaction
18 is effective for a period of 30 years after the date of
19 filing if it indicates that it is filed in connection with a
20 public-finance transaction or manufactured-home transaction.
21 (c) Lapse and continuation of financing statement. The
22 effectiveness of a filed financing statement lapses on the
23 expiration of the period of its effectiveness unless before
24 the lapse a continuation statement is filed pursuant to
25 subsection (d). Upon lapse, a financing statement ceases to
26 be effective and any security interest or agricultural lien
27 that was perfected by the financing statement becomes
28 unperfected, unless the security interest is perfected
29 otherwise. If the security interest or agricultural lien
30 becomes unperfected upon lapse, it is deemed never to have
31 been perfected as against a purchaser of the collateral for
32 value.
33 (d) When continuation statement may be filed. A
SB1231 Enrolled -194- LRB9106284WHdv
1 continuation statement may be filed only within six months
2 before the expiration of the five-year period specified in
3 subsection (a) or the 30-year period specified in subsection
4 (b), whichever is applicable.
5 (e) Effect of filing continuation statement. Except as
6 otherwise provided in Section 9-510, upon timely filing of a
7 continuation statement, the effectiveness of the initial
8 financing statement continues for a period of five years
9 commencing on the day on which the financing statement would
10 have become ineffective in the absence of the filing. Upon
11 the expiration of the five-year period, the financing
12 statement lapses in the same manner as provided in subsection
13 (c), unless, before the lapse, another continuation statement
14 is filed pursuant to subsection (d). Succeeding continuation
15 statements may be filed in the same manner to continue the
16 effectiveness of the initial financing statement.
17 (f) Transmitting utility financing statement. If a
18 debtor is a transmitting utility and a filed financing
19 statement so indicates, the financing statement is effective
20 until a termination statement is filed.
21 (g) Record of mortgage as financing statement. A record
22 of a mortgage that is effective as a financing statement
23 filed as a fixture filing under Section 9-502(c) remains
24 effective as a financing statement filed as a fixture filing
25 until the mortgage is released or satisfied of record or its
26 effectiveness otherwise terminates as to the real property.
27 (810 ILCS 5/9-516 new)
28 Sec. 9-516. What constitutes filing; effectiveness of
29 filing.
30 (a) What constitutes filing. Except as otherwise
31 provided in subsection (b), communication of a record to a
32 filing office and tender of the filing fee or acceptance of
33 the record by the filing office constitutes filing.
SB1231 Enrolled -195- LRB9106284WHdv
1 (b) Refusal to accept record; filing does not occur.
2 Filing does not occur with respect to a record that a filing
3 office refuses to accept because:
4 (1) the record is not communicated by a method or
5 medium of communication authorized by the filing office;
6 (2) an amount equal to or greater than the
7 applicable filing fee is not tendered;
8 (3) the filing office is unable to index the record
9 because:
10 (A) in the case of an initial financing
11 statement, the record does not provide a name for
12 the debtor;
13 (B) in the case of an amendment or correction
14 statement, the record:
15 (i) does not identify the initial
16 financing statement as required by Section
17 9-512 or 9-518, as applicable; or
18 (ii) identifies an initial financing
19 statement whose effectiveness has lapsed under
20 Section 9-515;
21 (C) in the case of an initial financing
22 statement that provides the name of a debtor
23 identified as an individual or an amendment that
24 provides a name of a debtor identified as an
25 individual which was not previously provided in the
26 financing statement to which the record relates, the
27 record does not identify the debtor's last name; or
28 (D) in the case of a record filed or recorded
29 in the filing office described in Section
30 9-501(a)(1), the record does not provide a
31 sufficient description of the real property to which
32 it relates;
33 (4) in the case of an initial financing statement
34 or an amendment that adds a secured party of record, the
SB1231 Enrolled -196- LRB9106284WHdv
1 record does not provide a name and mailing address for
2 the secured party of record;
3 (5) in the case of an initial financing statement
4 or an amendment that provides a name of a debtor which
5 was not previously provided in the financing statement to
6 which the amendment relates, the record does not:
7 (A) provide a mailing address for the debtor;
8 (B) indicate whether the debtor is an
9 individual or an organization; or
10 (C) if the financing statement indicates that
11 the debtor is an organization, provide:
12 (i) a type of organization for the
13 debtor;
14 (ii) a jurisdiction of organization for
15 the debtor; or
16 (iii) an organizational identification
17 number for the debtor or indicate that the
18 debtor has none;
19 (6) in the case of an assignment reflected in an
20 initial financing statement under Section 9-514(a) or an
21 amendment filed under Section 9-514(b), the record does
22 not provide a name and mailing address for the assignee;
23 or
24 (7) in the case of a continuation statement, the
25 record is not filed within the six-month period
26 prescribed by Section 9-515(d).
27 (c) Rules applicable to subsection (b). For purposes of
28 subsection (b):
29 (1) a record does not provide information if the
30 filing office is unable to read or decipher the
31 information; and
32 (2) a record that does not indicate that it is an
33 amendment or identify an initial financing statement to
34 which it relates, as required by Section 9-512, 9-514, or
SB1231 Enrolled -197- LRB9106284WHdv
1 9-518, is an initial financing statement.
2 (d) Refusal to accept record; record effective as filed
3 record. A record that is communicated to the filing office
4 with tender of the filing fee, but which the filing office
5 refuses to accept for a reason other than one set forth in
6 subsection (b), is effective as a filed record except as
7 against a purchaser of the collateral which gives value in
8 reasonable reliance upon the absence of the record from the
9 files.
10 (810 ILCS 5/9-517 new)
11 Sec. 9-517. Effect of indexing errors. The failure of
12 the filing office to index a record correctly does not affect
13 the effectiveness of the filed record.
14 (810 ILCS 5/9-518 new)
15 Sec. 9-518. Claim concerning inaccurate or wrongfully
16 filed record.
17 (a) Correction statement. A person may file in the
18 filing office a correction statement with respect to a record
19 indexed there under the person's name if the person believes
20 that the record is inaccurate or was wrongfully filed.
21 (b) Sufficiency of correction statement. A correction
22 statement must:
23 (1) identify the record to which it relates by:
24 (A) the file number assigned to the initial
25 financing statement to which the record relates; and
26 (B) if the correction statement relates to a
27 record filed or recorded in a filing office
28 described in Section 9-501(a)(1), the date and time
29 that the initial financing statement was filed and
30 the information specified in Section 9-502(b);
31 (2) indicate that it is a correction statement; and
32 (3) provide the basis for the person's belief that
SB1231 Enrolled -198- LRB9106284WHdv
1 the record is inaccurate and indicate the manner in which
2 the person believes the record should be amended to cure
3 any inaccuracy or provide the basis for the person's
4 belief that the record was wrongfully filed.
5 (c) Record not affected by correction statement. The
6 filing of a correction statement does not affect the
7 effectiveness of an initial financing statement or other
8 filed record.
9 (810 ILCS 5/Art. 9, Part 5, Subpart 2 heading new)
10 SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
11 (810 ILCS 5/9-519 new)
12 Sec. 9-519. Numbering, maintaining, and indexing
13 records; communicating information provided in records.
14 (a) Filing office duties. For each record filed in a
15 filing office, the filing office shall:
16 (1) assign a unique number to the filed record;
17 (2) create a record that bears the number assigned
18 to the filed record and the date and time of filing;
19 (3) maintain the filed record for public
20 inspection; and
21 (4) index the filed record in accordance with
22 subsections (c), (d), and (e).
23 (b) File number. A file number assigned after January
24 1, 2002, must include a digit that:
25 (1) is mathematically derived from or related to
26 the other digits of the file number; and
27 (2) aids the filing office in determining whether a
28 number communicated as the file number includes a
29 single-digit or transpositional error.
30 (c) Indexing: general. Except as otherwise provided in
31 subsections (d) and (e), the filing office shall:
32 (1) index an initial financing statement according
SB1231 Enrolled -199- LRB9106284WHdv
1 to the name of the debtor and index all filed records
2 relating to the initial financing statement in a manner
3 that associates with one another an initial financing
4 statement and all filed records relating to the initial
5 financing statement; and
6 (2) index a record that provides a name of a debtor
7 which was not previously provided in the financing
8 statement to which the record relates also according to
9 the name that was not previously provided.
10 (d) Indexing: real-property-related financing
11 statement. If a financing statement is filed as a fixture
12 filing or covers as-extracted collateral or timber to be cut,
13 it must be filed for record and the filing office shall index
14 it:
15 (1) under the names of the debtor and of each owner
16 of record shown on the financing statement as if they
17 were the mortgagors under a mortgage of the real property
18 described; and
19 (2) to the extent that the law of this State
20 provides for indexing of records of mortgages under the
21 name of the mortgagee, under the name of the secured
22 party as if the secured party were the mortgagee
23 thereunder, or, if indexing is by description, as if the
24 financing statement were a record of a mortgage of the
25 real property described.
26 (e) Indexing: real-property-related assignment. If a
27 financing statement is filed as a fixture filing or covers
28 as-extracted collateral or timber to be cut, the filing
29 office shall index an assignment filed under Section 9-514(a)
30 or an amendment filed under Section 9-514(b):
31 (1) under the name of the assignor as grantor; and
32 (2) to the extent that the law of this State
33 provides for indexing a record of the assignment of a
34 mortgage under the name of the assignee, under the name
SB1231 Enrolled -200- LRB9106284WHdv
1 of the assignee.
2 (f) Retrieval and association capability. The filing
3 office shall maintain a capability:
4 (1) to retrieve a record by the name of the debtor
5 and by the file number assigned to the initial financing
6 statement to which the record relates; and
7 (2) to associate and retrieve with one another an
8 initial financing statement and each filed record
9 relating to the initial financing statement.
10 (g) Removal of debtor's name. The filing office may not
11 remove a debtor's name from the index until one year after
12 the effectiveness of a financing statement naming the debtor
13 lapses under Section 9-515 with respect to all secured
14 parties of record.
15 (h) Timeliness of filing office performance. The filing
16 office shall perform the acts required by subsections (a)
17 through (e) at the time and in the manner prescribed by
18 filing-office rule, but not later than two business days
19 after the filing office receives the record in question.
20 (i) Inapplicability to real-property-related filing
21 office. Subsections (b) and (h) do not apply to a filing
22 office described in Section 9-501(a)(1).
23 (810 ILCS 5/9-520 new)
24 Sec. 9-520. Acceptance and refusal to accept record.
25 (a) Mandatory refusal to accept record. A filing office
26 shall refuse to accept a record for filing for a reason set
27 forth in Section 9-516(b) and may refuse to accept a record
28 for filing only for a reason set forth in Section 9-516(b).
29 (b) Communication concerning refusal. If a filing
30 office refuses to accept a record for filing, it shall
31 communicate to the person that presented the record the fact
32 of and reason for the refusal and the date and time the
33 record would have been filed had the filing office accepted
SB1231 Enrolled -201- LRB9106284WHdv
1 it. The communication must be made at the time and in the
2 manner prescribed by filing-office rule, but in the case of a
3 filing office described in Section 9-501(a)(2), in no event
4 more than two business days after the filing office receives
5 the record.
6 (c) When filed financing statement effective. A filed
7 financing statement satisfying Section 9-502(a) and (b) is
8 effective, even if the filing office is required to refuse to
9 accept it for filing under subsection (a). However, Section
10 9-338 applies to a filed financing statement providing
11 information described in Section 9-516(b)(5) which is
12 incorrect at the time the financing statement is filed.
13 (d) Separate application to multiple debtors. If a
14 record communicated to a filing office provides information
15 that relates to more than one debtor, this Part applies as to
16 each debtor separately.
17 (810 ILCS 5/9-521 new)
18 Sec. 9-521. Uniform form of written financing statement
19 and amendment.
20 (a) Initial financing statement form. A filing office
21 that accepts written records may not refuse to accept a
22 written initial financing statement in the form and format
23 set forth in the final official text of the 1999 revisions to
24 Article 9 of the Uniform Commercial Code promulgated by the
25 American Law Institute and the National Conference of
26 Commissioners on Uniform State Laws, except for a reason set
27 forth in Section 9-516(b).
28 (b) Amendment form. A filing office that accepts
29 written records may not refuse to accept a written record in
30 the form and format set forth in the final official text of
31 the 1999 revisions to Article 9 of the Uniform Commercial
32 Code promulgated by the American Law Institute and the
33 National Conference of Commissioners on Uniform State Laws,
SB1231 Enrolled -202- LRB9106284WHdv
1 except for a reason set forth in Section 9-516(b).
2 (810 ILCS 5/9-522 new)
3 Sec. 9-522. Maintenance and destruction of records.
4 (a) Post-lapse maintenance and retrieval of information.
5 The filing office shall maintain a record of the information
6 provided in a filed financing statement for at least one year
7 after the effectiveness of the financing statement has lapsed
8 under Section 9-515 with respect to all secured parties of
9 record. The record must be retrievable by using the name of
10 the debtor and:
11 (1) if the record was filed in the filing office
12 described in Section 9-501(a)(1), by using the file
13 number assigned to the initial financing statement to
14 which the record relates and the date and time that the
15 record was filed or recorded; or
16 (2) if the record was filed in the filing office
17 described in Section 9-501(a)(2), by using the file
18 number assigned to the initial financing statement to
19 which the record relates.
20 (b) Destruction of written records. Except to the
21 extent that a statute governing disposition of public records
22 provides otherwise, the filing office immediately may destroy
23 any written record evidencing a financing statement. However,
24 if the filing office destroys a written record, it shall
25 maintain another record of the financing statement which
26 complies with subsection (a).
27 (810 ILCS 5/9-523 new)
28 Sec. 9-523. Information from filing office; sale or
29 license of records.
30 (a) Acknowledgment of filing written record. If a
31 person that files a written record requests an acknowledgment
32 of the filing, the filing office shall send to the person an
SB1231 Enrolled -203- LRB9106284WHdv
1 image of the record showing the number assigned to the record
2 pursuant to Section 9-519(a)(1) and the date and time of the
3 filing of the record. However, if the person furnishes a
4 copy of the record to the filing office, the filing office
5 may instead:
6 (1) note upon the copy the number assigned to the
7 record pursuant to Section 9-519(a)(1) and the date and
8 time of the filing of the record; and
9 (2) send the copy to the person.
10 (b) Acknowledgment of filing other record. If a person
11 files a record other than a written record, the filing office
12 shall communicate to the person an acknowledgment that
13 provides:
14 (1) the information in the record;
15 (2) the number assigned to the record pursuant to
16 Section 9-519(a)(1); and
17 (3) the date and time of the filing of the record.
18 (c) Communication of requested information. The filing
19 office shall communicate or otherwise make available in a
20 record the following information to any person that requests
21 it:
22 (1) whether there is on file on a date and time
23 specified by the filing office, but not a date earlier
24 than three business days before the filing office
25 receives the request, any financing statement that:
26 (A) designates a particular debtor or, if the
27 request so states, designates a particular debtor at
28 the address specified in the request;
29 (B) has not lapsed under Section 9-515 with
30 respect to all secured parties of record; and
31 (C) if the request so states, has lapsed under
32 Section 9-515 and a record of which is maintained by
33 the filing office under Section 9-522(a);
34 (2) the date and time of filing of each financing
SB1231 Enrolled -204- LRB9106284WHdv
1 statement; and
2 (3) the information provided in each financing
3 statement.
4 (d) Medium for communicating information. In complying
5 with its duty under subsection (c), the filing office may
6 communicate information in any medium. However, if
7 requested, the filing office shall communicate information by
8 issuing a record that can be admitted into evidence in the
9 courts of this State without extrinsic evidence of its
10 authenticity.
11 (e) Timeliness of filing office performance. The filing
12 office shall perform the acts required by subsections (a)
13 through (d) at the time and in the manner prescribed by
14 filing-office rule, but in the case of a filing office
15 described in Section 9-501(a)(2), not later than two business
16 days after the filing office receives the request.
17 (f) Public availability of records. At least weekly,
18 the Secretary of State shall offer to sell or license to the
19 public on a nonexclusive basis, in bulk, copies of all
20 records filed in it under this Part, in every medium from
21 time to time available to the filing office.
22 (810 ILCS 5/9-524 new)
23 Sec. 9-524. Delay by filing office. Delay by the filing
24 office beyond a time limit prescribed by this Part is excused
25 if:
26 (1) the delay is caused by interruption of
27 communication or computer facilities, war, emergency
28 conditions, failure of equipment, or other circumstances
29 beyond control of the filing office; and
30 (2) the filing office exercises reasonable
31 diligence under the circumstances.
32 (810 ILCS 5/9-525 new)
SB1231 Enrolled -205- LRB9106284WHdv
1 Sec. 9-525. Fees.
2 (a) Initial financing statement or other record: general
3 rule. Except as otherwise provided in subsection (e), the fee
4 for filing and indexing a record under this Part, other than
5 an initial financing statement of the kind described in
6 subsection (b), is:
7 (1) $20 if the record is communicated in writing
8 and consists of one or two pages;
9 (2) $20 if the record is communicated in writing
10 and consists of more than two pages; and
11 (3) $20 if the record is communicated by another
12 medium authorized by filing-office rule.
13 (b) Initial financing statement: public-finance and
14 manufactured-housing transactions. Except as otherwise
15 provided in subsection (e), the fee for filing and indexing
16 an initial financing statement of the following kind is:
17 (1) $20 if the financing statement indicates that
18 it is filed in connection with a public-finance
19 transaction;
20 (2) $20 if the financing statement indicates that
21 it is filed in connection with a manufactured-home
22 transaction.
23 (c) Number of names. The number of names required to be
24 indexed does not affect the amount of the fee in subsections
25 (a) and (b).
26 (d) Response to information request. The fee for
27 responding to a request for information from the filing
28 office, including for issuing a certificate showing
29 communicating whether there is on file any financing
30 statement naming a particular debtor, is:
31 (1) $10 if the request is communicated in writing;
32 and
33 (2) $10 if the request is communicated by another
34 medium authorized by filing-office rule.
SB1231 Enrolled -206- LRB9106284WHdv
1 (e) Record of mortgage. This Section does not require a
2 fee with respect to a record of a mortgage which is effective
3 as a financing statement filed as a fixture filing or as a
4 financing statement covering as-extracted collateral or
5 timber to be cut under Section 9-502(c). However, the
6 recording and satisfaction fees that otherwise would be
7 applicable to the record of the mortgage apply.
8 (810 ILCS 5/9-526 new)
9 Sec. 9-526. Filing-office rules.
10 (a) Adoption of filing-office rules. The Secretary of
11 State shall adopt and publish rules to implement this
12 Article. The filing-office rules must be:
13 (1) consistent with this Article; and
14 (2) adopted and published in accordance with the
15 Illinois Administrative Procedure Act.
16 (b) Harmonization of rules. To keep the filing-office
17 rules and practices of the filing office in harmony with the
18 rules and practices of filing offices in other jurisdictions
19 that enact substantially this Part, and to keep the
20 technology used by the filing office compatible with the
21 technology used by filing offices in other jurisdictions that
22 enact substantially this Part, the Secretary of State, so far
23 as is consistent with the purposes, policies, and provisions
24 of this Article, in adopting, amending, and repealing
25 filing-office rules, shall:
26 (1) consult with filing offices in other
27 jurisdictions that enact substantially this Part; and
28 (2) consult the most recent version of the Model
29 Rules promulgated by the International Association of
30 Corporate Administrators or any successor organization;
31 and
32 (3) take into consideration the rules and practices
33 of, and the technology used by, filing offices in other
SB1231 Enrolled -207- LRB9106284WHdv
1 jurisdictions that enact substantially this Part.
2 (810 ILCS 5/9-527 new)
3 Sec. 9-527. Duty to report. The Secretary of State
4 shall report annually to the Governor and Legislature on the
5 operation of the filing office. The report must contain a
6 statement of the extent to which:
7 (1) the filing-office rules are not in harmony with
8 the rules of filing offices in other jurisdictions that
9 enact substantially this Part and the reasons for these
10 variations; and
11 (2) the filing-office rules are not in harmony with
12 the most recent version of the Model Rules promulgated by
13 the International Association of Corporate
14 Administrators, or any successor organization, and the
15 reasons for these variations.
16 (810 ILCS 5/Art. 9, Part 6 heading new)
17 PART 6. DEFAULT
18 (810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new)
19 SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
20 (810 ILCS 5/9-601 new)
21 Sec. 9-601. Rights after default; judicial enforcement;
22 consignor or buyer of accounts, chattel paper, payment
23 intangibles, or promissory notes.
24 (a) Rights of secured party after default. After
25 default, a secured party has the rights provided in this Part
26 and, except as otherwise provided in Section 9-602, those
27 provided by agreement of the parties. A secured party:
28 (1) may reduce a claim to judgment, foreclose, or
29 otherwise enforce the claim, security interest, or
30 agricultural lien by any available judicial procedure;
SB1231 Enrolled -208- LRB9106284WHdv
1 and
2 (2) if the collateral is documents, may proceed
3 either as to the documents or as to the goods they cover.
4 (b) Rights and duties of secured party in possession or
5 control. A secured party in possession of collateral or
6 control of collateral under Section 9-104, 9-105, 9-106, or
7 9-107 has the rights and duties provided in Section 9-207.
8 (c) Rights cumulative; simultaneous exercise. The
9 rights under subsections (a) and (b) are cumulative and may
10 be exercised simultaneously.
11 (d) Rights of debtor and obligor. Except as otherwise
12 provided in subsection (g) and Section 9-605, after default,
13 a debtor and an obligor have the rights provided in this Part
14 and by agreement of the parties.
15 (e) Lien of levy after judgment. If a secured party has
16 reduced its claim to judgment, the lien of any levy that may
17 be made upon the collateral by virtue of a judgment relates
18 back to the earliest of:
19 (1) the date of perfection of the security interest
20 or agricultural lien in the collateral;
21 (2) the date of filing a financing statement
22 covering the collateral; or
23 (3) any date specified in a statute under which the
24 agricultural lien was created.
25 (f) Execution sale. A sale pursuant to a judgment is a
26 foreclosure of the security interest or agricultural lien by
27 judicial procedure within the meaning of this Section. A
28 secured party may purchase at the sale and thereafter hold
29 the collateral free of any other requirements of this
30 Article.
31 (g) Consignor or buyer of certain rights to payment.
32 Except as otherwise provided in Section 9-607(c), this Part
33 imposes no duties upon a secured party that is a consignor or
34 is a buyer of accounts, chattel paper, payment intangibles,
SB1231 Enrolled -209- LRB9106284WHdv
1 or promissory notes.
2 (810 ILCS 5/9-602 new)
3 Sec. 9-602. Waiver and variance of rights and duties.
4 Except as otherwise provided in Section 9-624, to the extent
5 that they give rights to a debtor or obligor and impose
6 duties on a secured party, the debtor or obligor may not
7 waive or vary the rules stated in the following listed
8 Sections:
9 (1) Section 9-207(b)(4)(C), which deals with use
10 and operation of the collateral by the secured party;
11 (2) Section 9-210, which deals with requests for an
12 accounting and requests concerning a list of collateral
13 and statement of account;
14 (3) Section 9-607(c), which deals with collection
15 and enforcement of collateral;
16 (4) Sections 9-608(a) and 9-615(c) to the extent
17 that they deal with application or payment of noncash
18 proceeds of collection, enforcement, or disposition;
19 (5) Sections 9-608(a) and 9-615(d) to the extent
20 that they require accounting for or payment of surplus
21 proceeds of collateral;
22 (6) Section 9-609 to the extent that it imposes
23 upon a secured party that takes possession of collateral
24 without judicial process the duty to do so without breach
25 of the peace;
26 (7) Sections 9-610(b), 9-611, 9-613, and 9-614,
27 which deal with disposition of collateral;
28 (8) Section 9-615(f), which deals with calculation
29 of a deficiency or surplus when a disposition is made to
30 the secured party, a person related to the secured party,
31 or a secondary obligor;
32 (9) Section 9-616, which deals with explanation of
33 the calculation of a surplus or deficiency;
SB1231 Enrolled -210- LRB9106284WHdv
1 (10) Sections 9-620, 9-621, and 9-622, which deal
2 with acceptance of collateral in satisfaction of
3 obligation;
4 (11) Section 9-623, which deals with redemption of
5 collateral;
6 (12) Section 9-624, which deals with permissible
7 waivers; and
8 (13) Sections 9-625 and 9-626, which deal with the
9 secured party's liability for failure to comply with this
10 Article.
11 (810 ILCS 5/9-603 new)
12 Sec. 9-603. Agreement on standards concerning rights and
13 duties.
14 (a) Agreed standards. The parties may determine by
15 agreement the standards measuring the fulfillment of the
16 rights of a debtor or obligor and the duties of a secured
17 party under a rule stated in Section 9-602 if the standards
18 are not manifestly unreasonable.
19 (b) Agreed standards inapplicable to breach of peace.
20 Subsection (a) does not apply to the duty under Section 9-609
21 to refrain from breaching the peace.
22 (810 ILCS 5/9-604 new)
23 Sec. 9-604. Procedure if security agreement covers real
24 property or fixtures.
25 (a) Enforcement: personal and real property. If a
26 security agreement covers both personal and real property, a
27 secured party may proceed:
28 (1) under this Part as to the personal property
29 without prejudicing any rights with respect to the real
30 property; or
31 (2) as to both the personal property and the real
32 property in accordance with the rights with respect to
SB1231 Enrolled -211- LRB9106284WHdv
1 the real property, in which case the other provisions of
2 this Part do not apply.
3 (b) Enforcement: fixtures. Subject to subsection (c),
4 if a security agreement covers goods that are or become
5 fixtures, a secured party may proceed:
6 (1) under this Part; or
7 (2) in accordance with the rights with respect to
8 real property, in which case the other provisions of this
9 Part do not apply.
10 (c) Removal of fixtures. Subject to the other
11 provisions of this Part, if a secured party holding a
12 security interest in fixtures has priority over all owners
13 and encumbrancers of the real property, the secured party,
14 after default, may remove the collateral from the real
15 property.
16 (d) Injury caused by removal. A secured party that
17 removes collateral shall promptly reimburse any encumbrancer
18 or owner of the real property, other than the debtor, for the
19 cost of repair of any physical injury caused by the removal.
20 The secured party need not reimburse the encumbrancer or
21 owner for any diminution in value of the real property caused
22 by the absence of the goods removed or by any necessity of
23 replacing them. A person entitled to reimbursement may
24 refuse permission to remove until the secured party gives
25 adequate assurance for the performance of the obligation to
26 reimburse.
27 (810 ILCS 5/9-605 new)
28 Sec. 9-605. Unknown debtor or secondary obligor. A
29 secured party does not owe a duty based on its status as
30 secured party:
31 (1) to a person that is a debtor or obligor, unless
32 the secured party knows:
33 (A) that the person is a debtor or obligor;
SB1231 Enrolled -212- LRB9106284WHdv
1 (B) the identity of the person; and
2 (C) how to communicate with the person; or
3 (2) to a secured party or lienholder that has filed
4 a financing statement against a person, unless the
5 secured party knows:
6 (A) that the person is a debtor; and
7 (B) the identity of the person.
8 (810 ILCS 5/9-606 new)
9 Sec. 9-606. Time of default for agricultural lien. For
10 purposes of this Part, a default occurs in connection with an
11 agricultural lien at the time the secured party becomes
12 entitled to enforce the lien in accordance with the statute
13 under which it was created.
14 (810 ILCS 5/9-607 new)
15 Sec. 9-607. Collection and enforcement by secured party.
16 (a) Collection and enforcement generally. If so agreed,
17 and in any event after default, a secured party:
18 (1) may notify an account debtor or other person
19 obligated on collateral to make payment or otherwise
20 render performance to or for the benefit of the secured
21 party;
22 (2) may take any proceeds to which the secured
23 party is entitled under Section 9-315;
24 (3) may enforce the obligations of an account
25 debtor or other person obligated on collateral and
26 exercise the rights of the debtor with respect to the
27 obligation of the account debtor or other person
28 obligated on collateral to make payment or otherwise
29 render performance to the debtor, and with respect to any
30 property that secures the obligations of the account
31 debtor or other person obligated on the collateral;
32 (4) if it holds a security interest in a deposit
SB1231 Enrolled -213- LRB9106284WHdv
1 account perfected by control under Section 9-104(a)(1),
2 may apply the balance of the deposit account to the
3 obligation secured by the deposit account; and
4 (5) if it holds a security interest in a deposit
5 account perfected by control under Section 9-104(a)(2) or
6 (3), may instruct the bank to pay the balance of the
7 deposit account to or for the benefit of the secured
8 party.
9 (b) Nonjudicial enforcement of mortgage. If necessary
10 to enable a secured party to exercise under subsection (a)(3)
11 the right of a debtor to enforce a mortgage nonjudicially,
12 the secured party may record in the office in which a record
13 of the mortgage is recorded:
14 (1) a copy of the security agreement that creates
15 or provides for a security interest in the obligation
16 secured by the mortgage; and
17 (2) the secured party's sworn affidavit in
18 recordable form stating that:
19 (A) a default has occurred; and
20 (B) the secured party is entitled to enforce
21 the mortgage nonjudicially.
22 (c) Commercially reasonable collection and enforcement.
23 A secured party shall proceed in a commercially reasonable
24 manner if the secured party:
25 (1) undertakes to collect from or enforce an
26 obligation of an account debtor or other person obligated
27 on collateral; and
28 (2) is entitled to charge back uncollected
29 collateral or otherwise to full or limited recourse
30 against the debtor or a secondary obligor.
31 (d) Expenses of collection and enforcement. A secured
32 party may deduct from the collections made pursuant to
33 subsection (c) reasonable expenses of collection and
34 enforcement, including reasonable attorney's fees and legal
SB1231 Enrolled -214- LRB9106284WHdv
1 expenses incurred by the secured party.
2 (e) Duties to secured party not affected. This Section
3 does not determine whether an account debtor, bank, or other
4 person obligated on collateral owes a duty to a secured
5 party.
6 (810 ILCS 5/9-608 new)
7 Sec. 9-608. Application of proceeds of collection or
8 enforcement; liability for deficiency and right to surplus.
9 (a) Application of proceeds, surplus, and deficiency if
10 obligation secured. If a security interest or agricultural
11 lien secures payment or performance of an obligation, the
12 following rules apply:
13 (1) A secured party shall apply or pay over for
14 application the cash proceeds of collection or
15 enforcement under Section 9-607 in the following order
16 to:
17 (A) the reasonable expenses of collection and
18 enforcement and, to the extent provided for by
19 agreement and not prohibited by law, reasonable
20 attorney's fees and legal expenses incurred by the
21 secured party;
22 (B) the satisfaction of obligations secured by
23 the security interest or agricultural lien under
24 which the collection or enforcement is made; and
25 (C) the satisfaction of obligations secured by
26 any subordinate security interest in or other lien
27 on the collateral subject to the security interest
28 or agricultural lien under which the collection or
29 enforcement is made if the secured party receives an
30 authenticated demand for proceeds before
31 distribution of the proceeds is completed.
32 (2) If requested by a secured party, a holder of a
33 subordinate security interest or other lien shall furnish
SB1231 Enrolled -215- LRB9106284WHdv
1 reasonable proof of the interest or lien within a
2 reasonable time. Unless the holder complies, the secured
3 party need not comply with the holder's demand under
4 paragraph (1)(C).
5 (3) A secured party need not apply or pay over for
6 application noncash proceeds of collection and
7 enforcement under Section 9-607 unless the failure to do
8 so would be commercially unreasonable. A secured party
9 that applies or pays over for application noncash
10 proceeds shall do so in a commercially reasonable manner.
11 (4) A secured party shall account to and pay a
12 debtor for any surplus, and the obligor is liable for any
13 deficiency.
14 (b) No surplus or deficiency in sales of certain rights
15 to payment. If the underlying transaction is a sale of
16 accounts, chattel paper, payment intangibles, or promissory
17 notes, the debtor is not entitled to any surplus, and the
18 obligor is not liable for any deficiency.
19 (810 ILCS 5/9-609 new)
20 Sec. 9-609. Secured party's right to take possession
21 after default.
22 (a) Possession; rendering equipment unusable;
23 disposition on debtor's premises. After default, a secured
24 party:
25 (1) may take possession of the collateral; and
26 (2) without removal, may render equipment unusable
27 and dispose of collateral on a debtor's premises under
28 Section 9-610.
29 (b) Judicial and nonjudicial process. A secured party
30 may proceed under subsection (a):
31 (1) pursuant to judicial process; or
32 (2) without judicial process, if it proceeds
33 without breach of the peace.
SB1231 Enrolled -216- LRB9106284WHdv
1 (c) Assembly of collateral. If so agreed, and in any
2 event after default, a secured party may require the debtor
3 to assemble the collateral and make it available to the
4 secured party at a place to be designated by the secured
5 party which is reasonably convenient to both parties.
6 (810 ILCS 5/9-610 new)
7 Sec. 9-610. Disposition of collateral after default.
8 (a) Disposition after default. After default, a secured
9 party may sell, lease, license, or otherwise dispose of any
10 or all of the collateral in its present condition or
11 following any commercially reasonable preparation or
12 processing.
13 (b) Commercially reasonable disposition. Every aspect
14 of a disposition of collateral, including the method, manner,
15 time, place, and other terms, must be commercially
16 reasonable. If commercially reasonable, a secured party may
17 dispose of collateral by public or private proceedings, by
18 one or more contracts, as a unit or in parcels, and at any
19 time and place and on any terms.
20 (c) Purchase by secured party. A secured party may
21 purchase collateral:
22 (1) at a public disposition; or
23 (2) at a private disposition only if the collateral
24 is of a kind that is customarily sold on a recognized
25 market or the subject of widely distributed standard
26 price quotations.
27 (d) Warranties on disposition. A contract for sale,
28 lease, license, or other disposition includes the warranties
29 relating to title, possession, quiet enjoyment, and the like
30 which by operation of law accompany a voluntary disposition
31 of property of the kind subject to the contract.
32 (e) Disclaimer of warranties. A secured party may
33 disclaim or modify warranties under subsection (d):
SB1231 Enrolled -217- LRB9106284WHdv
1 (1) in a manner that would be effective to disclaim
2 or modify the warranties in a voluntary disposition of
3 property of the kind subject to the contract of
4 disposition; or
5 (2) by communicating to the purchaser a record
6 evidencing the contract for disposition and including an
7 express disclaimer or modification of the warranties.
8 (f) Record sufficient to disclaim warranties. A record
9 is sufficient to disclaim warranties under subsection (e) if
10 it indicates "There is no warranty relating to title,
11 possession, quiet enjoyment, or the like in this disposition"
12 or uses words of similar import.
13 (810 ILCS 5/9-611 new)
14 Sec. 9-611. Notification before disposition of
15 collateral.
16 (a) "Notification date." In this Section, "notification
17 date" means the earlier of the date on which:
18 (1) a secured party sends to the debtor and any
19 secondary obligor an authenticated notification of
20 disposition; or
21 (2) the debtor and any secondary obligor waive the
22 right to notification.
23 (b) Notification of disposition required. Except as
24 otherwise provided in subsection (d), a secured party that
25 disposes of collateral under Section 9-610 shall send to the
26 persons specified in subsection (c) a reasonable
27 authenticated notification of disposition.
28 (c) Persons to be notified. To comply with subsection
29 (b), the secured party shall send an authenticated
30 notification of disposition to:
31 (1) the debtor;
32 (2) any secondary obligor; and
33 (3) if the collateral is other than consumer goods:
SB1231 Enrolled -218- LRB9106284WHdv
1 (A) any other person from which the secured
2 party has received, before the notification date, an
3 authenticated notification of a claim of an interest
4 in the collateral;
5 (B) any other secured party or lienholder
6 that, 10 days before the notification date, held a
7 security interest in or other lien on the collateral
8 perfected by the filing of a financing statement
9 that:
10 (i) identified the collateral;
11 (ii) was indexed under the debtor's name
12 as of that date; and
13 (iii) was filed in the office in which to
14 file a financing statement against the debtor
15 covering the collateral as of that date; and
16 (C) any other secured party that, 10 days
17 before the notification date, held a security
18 interest in the collateral perfected by compliance
19 with a statute, regulation, or treaty described in
20 Section 9-311(a).
21 (d) Subsection (b) inapplicable: perishable collateral;
22 recognized market. Subsection (b) does not apply if the
23 collateral is perishable or threatens to decline speedily in
24 value or is of a type customarily sold on a recognized
25 market.
26 (e) Compliance with subsection (c)(3)(B). A secured
27 party complies with the requirement for notification
28 prescribed by subsection (c)(3)(B) if:
29 (1) not later than 20 days or earlier than 30 days
30 before the notification date, the secured party requests,
31 in a commercially reasonable manner, information
32 concerning financing statements indexed under the
33 debtor's name in the office indicated in subsection
34 (c)(3)(B); and
SB1231 Enrolled -219- LRB9106284WHdv
1 (2) before the notification date, the secured
2 party:
3 (A) did not receive a response to the request
4 for information; or
5 (B) received a response to the request for
6 information and sent an authenticated notification
7 of disposition to each secured party or other
8 lienholder named in that response whose financing
9 statement covered the collateral.
10 (810 ILCS 5/9-612 new)
11 Sec. 9-612. Timeliness of notification before
12 disposition of collateral.
13 (a) Reasonable time is question of fact. Except as
14 otherwise provided in subsection (b), whether a notification
15 is sent within a reasonable time is a question of fact. The
16 limitation of the rule in subsection (b) to transactions
17 other than consumer-goods transactions is intended to leave
18 to the court the determination of the proper rules in
19 consumer-goods transactions. The court may not infer from
20 that limitation the nature of the proper rule in
21 consumer-goods transactions and may continue to apply
22 established approaches.
23 (b) 10-day period sufficient in non-consumer
24 transaction. In a transaction other than a consumer
25 transaction, a notification of disposition sent after default
26 and 10 days or more before the earliest time of disposition
27 set forth in the notification is sent within a reasonable
28 time before the disposition.
29 (810 ILCS 5/9-613 new)
30 Sec. 9-613. Contents and form of notification before
31 disposition of collateral: general. Except in a
32 consumer-goods transaction, the following rules apply:
SB1231 Enrolled -220- LRB9106284WHdv
1 (1) The contents of a notification of disposition
2 are sufficient if the notification:
3 (A) describes the debtor and the secured
4 party;
5 (B) describes the collateral that is the
6 subject of the intended disposition;
7 (C) states the method of intended disposition;
8 (D) states that the debtor is entitled to an
9 accounting of the unpaid indebtedness and states the
10 charge, if any, for an accounting; and
11 (E) states the time and place of a public
12 disposition or the time after which any other
13 disposition is to be made.
14 (2) Whether the contents of a notification that
15 lacks any of the information specified in paragraph (1)
16 are nevertheless sufficient is a question of fact.
17 (3) The contents of a notification providing
18 substantially the information specified in paragraph (1)
19 are sufficient, even if the notification is accompanied
20 by or combined other notification or includes:
21 (A) information not specified by that
22 paragraph; or
23 (B) minor errors that are not seriously
24 misleading.
25 (4) A particular phrasing of the notification is
26 not required.
27 (5) The following form of notification and the form
28 appearing in Section 9-614(4), when completed, each
29 provides sufficient information:
30 NOTIFICATION OF DISPOSITION OF COLLATERAL
31 To: ..................................... (Name of
32 debtor, obligor, or other person to which the
33 notification is sent)
34 From: ................................... (Name,
SB1231 Enrolled -221- LRB9106284WHdv
1 address, and telephone number of secured party)
2 Name of Debtor(s): ..................... (Include
3 only if debtor(s) are not an addressee)
4 For a public disposition:
5 We will sell or lease or license, as applicable, the
6 ............................ (describe collateral) to the
7 highest qualified bidder in public as follows:
8 Day and Date: ...................................
9 Time: ...........................................
10 Place: ..........................................
11 For a private disposition:
12 We will sell (or lease or license, as applicable)
13 the ........................... (describe collateral)
14 privately sometime after ................ (day and date).
15 You are entitled to an accounting of the unpaid
16 indebtedness secured by the property that we intend to
17 sell or lease or license, as applicable for a charge of
18 $................. You may request an accounting by
19 calling us at .................. (telephone number).
20 (810 ILCS 5/9-614 new)
21 Sec. 9-614. Contents and form of notification before
22 disposition of collateral: consumer-goods transaction. In a
23 consumer-goods transaction, the following rules apply:
24 (1) A notification of disposition must provide the
25 following information:
26 (A) the information specified in Section
27 9-613(1);
28 (B) a description of any liability for a
29 deficiency of the person to which the notification
30 is sent;
31 (C) a telephone number from which the amount
32 that must be paid to the secured party to redeem the
SB1231 Enrolled -222- LRB9106284WHdv
1 collateral under Section 9-623 is available; and
2 (D) a telephone number or mailing address from
3 which additional information concerning the
4 disposition and the obligation secured is available.
5 (2) A particular phrasing of the notification is
6 not required.
7 (3) The contents of a notification providing
8 substantially the information specified in paragraph (1)
9 are sufficient, even if the notification:
10 (A) is accompanied by or combined with other
11 notifications;
12 (B) includes information not specified by that
13 paragraph; or
14 (C) includes minor errors that are not
15 seriously misleading.
16 (4) The following form of notification, when
17 completed, provides sufficient information:
18 ............. (Name and address of secured party)
19 ............. (Date)
20 NOTICE OF OUR PLAN TO SELL PROPERTY
21 ......................................................
22 (Name and address of any obligor who is also a debtor)
23 Subject: ..................................
24 (Identification of Transaction)
25 We have your ..................... (describe
26 collateral), because you broke promises in our agreement.
27 For a public disposition:
28 We will sell ....................... (describe
29 collateral) at public sale. A sale could include a lease
30 or license. The sale will be held as follows:
31 Date: ................................
32 Time: ................................
33 Place: ................................
34 You may attend the sale and bring bidders if you
SB1231 Enrolled -223- LRB9106284WHdv
1 want.
2 For a private disposition:
3 We will sell ........................... (describe
4 collateral) at private sale sometime after
5 .................... (date). A sale could include a
6 lease or license.
7 The money that we get from the sale (after paying
8 our costs) will reduce the amount you owe. If we get
9 less money than you owe, you ............ (will or will
10 not, as applicable) still owe us the difference. If we
11 get more money than you owe, you will get the extra
12 money, unless we must pay it to someone else.
13 You can get the property back at any time before we
14 sell it by paying us the full amount you owe (not just
15 the past due payments), including our expenses. To learn
16 the exact amount you must pay, call us at
17 ................ (telephone number).
18 If you want us to explain to you in writing how we
19 have figured the amount that you owe us, you may call us
20 at .................. (telephone number) or write us at
21 .................................... (secured party's
22 address) and request a written explanation. We will
23 charge you $ ........... for the explanation if we sent
24 you another written explanation of the amount you owe us
25 within the last six months.
26 If you need more information about the sale call us
27 at .................. (telephone number) or write us at
28 ......................... (secured party's address).
29 We are sending this notice to the following other
30 people who have an interest ......................
31 (describe collateral) or who owe money under your
32 agreement:
33 .................................................
34 (Names of all other debtors and obligors, if any)
SB1231 Enrolled -224- LRB9106284WHdv
1 (5) A notification in the form of paragraph (4) is
2 sufficient, even if it includes errors in information not
3 required by paragraph (1).
4 (6) If a notification under this Section is not in
5 the form of paragraph (4), law other than this Article
6 determines the effect of including information not
7 required by paragraph (1).
8 (810 ILCS 5/9-615 new)
9 Sec. 9-615. Application of proceeds of disposition;
10 liability for deficiency and right to surplus.
11 (a) Application of proceeds. A secured party shall
12 apply or pay over for application the cash proceeds of
13 disposition in the following order to:
14 (1) the reasonable expenses of retaking, holding,
15 preparing for disposition, processing, and disposing,
16 and, to the extent provided for by agreement and not
17 prohibited by law, reasonable attorney's fees and legal
18 expenses incurred by the secured party;
19 (2) the satisfaction of obligations secured by the
20 security interest or agricultural lien under which the
21 disposition is made;
22 (3) the satisfaction of obligations secured by any
23 subordinate security interest in or other subordinate
24 lien on the collateral if:
25 (A) the secured party receives from the holder
26 of the subordinate security interest or other lien
27 an authenticated demand for proceeds before
28 distribution of the proceeds is completed; and
29 (B) in a case in which a consignor has an
30 interest in the collateral, the subordinate security
31 interest or other lien is senior to the interest of
32 the consignor; and
33 (4) a secured party that is a consignor of the
SB1231 Enrolled -225- LRB9106284WHdv
1 collateral if the secured party receives from the
2 consignor an authenticated demand for proceeds before
3 distribution of the proceeds is completed.
4 (b) Proof of subordinate interest. If requested by a
5 secured party, a holder of a subordinate security interest or
6 other lien shall furnish reasonable proof of the interest or
7 lien within a reasonable time. Unless the holder does so,
8 the secured party need not comply with the holder's demand
9 under subsection (a)(3).
10 (c) Application of noncash proceeds. A secured party
11 need not apply or pay over for application noncash proceeds
12 of disposition under this Section unless the failure to do so
13 would be commercially unreasonable. A secured party that
14 applies or pays over for application noncash proceeds shall
15 do so in a commercially reasonable manner.
16 (d) Surplus or deficiency if obligation secured. If the
17 security interest under which a disposition is made secures
18 payment or performance of an obligation, after making the
19 payments and applications required by subsection (a) and
20 permitted by subsection (c):
21 (1) unless subsection (a)(4) requires the secured
22 party to apply or pay over cash proceeds to a consignor,
23 the secured party shall account to and pay a debtor for
24 any surplus; and
25 (2) the obligor is liable for any deficiency.
26 (e) No surplus or deficiency in sales of certain rights
27 to payment. If the underlying transaction is a sale of
28 accounts, chattel paper, payment intangibles, or promissory
29 notes:
30 (1) the debtor is not entitled to any surplus; and
31 (2) the obligor is not liable for any deficiency.
32 (f) Calculation of surplus or deficiency in disposition
33 to person related to secured party. The surplus or
34 deficiency following a disposition is calculated based on the
SB1231 Enrolled -226- LRB9106284WHdv
1 amount of proceeds that would have been realized in a
2 disposition complying with this Part and described in
3 subsection (f)(2) of this Section to a transferee other than
4 the secured party, a person related to the secured party, or
5 a secondary obligor if:
6 (1) the transferee in the disposition is the
7 secured party, a person related to the secured party, or
8 a secondary obligor; and
9 (2) the amount of proceeds of the disposition is
10 significantly below the range of proceeds that would have
11 been received from a complying disposition by a forced
12 sale without reserve to a willing buyer other than the
13 secured party, a person related to the secured party, or
14 a secondary obligor.
15 (g) Cash proceeds received by junior secured party. A
16 secured party that receives cash proceeds of a disposition in
17 good faith and without knowledge that the receipt violates
18 the rights of the holder of a security interest or other lien
19 that is not subordinate to the security interest or
20 agricultural lien under which the disposition is made:
21 (1) takes the cash proceeds free of the security
22 interest or other lien;
23 (2) is not obligated to apply the proceeds of the
24 disposition to the satisfaction of obligations secured by
25 the security interest or other lien; and
26 (3) is not obligated to account to or pay the
27 holder of the security interest or other lien for any
28 surplus.
29 (810 ILCS 5/9-616 new)
30 Sec. 9-616. Explanation of calculation of surplus or
31 deficiency.
32 (a) Definitions. In this Section:
33 (1) "Explanation" means a writing that:
SB1231 Enrolled -227- LRB9106284WHdv
1 (A) states whether a surplus or deficiency is
2 owed and the amount of the surplus, if applicable;
3 (B) states, if applicable, that future debits,
4 credits, charges, including additional credit
5 service charges or interest, rebates, and expenses
6 may affect the amount of the surplus or deficiency;
7 (C) provides a telephone number or mailing
8 address from which the debtor or consumer obligor
9 may obtain additional information concerning the
10 transaction and from which such person may request
11 the amount of the deficiency and further information
12 regarding how the secured party calculated the
13 surplus or deficiency; and
14 (D) at the sender's option, the information
15 set forth in subsection (c).
16 (2) "Request" means a record:
17 (A) authenticated by a debtor or consumer
18 obligor;
19 (B) requesting that the recipient provide
20 information of how it calculated the surplus or
21 deficiency; and
22 (C) sent after disposition of the collateral
23 under Section 9-610.
24 (b) Explanation of calculation. In a consumer-goods
25 transaction in which the debtor is entitled to a surplus or a
26 consumer obligor is liable for a deficiency under Section
27 9-615, the secured party shall:
28 (1) send an explanation to the debtor or consumer
29 obligor, as applicable, after the disposition and:
30 (A) before or when the secured party accounts
31 to the debtor and pays any surplus or first makes
32 written demand on the consumer obligor after the
33 disposition for payment of the deficiency, other
34 than in instances in which such demand is made by a
SB1231 Enrolled -228- LRB9106284WHdv
1 third-party debt collector covered by the Fair Debt
2 Collection Practices Act; and
3 (B) within 14 days after receipt of a request
4 made by the debtor or consumer obligor within one
5 year after the secured party has given an
6 explanation under this Section or notice to such
7 debtor or consumer obligor under Section 9-614 of
8 this Article; or
9 (2) in the case of a consumer obligor who is liable
10 for a deficiency, within 14 days after receipt of a
11 request, send to the consumer obligor a record waiving
12 the secured party's right to a deficiency.
13 (c) Required information for response to request. To
14 comply with a request, the secured party must provide a
15 response in writing which includes the following information:
16 (1) the aggregate amount of obligations secured by
17 the security interest under which the disposition was
18 made, and, if the amount reflects a rebate of unearned
19 interest or credit service charge, an indication of that
20 fact, calculated as of a specified date:
21 (A) if the secured party takes or receives
22 possession of the collateral after default, not more
23 than 35 days before the secured party takes or
24 receives possession; or
25 (B) if the secured party takes or receives
26 possession of the collateral before default or does
27 not take possession of the collateral, not more than
28 35 days before the disposition;
29 (2) the amount of proceeds of the disposition;
30 (3) the aggregate amount of the obligations after
31 deducting the amount of proceeds;
32 (4) the amount, in the aggregate or by type, and
33 types of expenses, including expenses of retaking,
34 holding, preparing for disposition, processing, and
SB1231 Enrolled -229- LRB9106284WHdv
1 disposing of the collateral, and attorney's fees secured
2 by the collateral which are known to the secured party
3 and relate to the current disposition;
4 (5) the amount, in the aggregate or by type, and
5 types of credits, including rebates of interest or credit
6 service charges, to which the obligor is known to be
7 entitled and which are not reflected in the amount in
8 paragraph (1); and
9 (6) the amount of the surplus or deficiency.
10 (d) Substantial compliance. A particular phrasing of
11 the explanation or response to a request is not required. An
12 explanation or a response to a request complying
13 substantially with the requirements of this Section is
14 sufficient even if it is:
15 (1) accompanied by or combined with other
16 notifications;
17 (2) includes information not specified by this
18 Section;
19 (3) includes minor errors that are not seriously
20 misleading; or
21 (4) includes errors in information not required by
22 this Section.
23 (e) Charges for responses. A debtor or consumer obligor
24 is entitled without charge to one response to a request under
25 this Section during any six-month period in which the secured
26 party did not send to the debtor or consumer obligor an
27 explanation pursuant to subsection (b)(1). The secured party
28 may require payment of a charge not exceeding $25 for each
29 additional response.
30 (810 ILCS 5/9-617 new)
31 Sec. 9-617. Rights of transferee of collateral.
32 (a) Effects of disposition. A secured party's
33 disposition of collateral after default:
SB1231 Enrolled -230- LRB9106284WHdv
1 (1) transfers to a transferee for value all of the
2 debtor's rights in the collateral;
3 (2) discharges the security interest under which
4 the disposition is made; and
5 (3) discharges any subordinate security interest or
6 other subordinate lien.
7 (b) Rights of good-faith transferee. A transferee that
8 acts in good faith takes free of the rights and interests
9 described in subsection (a), even if the secured party fails
10 to comply with this Article or the requirements of any
11 judicial proceeding.
12 (c) Rights of other transferee. If a transferee does
13 not take free of the rights and interests described in
14 subsection (a), the transferee takes the collateral subject
15 to:
16 (1) the debtor's rights in the collateral;
17 (2) the security interest or agricultural lien
18 under which the disposition is made; and
19 (3) any other security interest or other lien.
20 (810 ILCS 5/9-618 new)
21 Sec. 9-618. Rights and duties of certain secondary
22 obligors.
23 (a) Rights and duties of secondary obligor. A secondary
24 obligor acquires the rights and becomes obligated to perform
25 the duties of the secured party after the secondary obligor:
26 (1) receives an assignment of a secured obligation
27 from the secured party;
28 (2) receives a transfer of collateral from the
29 secured party and agrees to accept the rights and assume
30 the duties of the secured party; or
31 (3) is subrogated to the rights of a secured party
32 with respect to collateral.
33 (b) Effect of assignment, transfer, or subrogation. An
SB1231 Enrolled -231- LRB9106284WHdv
1 assignment, transfer, or subrogation described in subsection
2 (a):
3 (1) is not a disposition of collateral under
4 Section 9-610; and
5 (2) relieves the secured party of further duties
6 under this Article.
7 (810 ILCS 5/9-619 new)
8 Sec. 9-619. Transfer of record or legal title.
9 (a) "Transfer statement." In this Section, "transfer
10 statement" means a record authenticated by a secured party
11 stating:
12 (1) that the debtor has defaulted in connection
13 with an obligation secured by specified collateral;
14 (2) that the secured party has exercised its
15 post-default remedies with respect to the collateral;
16 (3) that, by reason of the exercise, a transferee
17 has acquired the rights of the debtor in the collateral;
18 and
19 (4) the name and mailing address of the secured
20 party, debtor, and transferee.
21 (b) Effect of transfer statement. A transfer statement
22 entitles the transferee to the transfer of record of all
23 rights of the debtor in the collateral specified in the
24 statement in any official filing, recording, registration, or
25 certificate-of-title system covering the collateral. If a
26 transfer statement is presented with the applicable fee and
27 request form to the official or office responsible for
28 maintaining the system, the official or office shall:
29 (1) accept the transfer statement;
30 (2) promptly amend its records to reflect the
31 transfer; and
32 (3) if applicable, issue a new appropriate
33 certificate of title in the name of the transferee.
SB1231 Enrolled -232- LRB9106284WHdv
1 (c) Transfer not a disposition; no relief of secured
2 party's duties. A transfer of the record or legal title to
3 collateral to a secured party under subsection (b) or
4 otherwise is not of itself a disposition of collateral under
5 this Article and does not of itself relieve the secured party
6 of its duties under this Article.
7 (810 ILCS 5/9-620 new)
8 Sec. 9-620. Acceptance of collateral in full or partial
9 satisfaction of obligation; compulsory disposition of
10 collateral.
11 (a) Conditions to acceptance in satisfaction. Except as
12 otherwise provided in subsection (g), a secured party may
13 accept collateral in full or partial satisfaction of the
14 obligation it secures only if:
15 (1) the debtor consents to the acceptance under
16 subsection (c);
17 (2) the secured party does not receive, within the
18 time set forth in subsection (d), a notification of
19 objection to the proposal authenticated by:
20 (A) a person to which the secured party was
21 required to send a proposal under Section 9-621; or
22 (B) any other person, other than the debtor,
23 holding an interest in the collateral subordinate to
24 the security interest that is the subject of the
25 proposal;
26 (3) if the collateral is consumer goods, the
27 collateral is not in the possession of the debtor when
28 the debtor consents to the acceptance; and
29 (4) subsection (e) does not require the secured
30 party to dispose of the collateral or the debtor waives
31 the requirement pursuant to Section 9-624.
32 (b) Purported acceptance ineffective. A purported or
33 apparent acceptance of collateral under this Section is
SB1231 Enrolled -233- LRB9106284WHdv
1 ineffective unless:
2 (1) the secured party consents to the acceptance in
3 an authenticated record or sends a proposal to the
4 debtor; and
5 (2) the conditions of subsection (a) are met.
6 (c) Debtor's consent. For purposes of this Section:
7 (1) a debtor consents to an acceptance of
8 collateral in partial satisfaction of the obligation it
9 secures only if the debtor agrees to the terms of the
10 acceptance in a record authenticated after default; and
11 (2) a debtor consents to an acceptance of
12 collateral in full satisfaction of the obligation it
13 secures only if the debtor agrees to the terms of the
14 acceptance in a record authenticated after default or the
15 secured party:
16 (A) sends to the debtor after default a
17 proposal that is unconditional or subject only to a
18 condition that collateral not in the possession of
19 the secured party be preserved or maintained;
20 (B) in the proposal, proposes to accept
21 collateral in full satisfaction of the obligation it
22 secures; and
23 (C) does not receive a notification of
24 objection authenticated by the debtor within 20 days
25 after the proposal is sent.
26 (d) Effectiveness of notification. To be effective
27 under subsection (a)(2), a notification of objection must be
28 received by the secured party:
29 (1) in the case of a person to which the proposal
30 was sent pursuant to Section 9-621, within 20 days after
31 notification was sent to that person; and
32 (2) in other cases:
33 (A) within 20 days after the last notification
34 was sent pursuant to Section 9-621; or
SB1231 Enrolled -234- LRB9106284WHdv
1 (B) if a notification was not sent, before the
2 debtor consents to the acceptance under subsection
3 (c).
4 (e) Mandatory disposition of consumer goods. A secured
5 party that has taken possession of collateral shall dispose
6 of the collateral pursuant to Section 9-610 within the time
7 specified in subsection (f) if:
8 (1) 60 percent of the cash price has been paid in
9 the case of a purchase-money security interest in
10 consumer goods; or
11 (2) 60 percent of the principal amount of the
12 obligation secured has been paid in the case of a
13 non-purchase-money security interest in consumer goods.
14 (f) Compliance with mandatory disposition requirement.
15 To comply with subsection (e), the secured party shall
16 dispose of the collateral:
17 (1) within 90 days after taking possession; or
18 (2) within any longer period to which the debtor
19 and all secondary obligors have agreed in an agreement to
20 that effect entered into and authenticated after default.
21 (g) No partial satisfaction in consumer transaction. In
22 a consumer transaction, a secured party may not accept
23 collateral in partial satisfaction of the obligation it
24 secures.
25 (810 ILCS 5/9-621 new)
26 Sec. 9-621. Notification of proposal to accept
27 collateral.
28 (a) Persons to which proposal to be sent. A secured
29 party that desires to accept collateral in full or partial
30 satisfaction of the obligation it secures shall send its
31 proposal to:
32 (1) any person from which the secured party has
33 received, before the debtor consented to the acceptance,
SB1231 Enrolled -235- LRB9106284WHdv
1 an authenticated notification of a claim of an interest
2 in the collateral;
3 (2) any other secured party or lienholder that, 10
4 days before the debtor consented to the acceptance, held
5 a security interest in or other lien on the collateral
6 perfected by the filing of a financing statement that:
7 (A) identified the collateral;
8 (B) was indexed under the debtor's name as of
9 that date; and
10 (C) was filed in the office or offices in
11 which to file a financing statement against the
12 debtor covering the collateral as of that date; and
13 (3) any other secured party that, 10 days before
14 the debtor consented to the acceptance, held a security
15 interest in the collateral perfected by compliance with a
16 statute, regulation, or treaty described in Section
17 9-311(a).
18 (b) Proposal to be sent to secondary obligor in partial
19 satisfaction. A secured party that desires to accept
20 collateral in partial satisfaction of the obligation it
21 secures shall send its proposal to any secondary obligor in
22 addition to the persons described in subsection (a).
23 (810 ILCS 5/9-622 new)
24 Sec. 9-622. Effect of acceptance of collateral.
25 (a) Effect of acceptance. A secured party's acceptance
26 of collateral in full or partial satisfaction of the
27 obligation it secures:
28 (1) discharges the obligation to the extent
29 consented to by the debtor;
30 (2) transfers to the secured party all of a
31 debtor's rights in the collateral;
32 (3) discharges the security interest or
33 agricultural lien that is the subject of the debtor's
SB1231 Enrolled -236- LRB9106284WHdv
1 consent and any subordinate security interest or other
2 subordinate lien; and
3 (4) terminates any other subordinate interest.
4 (b) Discharge of subordinate interest notwithstanding
5 noncompliance. A subordinate interest is discharged or
6 terminated under subsection (a), even if the secured party
7 fails to comply with this Article.
8 (810 ILCS 5/9-623 new)
9 Sec. 9-623. Right to redeem collateral.
10 (a) Persons that may redeem. A debtor, any secondary
11 obligor, or any other secured party or lienholder may redeem
12 collateral.
13 (b) Requirements for redemption. To redeem collateral,
14 a person shall tender:
15 (1) fulfillment of all obligations secured by the
16 collateral; and
17 (2) the reasonable expenses and attorney's fees
18 described in Section 9-615(a)(1).
19 (c) When redemption may occur. A redemption may occur
20 at any time before a secured party:
21 (1) has collected collateral under Section 9-607;
22 (2) has disposed of collateral or entered into a
23 contract for its disposition under Section 9-610; or
24 (3) has accepted collateral in full or partial
25 satisfaction of the obligation it secures under Section
26 9-622.
27 (810 ILCS 5/9-624 new)
28 Sec. 9-624. Waiver.
29 (a) Waiver of disposition notification. A debtor or
30 secondary obligor may waive the right to notification of
31 disposition of collateral under Section 9-611 only by an
32 agreement to that effect entered into and authenticated after
SB1231 Enrolled -237- LRB9106284WHdv
1 default.
2 (b) Waiver of mandatory disposition. A debtor may waive
3 the right to require disposition of collateral under Section
4 9-620(e) only by an agreement to that effect entered into and
5 authenticated after default.
6 (c) Waiver of redemption right. A debtor or secondary
7 obligor may waive the right to redeem collateral under
8 Section 9-623 only by an agreement to that effect entered
9 into and authenticated after default.
10 (810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new)
11 SUBPART 2. NONCOMPLIANCE WITH ARTICLE
12 (810 ILCS 5/9-625 new)
13 Sec. 9-625. Remedies for secured party's failure to
14 comply with Article.
15 (a) Judicial orders concerning noncompliance. If it is
16 established that a secured party is not proceeding in
17 accordance with this Article, a court may order or restrain
18 collection, enforcement, or disposition of collateral on
19 appropriate terms and conditions.
20 (b) Damages for noncompliance. Subject to subsections
21 (c), (d), and (f), a person is liable for damages in the
22 amount of any loss caused by a failure to comply with this
23 Article. Loss caused by a failure to comply with a request
24 under Section 9-210 may include loss resulting from the
25 debtor's inability to obtain, or increased costs of,
26 alternative financing.
27 (c) Persons entitled to recover damages; statutory
28 damages in consumer-goods transaction. Except as otherwise
29 provided in Section 9-628:
30 (1) a person that, at the time of the failure, was
31 a debtor, was an obligor, or held a security interest in
32 or other lien on the collateral may recover in an
SB1231 Enrolled -238- LRB9106284WHdv
1 individual action damages under subsection (b) for its
2 loss; and
3 (2) if the collateral is consumer goods, a person
4 that was a debtor or a secondary obligor at the time a
5 secured party failed to comply with this Part may recover
6 in an individual action for that failure in any event an
7 amount not less than the credit service charge plus 10
8 percent of the principal amount of the obligation or the
9 time-price differential plus 10 percent of the cash
10 price.
11 (d) Recovery when deficiency eliminated or reduced. A
12 debtor whose deficiency is eliminated under Section 9-626 may
13 recover damages for the loss of any surplus. However, a
14 debtor or secondary obligor whose deficiency is eliminated or
15 reduced under Section 9-626 may not otherwise recover under
16 subsection (b) for noncompliance with the provisions of this
17 Part relating to collection, enforcement, disposition, or
18 acceptance.
19 (e) Statutory damages: noncompliance with specified
20 provisions. In addition to any damages recoverable under
21 subsection (b), the debtor, consumer obligor, or person named
22 as a debtor in a filed record, as applicable, may recover in
23 an individual action $500 for each instance that a person:
24 (1) fails to comply with Section 9-208;
25 (2) fails to comply with Section 9-209;
26 (3) files a record that the person is not entitled
27 to file under Section 9-509(a); or
28 (4) fails to cause the secured party of record to
29 file or send a termination statement as required by
30 Section 9-513(a) or (c).
31 (f) Statutory damages: noncompliance with Section
32 9-210. A debtor or consumer obligor may recover damages
33 under subsection (b) and, in addition, may in an individual
34 action recover $500 in each case from a person that, without
SB1231 Enrolled -239- LRB9106284WHdv
1 reasonable cause, fails to comply with a request under
2 Section 9-210. A recipient of a request under Section 9-210
3 which never claimed an interest in the collateral or
4 obligations that are the subject of a request under that
5 Section has a reasonable excuse for failure to comply with
6 the request within the meaning of this subsection.
7 (g) Limitation of security interest: noncompliance with
8 Section 9-210. If a secured party fails to comply with a
9 request regarding a list of collateral or a statement of
10 account under Section 9-210, the secured party may claim a
11 security interest only as shown in the statement included in
12 the request as against a person that is reasonably misled by
13 the failure.
14 (810 ILCS 5/9-626 new)
15 Sec. 9-626. Action in which deficiency or surplus is in
16 issue; applicable rules if amount of deficiency or surplus is
17 in issue. In an action in which the amount of a deficiency
18 or surplus is in issue, the following rules apply:
19 (1) A secured party need not prove compliance with
20 the provisions of this Part relating to collection,
21 enforcement, disposition, or acceptance unless the debtor
22 or a secondary obligor places the secured party's
23 compliance in issue.
24 (2) If the secured party's compliance is placed in
25 issue, the secured party has the burden of establishing
26 that the collection, enforcement, disposition, or
27 acceptance was conducted in accordance with this Part.
28 (3) Except as otherwise provided in Section 9-628,
29 if a secured party fails to prove that the collection,
30 enforcement, disposition, or acceptance was conducted in
31 accordance with the provisions of this Part relating to
32 collection, enforcement, disposition, or acceptance, the
33 liability of a debtor or a secondary obligor for a
SB1231 Enrolled -240- LRB9106284WHdv
1 deficiency is limited to an amount by which the sum of
2 the secured obligation, expenses, and attorney's fees
3 exceeds the greater of:
4 (A) the proceeds of the collection,
5 enforcement, disposition, or acceptance; or
6 (B) the amount of proceeds that would have
7 been realized had the noncomplying secured party
8 proceeded in accordance with the provisions of this
9 Part relating to collection, enforcement,
10 disposition, or acceptance.
11 (4) For purposes of paragraph (3)(B), the amount of
12 proceeds that would have been realized is equal to the
13 sum of the secured obligation, expenses, and attorney's
14 fees unless the secured party proves that the amount is
15 less than that sum.
16 (5) If a deficiency or surplus is calculated under
17 Section 9-615(f), the debtor or obligor has the burden of
18 establishing that the amount of proceeds of the
19 disposition is significantly below the range of prices
20 that a complying disposition to a person other than the
21 secured party, a person related to the secured party, or
22 a secondary obligor would have brought.
23 (810 ILCS 5/9-627 new)
24 Sec. 9-627. Determination of whether conduct was
25 commercially reasonable.
26 (a) Greater amount obtainable under other circumstances;
27 no preclusion of commercial reasonableness. The fact that a
28 greater amount could have been obtained by a collection,
29 enforcement, disposition, or acceptance at a different time
30 or in a different method from that selected by the secured
31 party is not of itself sufficient to preclude the secured
32 party from establishing that the collection, enforcement,
33 disposition, or acceptance was made in a commercially
SB1231 Enrolled -241- LRB9106284WHdv
1 reasonable manner.
2 (b) Dispositions that are commercially reasonable. A
3 disposition of collateral is made in a commercially
4 reasonable manner if the disposition is made:
5 (1) in the usual manner on any recognized market;
6 (2) at the price current in any recognized market
7 at the time of the disposition; or
8 (3) otherwise in conformity with reasonable
9 commercial practices among dealers in the type of
10 property that was the subject of the disposition.
11 (c) Approval by court or on behalf of creditors. A
12 collection, enforcement, disposition, or acceptance is
13 commercially reasonable if it has been approved:
14 (1) in a judicial proceeding;
15 (2) by a bona fide creditors' committee;
16 (3) by a representative of creditors; or
17 (4) by an assignee for the benefit of creditors.
18 (d) Approval under subsection (c) not necessary; absence
19 of approval has no effect. Approval under subsection (c)
20 need not be obtained, and lack of approval does not mean that
21 the collection, enforcement, disposition, or acceptance is
22 not commercially reasonable.
23 (810 ILCS 5/9-628 new)
24 Sec. 9-628. Nonliability and limitation on liability of
25 secured party; liability of secondary obligor.
26 (a) Limitation of liability to debtor or obligor.
27 Unless a secured party knows that a person is a debtor or
28 obligor, knows the identity of the person, and knows how to
29 communicate with the person:
30 (1) the secured party is not liable to the person,
31 or to a secured party or lienholder that has filed a
32 financing statement against the person, for failure to
33 comply with this Article; and
SB1231 Enrolled -242- LRB9106284WHdv
1 (2) the secured party's failure to comply with this
2 Article does not affect the liability of the person for a
3 deficiency.
4 (b) Limitation of liability to debtor, obligor, another
5 secured party, or lienholder. A secured party is not liable
6 because of its status as secured party:
7 (1) to a person that is a debtor or obligor, unless
8 the secured party knows:
9 (A) that the person is a debtor or obligor;
10 (B) the identity of the person; and
11 (C) how to communicate with the person; or
12 (2) to a secured party or lienholder that has filed
13 a financing statement against a person, unless the
14 secured party knows:
15 (A) that the person is a debtor; and
16 (B) the identity of the person.
17 (c) Limitation of liability if reasonable belief that
18 transaction not a consumer-goods transaction or consumer
19 transaction. A secured party is not liable to any person,
20 and a person's liability for a deficiency is not affected,
21 because of any act or omission arising out of the secured
22 party's reasonable belief that a transaction is not a
23 consumer-goods transaction or a consumer transaction or that
24 goods are not consumer goods, if the secured party's belief
25 is based on its reasonable reliance on:
26 (1) a debtor's representation concerning the
27 purpose for which collateral was to be used, acquired, or
28 held; or
29 (2) an obligor's representation concerning the
30 purpose for which a secured obligation was incurred.
31 (d) Limitation of liability for statutory damages. A
32 secured party is not liable to any person under Section
33 9-625(c)(2) for its failure to comply with Section 9-616.
34 (e) Limitation of multiple liability for statutory
SB1231 Enrolled -243- LRB9106284WHdv
1 damages. A secured party is not liable under Section
2 9-625(c)(2) more than once with respect to any one secured
3 obligation.
4 (810 ILCS 5/Art. 9, Part 7 heading new)
5 PART 7. TRANSITION
6 (810 ILCS 5/9-701 new)
7 Sec. 9-701. Effective date. (See Section 99 of the
8 Public Act adding this Section to this Act.)
9 (810 ILCS 5/9-702 new)
10 Sec. 9-702. Savings clause.
11 (a) Pre-effective-date transactions or liens. Except as
12 otherwise provided in this Part, this Act applies to a
13 transaction or lien within its scope, even if the transaction
14 or lien was entered into or created before the effective date
15 of this amendatory Act of the 91st General Assembly.
16 (b) Continuing validity. Except as otherwise provided
17 in subsection (c) and Sections 9-703 through 9-709:
18 (1) transactions and liens that were not governed
19 by Article 9 as it existed before the effective date of
20 this amendatory Act of the 91st General Assembly, were
21 validly entered into or created before the effective date
22 of this amendatory Act of the 91st General Assembly, and
23 would be subject to this Act if they had been entered
24 into or created after the effective date of this
25 amendatory Act of the 91st General Assembly, and the
26 rights, duties, and interests flowing from those
27 transactions and liens remain valid after the effective
28 date of this amendatory Act of the 91st General Assembly;
29 and
30 (2) the transactions and liens may be terminated,
31 completed, consummated, and enforced as required or
SB1231 Enrolled -244- LRB9106284WHdv
1 permitted by this Act or by the law that otherwise would
2 apply if this Act had not taken effect.
3 (c) Pre-effective-date proceedings. This amendatory Act
4 of the 91st General Assembly does not affect an action, case,
5 or proceeding commenced before the effective date of this
6 amendatory Act of the 91st General Assembly.
7 (810 ILCS 5/9-703 new)
8 Sec. 9-703. Security interest perfected before effective
9 date.
10 (a) Continuing priority over lien creditor: perfection
11 requirements satisfied. A security interest that is
12 enforceable immediately before the effective date of this
13 amendatory Act of the 91st General Assembly and would have
14 priority over the rights of a person that becomes a lien
15 creditor at that time is a perfected security interest under
16 this Act if, on the effective date of this amendatory Act of
17 the 91st General Assembly, the applicable requirements for
18 enforceability and perfection under this Act are satisfied
19 without further action.
20 (b) Continuing priority over lien creditor: perfection
21 requirements not satisfied. Except as otherwise provided in
22 Section 9-705, if, immediately before the effective date of
23 this amendatory Act of the 91st General Assembly, a security
24 interest is enforceable and would have priority over the
25 rights of a person that becomes a lien creditor at that time,
26 but the applicable requirements for enforceability or
27 perfection under this Act are not satisfied on the effective
28 date of this amendatory Act of the 91st General Assembly, the
29 security interest:
30 (1) is a perfected security interest for one year
31 after the effective date of this amendatory Act of the
32 91st General Assembly;
33 (2) remains enforceable thereafter only if the
SB1231 Enrolled -245- LRB9106284WHdv
1 security interest becomes enforceable under Section 9-203
2 before the year expires; and
3 (3) remains perfected thereafter only if the
4 applicable requirements for perfection under this Act are
5 satisfied before the year expires.
6 (810 ILCS 5/9-704 new)
7 Sec. 9-704. Security interest unperfected before
8 effective date. A security interest that is enforceable
9 immediately before the effective date of this amendatory Act
10 of the 91st General Assembly but which would be subordinate
11 to the rights of a person that becomes a lien creditor at
12 that time:
13 (1) remains an enforceable security interest for
14 one year after the effective date of this amendatory Act
15 of the 91st General Assembly;
16 (2) remains enforceable thereafter if the security
17 interest becomes enforceable under Section 9-203 on the
18 effective date of this amendatory Act of the 91st General
19 Assembly or within one year thereafter; and
20 (3) becomes perfected:
21 (A) without further action, on the effective date
22 of this amendatory Act of the 91st General Assembly if
23 the applicable requirements for perfection under this Act
24 are satisfied before or at that time; or
25 (B) when the applicable requirements for perfection
26 are satisfied if the requirements are satisfied after
27 that time.
28 (810 ILCS 5/9-705 new)
29 Sec. 9-705. Effectiveness of action taken before
30 effective date.
31 (a) Pre-effective-date action; one-year perfection
32 period unless reperfected. If action, other than the filing
SB1231 Enrolled -246- LRB9106284WHdv
1 of a financing statement, is taken before the effective date
2 of this amendatory Act of the 91st General Assembly and the
3 action would have resulted in priority of a security interest
4 over the rights of a person that becomes a lien creditor had
5 the security interest become enforceable before the effective
6 date of this amendatory Act of the 91st General Assembly, the
7 action is effective to perfect a security interest that
8 attaches under this Act within one year after the effective
9 date of this amendatory Act of the 91st General Assembly. An
10 attached security interest becomes unperfected one year after
11 the effective date of this amendatory Act of the 91st General
12 Assembly unless the security interest becomes a perfected
13 security interest under this Act before the expiration of
14 that period.
15 (b) Pre-effective-date filing. The filing of a
16 financing statement before the effective date of this
17 amendatory Act of the 91st General Assembly is effective to
18 perfect a security interest to the extent the filing would
19 satisfy the applicable requirements for perfection under this
20 Act.
21 (c) Pre-effective-date filing in jurisdiction formerly
22 governing perfection. This Act does not render ineffective
23 an effective financing statement that, before the effective
24 date of this amendatory Act of the 91st General Assembly, is
25 filed and satisfies the applicable requirements for
26 perfection under the law of the jurisdiction governing
27 perfection as provided in Section 9-103 of the Uniform
28 Commercial Code as it existed before the effective date of
29 this amendatory Act of the 91st General Assembly. However,
30 except as otherwise provided in subsections (d) and (e) and
31 Section 9-706, the financing statement ceases to be effective
32 at the earlier of:
33 (1) the time the financing statement would have
34 ceased to be effective under the law of the jurisdiction
SB1231 Enrolled -247- LRB9106284WHdv
1 in which it is filed; or
2 (2) June 30, 2006.
3 (d) Continuation statement. The filing of a
4 continuation statement after the effective date of this
5 amendatory Act of the 91st General Assembly does not continue
6 the effectiveness of the financing statement filed before the
7 effective date of this amendatory Act of the 91st General
8 Assembly. However, upon the timely filing of a continuation
9 statement after the effective date of this amendatory Act of
10 the 91st General Assembly and in accordance with the law of
11 the jurisdiction governing perfection as provided in Part 3,
12 the effectiveness of a financing statement filed in the same
13 office in that jurisdiction before the effective date of this
14 amendatory Act of the 91st General Assembly continues for the
15 period provided by the law of that jurisdiction.
16 (e) Application of subsection (c)(2) to transmitting
17 utility financing statement. Subsection (c)(2) applies to a
18 financing statement that, before the effective date of this
19 amendatory Act of the 91st General Assembly, is filed against
20 a transmitting utility and satisfies the applicable
21 requirements for perfection under the law of the jurisdiction
22 governing perfection as provided in Section 9-103, as that
23 Section existed before the effective date of this amendatory
24 Act of the 91st General Assembly, only to the extent that
25 Part 3 provides that the law of a jurisdiction other than
26 jurisdiction in which the financing statement is filed
27 governs perfection of a security interest in collateral
28 covered by the financing statement.
29 (f) Application of Part 5. A financing statement that
30 includes a financing statement filed before the effective
31 date of this amendatory Act of the 91st General Assembly and
32 a continuation statement filed after the effective date of
33 this amendatory Act of the 91st General Assembly is effective
34 only to the extent that it satisfies the requirements of Part
SB1231 Enrolled -248- LRB9106284WHdv
1 5 for an initial financing statement.
2 (810 ILCS 5/9-706 new)
3 Sec. 9-706. When initial financing statement suffices to
4 continue effectiveness of financing statement.
5 (a) Initial financing statement in lieu of continuation
6 statement. The filing of an initial financing statement in
7 the office specified in Section 9-501 continues the
8 effectiveness of a financing statement filed before the
9 effective date of this amendatory Act of the 91st General
10 Assembly if:
11 (1) the filing of an initial financing statement in
12 that office would be effective to perfect a security
13 interest under this Act;
14 (2) the pre-effective-date financing statement was
15 filed in an office in another State or another office in
16 this State; and
17 (3) the initial financing statement satisfies
18 subsection (c).
19 (b) Period of continued effectiveness. The filing of an
20 initial financing statement under subsection (a) continues
21 the effectiveness of the pre-effective-date financing
22 statement:
23 (1) if the initial financing statement is filed
24 before the effective date of this amendatory Act of the
25 91st General Assembly, for the period provided in Section
26 9-403 of the Uniform Commercial Code as it existed before
27 the effective date of this amendatory Act of the 91st
28 General Assembly with respect to a financing statement;
29 and
30 (2) if the initial financing statement is filed
31 after the effective date of this amendatory Act of the
32 91st General Assembly, for the period provided in Section
33 9-515 with respect to an initial financing statement.
SB1231 Enrolled -249- LRB9106284WHdv
1 (c) Requirements for initial financing statement under
2 subsection (a). To be effective for purposes of subsection
3 (a), an initial financing statement must:
4 (1) satisfy the requirements of Part 5 for an
5 initial financing statement;
6 (2) identify the pre-effective-date financing
7 statement by indicating the office in which the financing
8 statement was filed and providing the dates of filing and
9 file numbers, if any, of the financing statement and of
10 the most recent continuation statement filed with respect
11 to the financing statement; and
12 (3) indicate that the pre-effective-date financing
13 statement remains effective.
14 (810 ILCS 5/9-707 new)
15 Sec. 9-707. Amendment of pre-effective-date financing
16 statement.
17 (a) "Pre-effective-date financing statement". In this
18 Section, "pre-effective-date financing statement" means a
19 financing statement filed before the effective date of this
20 amendatory Act of the 91st General Assembly.
21 (b) Applicable law. After the effective date of this
22 amendatory Act of the 91st General Assembly, a person may add
23 or delete collateral covered by, continue or terminate the
24 effectiveness of, or otherwise amend the information provided
25 in, a pre-effective-date financing statement only in
26 accordance with the law of the jurisdiction governing
27 perfection as provided in Part 3. However, the effectiveness
28 of a pre-effective-date financing statement also may be
29 terminated in accordance with the law of the jurisdiction in
30 which the financing statement is filed.
31 (c) Method of amending: general rule. Except as
32 otherwise provided in subsection (d), if the law of this
33 State governs perfection of a security interest, the
SB1231 Enrolled -250- LRB9106284WHdv
1 information in a pre-effective-date financing statement may
2 be amended after the effective date of this amendatory Act of
3 the 91st General Assembly only if:
4 (1) the pre-effective-date financing statement and
5 an amendment are filed in the office specified in Section
6 9-501;
7 (2) an amendment is filed in the office specified
8 in Section 9-501 concurrently with, or after the filing
9 in that office of, an initial financing statement that
10 satisfies Section 9-706(c); or
11 (3) an initial financing statement that provides
12 the information as amended and satisfies Section 9-706(c)
13 is filed in the office specified in Section 9-501.
14 (d) Method of amending: continuation. If the law of
15 this State governs perfection of a security interest, the
16 effectiveness of a pre-effective-date financing statement may
17 be continued only under Section 9-705(d) and (f) or Section
18 9-706.
19 (e) Method of amending: additional termination rule.
20 Whether or not the law of this State governs perfection of a
21 security interest, the effectiveness of a pre-effective-date
22 financing statement filed in this State may be terminated
23 after the effective date of this amendatory Act of the 91st
24 General Assembly by filing a termination statement in the
25 office in which the pre-effective-date financing statement is
26 filed, unless an initial financing statement that satisfies
27 Section 9-706(c) has been filed in the office specified by
28 the law of the jurisdiction governing perfection as provided
29 in Part 3 as the office in which to file a financing
30 statement.
31 (810 ILCS 5/9-708 new)
32 Sec. 9-708. Persons entitled to file initial financing
33 statement or continuation statement. A person may file an
SB1231 Enrolled -251- LRB9106284WHdv
1 initial financing statement or a continuation statement under
2 this Part if:
3 (1) the secured party of record authorizes the
4 filing; and
5 (2) the filing is necessary under this Part:
6 (A) to continue the effectiveness of a
7 financing statement filed before the effective date
8 of this amendatory Act of the 91st General Assembly;
9 or
10 (B) to perfect or continue the perfection of a
11 security interest.
12 (810 ILCS 5/9-709 new)
13 Sec. 9-709. Priority.
14 (a) Law governing priority. This Act determines the
15 priority of conflicting claims to collateral. However, if
16 the relative priorities of the claims were established before
17 the effective date of this amendatory Act of the 91st General
18 Assembly, Article 9 as it existed before the effective date
19 of this amendatory Act of the 91st General Assembly
20 determines priority.
21 (b) Priority if security interest becomes enforceable
22 under Section 9-203. For purposes of Section 9-322(a), the
23 priority of a security interest that becomes enforceable
24 under Section 9-203 of this Act dates from the effective date
25 of this amendatory Act of the 91st General Assembly if the
26 security interest is perfected under this Act by the filing
27 of a financing statement before the effective date of this
28 amendatory Act of the 91st General Assembly which would not
29 have been effective to perfect the security interest under
30 Article 9 as it existed before the effective date of this
31 amendatory Act of the 91st General Assembly. This subsection
32 does not apply to conflicting security interests each of
33 which is perfected by the filing of such a financing
SB1231 Enrolled -252- LRB9106284WHdv
1 statement.
2 (810 ILCS 5/9-710 new)
3 Sec. 9-710. Local-filing office responsibilities for
4 filings under the Uniform Commercial Code prior to this
5 amendatory Act of the 91st General Assembly.
6 (a) In this Section:
7 (1) "Local-filing office" means a filing office,
8 other than the office of the Secretary of State, that is
9 designated as the proper place to file a financing
10 statement under Section 9-401(1) of the Uniform
11 Commercial Code as in effect immediately before the
12 effective date of this amendatory Act of the 91st General
13 Assembly. The term applies only with respect to a record
14 that covers a type of collateral as to which the filing
15 office is designated in that Section as the proper place
16 to file.
17 (2) "Former-Article-9 records" means:
18 (A) financing statements and other records
19 that have been filed in a local-filing office before
20 July 1, 2001, and that are, or upon processing and
21 indexing will be, reflected in the index maintained,
22 as of June 30, 2001, by the local-filing office for
23 financing statements and other records filed in the
24 local filing office before July 1, 2001.
25 (B) the index as of June 30, 2001.
26 (b) Except for a record terminating a former-Article-9
27 record, a local-filing office must not accept for filing a
28 record presented after June 30, 2001, whether or not the
29 record relates to a financing statement filed in the
30 local-filing office before July 1, 2001. If the record
31 terminating such former-Article-9 record statement is in the
32 standard form prescribed by the Secretary of State, the
33 uniform fee for filing and indexing the termination statement
SB1231 Enrolled -253- LRB9106284WHdv
1 in the office of a county recorder shall be $5 and otherwise
2 shall be $10, plus in each case an additional fee of $5 for
3 each name more than one at each address listed against which
4 the record is required to be indexed.
5 (c) Until July 1, 2001, each local-filing office must
6 maintain all former-Article-9 records in accordance with the
7 Uniform Commercial Code as in effect immediately before the
8 effective date of this amendatory Act of the 91st General
9 Assembly. A former-Article-9 record that is not reflected on
10 the index maintained on June 30, 2001, by the local-filing
11 office must be processed and indexed, and reflected on the
12 index as of June 30, 2001, as soon as practicable but in any
13 event no later than July 30, 2001.
14 (d) Until at least June 30, 2008, each local-filing
15 office must respond to requests for information with respect
16 to former-Article-9 records relating to a debtor and issue
17 certificates, in accordance with the Uniform Commercial Code
18 as in effect immediately before this amendatory Act of the
19 91st General Assembly. The fees charged for responding to
20 requests for information relating to the debtor issuing the
21 certificates with respect to former-Article-9 records must be
22 the fees in effect under the Uniform Commercial Code as in
23 effect immediately before the effective date of this
24 amendatory Act of the 91st General Assembly on June 30, 2001,
25 unless a different fee is later set by the local filing
26 office. However, the different fee must not exceed $10 for
27 responding to a request for information relating to a debtor
28 or $10 for issuing a certificate.
29 (e) After June 30, 2008, each local-filing office may
30 remove and destroy, in accordance with any then applicable
31 record retention law of this State, all former-Article-9
32 records, including the related index.
33 (f) This Section does not apply, with respect to
34 financing statements and other records, to a filing office in
SB1231 Enrolled -254- LRB9106284WHdv
1 which mortgages or records of mortgages on real property are
2 required to be filed or recorded if:
3 (1) the collateral is timber to be cut or
4 as-extracted collateral, or
5 (2) the record is or relates to a financing
6 statement filed as a fixture filing and the collateral is
7 goods that are or are to become fixtures.
8 PART 99. (BLANK) MISCELLANEOUS ILLINOIS PROVISIONS
9 (810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901)
10 Sec. 9-9901. (Blank). Liability of Secretary of State.
11 Neither the Secretary of State nor any of the Secretary of
12 State's employees or agents shall be subject to personal
13 liability by reason of any error or omission in the
14 performance of any duty under this Article except in case of
15 wilful negligence.
16 (Source: P.A. 87-1047.)
17 (810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902)
18 Sec. 9-9902. (Blank). Security interests in crops.
19 (a) Legislative findings; purpose. The General Assembly
20 finds:
21 (1) it has been the accepted practice between
22 farmers and agricultural lenders for lenders to extend
23 credit with repayment secured by a security interest in
24 crops perfected in accordance with the provisions of this
25 Article;
26 (2) in making these loans, it has been the accepted
27 practice of agricultural lenders to rely upon a search of
28 financing statements properly filed in accordance with
29 the provisions of this Article to determine the presence
30 of claims in favor of other lenders;
31 (3) recently, this long standing practice and the
SB1231 Enrolled -255- LRB9106284WHdv
1 expectations of agricultural lenders have been negated by
2 court decisions that hold that a mortgagee of real estate
3 who takes possession, during foreclosure proceedings, of
4 mortgaged real estate with unsevered crops has priority
5 over a perfected security interest in crops;
6 (4) as a result of these court decisions, the
7 documentation and expenses in connection with prudent
8 agricultural lending practices will significantly
9 increase, creating an undue burden on agricultural
10 lenders;
11 (5) 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 result in the creation of claims against crops that
15 agricultural lenders will be unable to discover by public
16 record search;
17 (6) these court decisions defeat the legitimate
18 expectations of agricultural lenders, unnecessarily
19 increase the cost of agricultural credit and impede the
20 free flow and availability of agricultural credit,
21 constituting an undue burden on the Illinois farm
22 economy;
23 (7) the application of these court decisions to the
24 holders of obligations secured by the collateral
25 assignment of beneficial interests in land trusts will
26 similarly defeat the expectations of agricultural
27 lenders, unnecessarily increase the cost of agricultural
28 credit and impede the free flow and availability of
29 agricultural credit, constituting an undue burden on the
30 Illinois farm economy;
31 (8) real estate lenders, frequently dealing with
32 farmers prior to the involvement of other agricultural
33 lenders, in the ordinary course of lending can perfect a
34 security interest in crops in accordance with the
SB1231 Enrolled -256- LRB9106284WHdv
1 provisions of this Article to the extent these lenders
2 are relying on that collateral;
3 (9) it is the purpose of this Section to restore an
4 efficient system of searching for the claims of lenders
5 and the protection afforded agricultural lenders by a
6 perfected security interest in crops under this Article,
7 and thereby to foster and encourage the availability of
8 agricultural credit.
9 (b) Definitions. In this Section the following meanings
10 apply:
11 (1) "Collateral assignment of beneficial interest"
12 means any pledge or assignment of the beneficial interest
13 in a land trust to a person to secure a debt or other
14 obligation.
15 (2) "Land trust" means any trust arrangement under
16 which the legal and equitable title to real estate is
17 held by a trustee, the interest of the beneficiary of the
18 trust is personal property and the beneficiary or any
19 person designated in writing by the beneficiary has (i)
20 the exclusive power to direct or control the trustee in
21 dealing with the title to the trust property, (ii) the
22 exclusive control of the management, operation, renting,
23 and selling of the trust property, and (iii) the
24 exclusive right to the earnings, avails, and proceeds of
25 the trust property.
26 (c) Rights to crops. With respect to any crops growing
27 or to be grown on real estate held in a land trust, the
28 rights of a holder of an obligation secured by a collateral
29 assignment of beneficial interest in the land trust,
30 including rights by virtue of an equitable lien, shall be
31 subject to a security interest properly perfected under this
32 Article.
33 (d) Application of Section. This Section applies to the
34 holder of an obligation secured by a collateral assignment of
SB1231 Enrolled -257- LRB9106284WHdv
1 beneficial interest in a land trust who becomes entitled to
2 crops by obtaining possession on or after December 22, 1988.
3 (Source: P.A. 87-1047.)
4 Section 10. The Uniform Commercial Code is amended by
5 changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502,
6 2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103,
7 8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section
8 5-118 as follows:
9 (810 ILCS 5/1-105) (from Ch. 26, par. 1-105)
10 Sec. 1-105. Territorial application of the Act; parties'
11 power to choose applicable law.
12 (1) Except as provided in this Section, when a
13 transaction bears a reasonable relation to this State and
14 also to another state or nation the parties may agree that
15 the law either of this State or of the other state or nation
16 shall govern their rights and duties. Failing an agreement,
17 this Act applies to transactions bearing an appropriate
18 relation to this State.
19 (2) Where one of the following provisions of this Act
20 specifies the applicable law, that provision governs and a
21 contrary agreement is effective only to the extent permitted
22 by the law (including the conflict of laws rules) so
23 specified:
24 Rights of creditors against sold goods. Section 2-402.
25 Applicability of the Article on Leases. Sections 2A-105
26 and 2A-106.
27 Applicability of the Article on Bank Deposits and
28 Collections. Section 4-102.
29 Governing law in the Article on Funds Transfers. Section
30 4A-507.
31 Letters of Credit. Section 5-116.
32 Applicability of the Article on Investment Securities.
SB1231 Enrolled -258- LRB9106284WHdv
1 Section 8-110.
2 Law governing perfection, the effect of perfection or
3 nonperfection, and the priority of security
4 interests and agricultural liens. Sections 9-301
5 through 9-307.
6 Perfection provisions of the Article on Secured
7 Transactions. Section 9-103.
8 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
9 (810 ILCS 5/1-201) (from Ch. 26, par. 1-201)
10 Sec. 1-201. General Definitions. Subject to additional
11 definitions contained in the subsequent Articles of this Act
12 which are applicable to specific Articles or Parts thereof,
13 and unless the context otherwise requires, in this Act:
14 (1) "Action" in the sense of a judicial proceeding
15 includes recoupment, counterclaim, set-off, suit in equity
16 and any other proceedings in which rights are determined.
17 (2) "Aggrieved party" means a party entitled to resort
18 to a remedy.
19 (3) "Agreement" means the bargain of the parties in fact
20 as found in their language or by implication from other
21 circumstances including course of dealing or usage of trade
22 or course of performance as provided in this Act (Sections
23 1-205, and 2-208, and 2A-207). Whether an agreement has legal
24 consequences is determined by the provisions of this Act, if
25 applicable; otherwise by the law of contracts (Section
26 1-103). (Compare "Contract".)
27 (4) "Bank" means any person engaged in the business of
28 banking.
29 (5) "Bearer" means the person in possession of an
30 instrument, document of title, or certificated security
31 payable to bearer or indorsed in blank.
32 (6) "Bill of lading" means a document evidencing the
33 receipt of goods for shipment issued by a person engaged in
SB1231 Enrolled -259- LRB9106284WHdv
1 the business of transporting or forwarding goods, and
2 includes an airbill. "Airbill" means a document serving for
3 air transportation as a bill of lading does for marine or
4 rail transportation, and includes an air consignment note or
5 air waybill.
6 (7) "Branch" includes a separately incorporated foreign
7 branch of a bank.
8 (8) "Burden of establishing" a fact means the burden of
9 persuading the triers of fact that the existence of the fact
10 is more probable than its non-existence.
11 (9) "Buyer in ordinary course of business" means a
12 person that buys goods who in good faith, and without
13 knowledge that the sale violates to him is in violation of
14 the ownership rights or security interest of another person a
15 third party in the goods, and buys in the ordinary course
16 from a person, other than a pawnbroker, in the business of
17 selling goods of that kind but does not include a pawnbroker.
18 A person buys goods in the ordinary course if the sale to the
19 person comports with the usual or customary practices in the
20 kind of business in which the seller is engaged or with the
21 seller's own usual or customary practices. A person that
22 sells oil, gas, or other minerals at the wellhead or minehead
23 is a person All persons who sell minerals or the like
24 (including oil and gas) at wellhead or minehead shall be
25 deemed to be persons in the business of selling goods of that
26 kind. A buyer in ordinary course of business "Buying" may
27 buy be for cash, or by exchange of other property, or on
28 secured or unsecured credit, and may acquire includes
29 receiving goods or documents of title under a pre-existing
30 contract for sale. Only a buyer that takes possession of the
31 goods or has a right to recover the goods from the seller
32 under Article 2 may be a buyer in ordinary course of
33 business. A person that acquires goods in a transfer in bulk
34 or as security for or in total or partial satisfaction of a
SB1231 Enrolled -260- LRB9106284WHdv
1 money debt is not a buyer in ordinary course of business. but
2 does not include a transfer in bulk or as security for or in
3 total or partial satisfaction of a money debt.
4 (10) "Conspicuous": A term or clause is conspicuous when
5 it is so written that a reasonable person against whom it is
6 to operate ought to have noticed it. A printed heading in
7 capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous.
8 Language in the body of a form is "conspicuous" if it is in
9 larger or other contrasting type or color. But in a telegram
10 any stated term is "conspicuous". Whether a term or clause is
11 "conspicuous" or not is for decision by the court.
12 (11) "Contract" means the total legal obligation which
13 results from the parties' agreement as affected by this Act
14 and any other applicable rules of law. (Compare "Agreement".)
15 (12) "Creditor" includes a general creditor, a secured
16 creditor, a lien creditor and any representative of
17 creditors, including an assignee for the benefit of
18 creditors, a trustee in bankruptcy, a receiver in equity and
19 an executor or administrator of an insolvent debtor's or
20 assignor's estate.
21 (13) "Defendant" includes a person in the position of
22 defendant in a cross-action or counterclaim.
23 (14) "Delivery" with respect to instruments, documents
24 of title, chattel paper or certificated securities means
25 voluntary transfer of possession.
26 (15) "Document of title" includes bill of lading, dock
27 warrant, dock receipt, warehouse receipt or order for the
28 delivery of goods, and also any other document which in the
29 regular course of business or financing is treated as
30 adequately evidencing that the person in possession of it is
31 entitled to receive, hold and dispose of the document and the
32 goods it covers. To be a document of title a document must
33 purport to be issued by or addressed to a bailee and purport
34 to cover goods in the bailee's possession which are either
SB1231 Enrolled -261- LRB9106284WHdv
1 identified or are fungible portions of an identified mass.
2 (16) "Fault" means wrongful act, omission or breach.
3 (17) "Fungible" with respect to goods or securities
4 means goods or securities of which any unit is, by nature or
5 usage of trade, the equivalent of any other like unit. Goods
6 which are not fungible shall be deemed fungible for the
7 purposes of this Act to the extent that under a particular
8 agreement or document unlike units are treated as
9 equivalents.
10 (18) "Genuine" means free of forgery or counterfeiting.
11 (19) "Good faith" means honesty in fact in the conduct
12 or transaction concerned.
13 (20) "Holder" with respect to a negotiable instrument
14 means the person in possession if the instrument is payable
15 to bearer or, in the case of an instrument payable to an
16 identified person, if the identified person is in possession.
17 "Holder" with respect to a document of title means the person
18 in possession if the goods are deliverable to bearer or to
19 the order of the person in possession.
20 (21) To "honor" is to pay or accept and pay, or where a
21 credit so engages to purchase or discount a draft complying
22 with the terms of the credit.
23 (22) "Insolvency proceedings" includes any assignment
24 for the benefit of creditors or other proceedings intended to
25 liquidate or rehabilitate the estate of the person involved.
26 (23) A person is "insolvent" who either has ceased to
27 pay his debts in the ordinary course of business or cannot
28 pay his debts as they become due or is insolvent within the
29 meaning of the federal bankruptcy law.
30 (24) "Money" means a medium of exchange authorized or
31 adopted by a domestic or foreign government and includes a
32 monetary unit of account established by an intergovernmental
33 organization or by agreement between 2 or more nations.
34 (25) A person has "notice" of a fact when
SB1231 Enrolled -262- LRB9106284WHdv
1 (a) he has actual knowledge of it; or
2 (b) he has received a notice or notification of it;
3 or
4 (c) from all the facts and circumstances known to
5 him at the time in question he has reason to know that it
6 exists. A person "knows" or has "knowledge" of a fact
7 when he has actual knowledge of it. "Discover" or "learn"
8 or a word or phrase of similar import refers to knowledge
9 rather than to reason to know. The time and circumstances
10 under which a notice or notification may cease to be
11 effective are not determined by this Act.
12 (26) A person "notifies" or "gives" a notice or
13 notification to another by taking such steps as may be
14 reasonably required to inform the other in ordinary course
15 whether or not such other actually comes to know of it. A
16 person "receives" a notice or notification when
17 (a) it comes to his attention; or
18 (b) it is duly delivered at the place of business
19 through which the contract was made or at any other place
20 held out by him as the place for receipt of such
21 communications.
22 (27) Notice, knowledge or a notice or notification
23 received by an organization is effective for a particular
24 transaction from the time when it is brought to the attention
25 of the individual conducting that transaction, and in any
26 event from the time when it would have been brought to his
27 attention if the organization had exercised due diligence. An
28 organization exercises due diligence if it maintains
29 reasonable routines for communicating significant information
30 to the person conducting the transaction and there is
31 reasonable compliance with the routines. Due diligence does
32 not require an individual acting for the organization to
33 communicate information unless such communication is part of
34 his regular duties or unless he has reason to know of the
SB1231 Enrolled -263- LRB9106284WHdv
1 transaction and that the transaction would be materially
2 affected by the information.
3 (28) "Organization" includes a corporation, government
4 or governmental subdivision or agency, business trust,
5 estate, trust, partnership or association, two or more
6 persons having a joint or common interest, or any other legal
7 or commercial entity.
8 (29) "Party", as distinct from "third party", means a
9 person who has engaged in a transaction or made an agreement
10 within this Act.
11 (30) "Person" includes an individual or an organization
12 (see Section 1-102).
13 (31) "Presumption" or "presumed" means that the trier of
14 fact must find the existence of the fact presumed unless and
15 until evidence is introduced which would support a finding of
16 its non-existence.
17 (32) "Purchase" includes taking by sale, discount,
18 negotiation, mortgage, pledge, lien, security interest, issue
19 or reissue, gift or any other voluntary transaction creating
20 an interest in property.
21 (33) "Purchaser" means a person who takes by purchase.
22 (34) "Remedy" means any remedial right to which an
23 aggrieved party is entitled with or without resort to a
24 tribunal.
25 (35) "Representative" includes an agent, an officer of a
26 corporation or association, and a trustee, executor or
27 administrator of an estate, or any other person empowered to
28 act for another.
29 (36) "Rights" includes remedies.
30 (37) "Security interest" means an interest in personal
31 property or fixtures which secures payment or performance of
32 an obligation. The retention or reservation of title by a
33 seller of goods notwithstanding shipment or delivery to the
34 buyer (Section 2-401) is limited in effect to a reservation
SB1231 Enrolled -264- LRB9106284WHdv
1 of a "security interest". The term also includes any interest
2 of a consignor and a buyer of accounts, or chattel paper, a
3 payment intangible, or a promissory note in a transaction
4 that which is subject to Article 9. The special property
5 interest of a buyer of goods on identification of those goods
6 to a contract for sale under Section 2-401 is not a "security
7 interest", but a buyer may also acquire a "security
8 interest", by complying with Article 9. Except as otherwise
9 provided in Section 2-505, the right of a seller or lessor of
10 goods under Article 2 or 2A to retain or acquire possession
11 of the goods is not a "security interest", but a seller or
12 lessor may also acquire a "security interest" by complying
13 with Article 9. The retention or reservation of title by a
14 seller of goods notwithstanding shipment or delivery to the
15 buyer (Section 2-401) is limited in effect to a reservation
16 of a "security interest". Unless a consignment is intended as
17 security, reservation of title thereunder is not a "security
18 interest" but a consignment is in any event subject to the
19 provisions on consignment sales (Section 2-326).
20 Whether a transaction creates a lease or security
21 interest is determined by the facts of each case; however, a
22 transaction creates a security interest if the consideration
23 the lessee is to pay the lessor for the right to possession
24 and use of the goods is an obligation for the term of the
25 lease not subject to termination by the lessee; and
26 (a) the original term of the lease is equal to or
27 greater than the remaining economic life of the goods;
28 (b) the lessee is bound to renew the lease for the
29 remaining economic life of the goods or is bound to
30 become the owner of the goods;
31 (c) the lessee has an option to renew the lease for
32 the remaining economic life of the goods for no
33 additional consideration or nominal additional
34 consideration upon compliance with the lease agreement;
SB1231 Enrolled -265- LRB9106284WHdv
1 or
2 (d) the lessee has an option to become the owner of
3 the goods for no additional consideration or nominal
4 additional consideration upon compliance with the lease
5 agreement.
6 A transaction does not create a security interest merely
7 because it provides that:
8 (a) the present value of the consideration the
9 lessee is obligated to pay the lessor for the right to
10 possession and use of the goods is substantially equal to
11 or is greater than the fair market value of the goods at
12 the time the lease is entered into;
13 (b) the lessee assumes risk of loss of the goods,
14 or agrees to pay taxes, insurance, filing, recording, or
15 registration fees, or service or maintenance costs with
16 respect to the goods;
17 (c) the lessee has an option to renew the lease or
18 to become the owner of the goods;
19 (d) the lessee has an option to renew the lease for
20 a fixed rent that is equal to or greater than the
21 reasonably predictable fair market rent for the use of
22 the goods for the term of the renewal at the time the
23 option is to be performed; or
24 (e) the lessee has an option to become the owner of
25 the goods for a fixed price that is equal to or greater
26 than the reasonably predictable fair market value of the
27 goods at the time the option is to be performed.
28 For purposes of this subsection (37):
29 (x) Additional consideration is not nominal if (i)
30 when the option to renew the lease is granted to the
31 lessee the rent is stated to be the fair market rent for
32 the use of the goods for the term of the renewal
33 determined at the time the option is to be performed, or
34 (ii) when the option to become the owner of the goods is
SB1231 Enrolled -266- LRB9106284WHdv
1 granted to the lessee the price is stated to be the fair
2 market value of the goods determined at the time the
3 option is to be performed. Additional consideration is
4 nominal if it is less than the lessee's reasonably
5 predictable cost of performing under the lease agreement
6 if the option is not exercised;
7 (y) "Reasonably predictable" and "remaining
8 economic life of the goods" are to be determined with
9 reference to the facts and circumstances at the time the
10 transaction is entered into; and
11 (z) "Present value" means the amount as of a date
12 certain of one or more sums payable in the future,
13 discounted to the date certain. The discount is
14 determined by the interest rate specified by the parties
15 if the rate is not manifestly unreasonable at the time
16 the transaction is entered into; otherwise, the discount
17 is determined by a commercially reasonable rate that
18 takes into account the facts and circumstances as of each
19 case at the time the transaction was entered into.
20 (38) "Send" in connection with any writing or notice
21 means to deposit in the mail or deliver for transmission by
22 any other usual means of communication with postage or cost
23 of transmission provided for and properly addressed and in
24 the case of an instrument to an address specified thereon or
25 otherwise agreed, or if there be none to any address
26 reasonable under the circumstances. The receipt of any
27 writing or notice within the time at which it would have
28 arrived if properly sent has the effect of a proper sending.
29 (39) "Signed" includes any symbol executed or adopted by
30 a party with present intention to authenticate a writing.
31 (40) "Surety" includes guarantor.
32 (41) "Telegram" includes a message transmitted by radio,
33 teletype, cable, any mechanical method of transmission, or
34 the like.
SB1231 Enrolled -267- LRB9106284WHdv
1 (42) "Term" means that portion of an agreement which
2 relates to a particular matter.
3 (43) "Unauthorized" signature means one made without
4 actual, implied, or apparent authority and includes a
5 forgery.
6 (44) "Value". Except as otherwise provided with respect
7 to negotiable instruments and bank collections (Sections
8 3-303, 4-210, 4-208 and 4-211 4-209), a person gives "value"
9 for rights if he acquires them:
10 (a) in return for a binding commitment to extend
11 credit or for the extension of immediately available
12 credit whether or not drawn upon and whether or not a
13 charge-back is provided for in the event of difficulties
14 in collection; or
15 (b) as security for or in total or partial
16 satisfaction of a pre-existing claim; or
17 (c) by accepting delivery pursuant to a
18 pre-existing contract for purchase; or
19 (d) generally, in return for any consideration
20 sufficient to support a simple contract.
21 (45) "Warehouse receipt" means a receipt issued by a
22 person engaged in the business of storing goods for hire.
23 (46) "Written" or "writing" includes printing,
24 typewriting or any other intentional reduction to tangible
25 form.
26 (Source: P.A. 87-493; 87-582; 87-895; 87-1135.)
27 (810 ILCS 5/2-103) (from Ch. 26, par. 2-103)
28 Sec. 2-103. Definitions and index of definitions.
29 (1) In this Article unless the context otherwise
30 requires
31 (a) "Buyer" means a person who buys or contracts to
32 buy goods.
33 (b) "Good faith" in the case of a merchant means
SB1231 Enrolled -268- LRB9106284WHdv
1 honesty in fact and the observance of reasonable commercial
2 standards of fair dealing in the trade.
3 (c) "Receipt" of goods means taking physical
4 possession of them.
5 (d) "Seller" means a person who sells or contracts
6 to sell goods.
7 (2) Other definitions applying to this Article or to
8 specified Parts thereof, and the sections in which they
9 appear are:
10 "Acceptance". Section 2--606.
11 "Banker's credit". Section 2--325.
12 "Between merchants". Section 2--104.
13 "Cancellation". Section 2--106(4).
14 "Commercial unit". Section 2--105.
15 "Confirmed credit". Section 2--325.
16 "Conforming to contract". Section 2--106.
17 "Contract for sale". Section 2--106.
18 "Cover". Section 2--712.
19 "Entrusting". Section 2--403.
20 "Financing agency". Section 2--104.
21 "Future goods". Section 2--105.
22 "Goods". Section 2--105.
23 "Identification". Section 2--501.
24 "Installment contract". Section 2--612.
25 "Letter of Credit". Section 2--325.
26 "Lot". Section 2--105.
27 "Merchant". Section 2--104.
28 "Overseas". Section 2--323.
29 "Person in position of seller". Section 2--707.
30 "Present sale". Section 2--106.
31 "Sale". Section 2--106.
32 "Sale on approval". Section 2--326.
33 "Sale or return". Section 2--326.
34 "Termination". Section 2--106.
SB1231 Enrolled -269- LRB9106284WHdv
1 (3) The following definitions in other Articles apply to
2 this Article:
3 "Check". Section 3--104.
4 "Consignee". Section 7--102.
5 "Consignor". Section 7--102.
6 "Consumer goods". Section 9-102 9--109.
7 "Dishonor". Section 3-502 3--507.
8 "Draft". Section 3--104.
9 (4) In addition Article 1 contains general definitions
10 and principles of construction and interpretation applicable
11 throughout this Article.
12 (Source: Laws 1961, p. 2101.)
13 (810 ILCS 5/2-210) (from Ch. 26, par. 2-210)
14 Sec. 2-210. Delegation of performance; assignment of
15 rights.
16 (1) A party may perform his duty through a delegate
17 unless otherwise agreed or unless the other party has a
18 substantial interest in having his original promisor perform
19 or control the acts required by the contract. No delegation
20 of performance relieves the party delegating of any duty to
21 perform or any liability for breach.
22 (2) Except as otherwise provided in Section 9-406,
23 unless otherwise agreed all rights of either seller or buyer
24 can be assigned except where the assignment would materially
25 change the duty of the other party, or increase materially
26 the burden or risk imposed on him by his contract, or impair
27 materially his chance of obtaining return performance. A
28 right to damages for breach of the whole contract or a right
29 arising out of the assignor's due performance of his entire
30 obligation can be assigned despite agreement otherwise.
31 (3) The creation, attachment, perfection, or enforcement
32 of a security interest in the seller's interest under a
33 contract is not a transfer that materially changes the duty
SB1231 Enrolled -270- LRB9106284WHdv
1 of or increases materially the burden or risk imposed on the
2 buyer or impairs materially the buyer's chance of obtaining
3 return performance with the purview of subsection (2) unless,
4 and then only to the extent that, enforcement actually
5 results in a delegation of material performance of the
6 seller. Even in that event, the creation, attachment,
7 perfection, and enforcement of the security interest remain
8 effective, but (i) the seller is liable to the buyer for
9 damages caused by the delegation to the extent that the
10 damages could not reasonably be prevented by the buyer, and
11 (ii) a court having jurisdiction may grant other appropriate
12 relief, including cancellation of the contract for sale or an
13 injunction against enforcement of the security interest or
14 consummation of the enforcement.
15 (4) (3) Unless the circumstances indicate the contrary a
16 prohibition of assignment of "the contract" is to be
17 construed as barring only the delegation to the assignee of
18 the assignor's performance.
19 (5) (4) An assignment of "the contract" or of "all my
20 rights under the contract" or an assignment in similar
21 general terms is an assignment of rights and unless the
22 language or the circumstances (as in an assignment for
23 security) indicate the contrary, it is a delegation of
24 performance of the duties of the assignor and its acceptance
25 by the assignee constitutes a promise by him to perform those
26 duties. This promise is enforceable by either the assignor or
27 the other party to the original contract.
28 (6) (5) The other party may treat any assignment which
29 delegates performance as creating reasonable grounds for
30 insecurity and may without prejudice to his rights against
31 the assignor demand assurances from the assignee (Section
32 2--609).
33 (Source: Laws 1961, p. 2101.)
SB1231 Enrolled -271- LRB9106284WHdv
1 (810 ILCS 5/2-326) (from Ch. 26, par. 2-326)
2 Sec. 2-326. Sale on approval and sale or return;
3 consignment sales and rights of creditors.
4 (1) Unless otherwise agreed, if delivered goods may be
5 returned by the buyer even though they conform to the
6 contract, the transaction is
7 (a) a "sale on approval" if the goods are delivered
8 primarily for use, and
9 (b) a "sale or return" if the goods are delivered
10 primarily for resale.
11 (2) Except as provided in subsection (3), Goods held on
12 approval are not subject to the claims of the buyer's
13 creditors until acceptance; goods held on sale or return are
14 subject to such claims while in the buyer's possession.
15 (3) Where goods are delivered to a person for sale and
16 such person maintains a place of business at which he deals
17 in goods of the kind involved, under a name other than the
18 name of the person making delivery, then with respect to
19 claims of creditors of the person conducting the business the
20 goods are deemed to be on sale or return. The provisions of
21 this subsection are applicable even though an agreement
22 purports to reserve title to the person making delivery until
23 payment or resale or uses such words as "on consignment" or
24 "on memorandum". However, this subsection is not applicable
25 if the person making delivery
26 (a) complies with an applicable law providing for a
27 consignor's interest or the like to be evidenced by a sign,
28 or
29 (b) establishes that the person conducting the
30 business is generally known by his creditors to be
31 substantially engaged in selling the goods of others, or
32 (c) complies with the filing provisions of the
33 Article on Secured Transactions (Article 9).
34 (4) Any "or return" term of a contract for sale is to be
SB1231 Enrolled -272- LRB9106284WHdv
1 treated as a separate contract for sale within the statute of
2 frauds section of this Article (Section 2--201) and as
3 contradicting the sale aspect of the contract within the
4 provisions of this Article on parol or extrinsic evidence
5 (Section 2--202).
6 (Source: Laws 1961, p. 2101.)
7 (810 ILCS 5/2-502) (from Ch. 26, par. 2-502)
8 Sec. 2-502. Buyer's right to goods on seller's
9 insolvency.
10 (1) Subject to subsections subsection (2) and (3) and
11 even though the goods have not been shipped a buyer who has
12 paid a part or all of the price of goods in which he has a
13 special property under the provisions of the immediately
14 preceding section may on making and keeping good a tender of
15 any unpaid portion of their price recover them from the
16 seller if:
17 (a) in the case of goods bought for personal,
18 family, or household purposes, the seller repudiates or
19 fails to deliver as required by the contract; or
20 (b) in all cases, the seller becomes insolvent
21 within 10 days after receipt of the first installment on
22 their price.
23 (2) The buyer's right to recover the goods under
24 subsection (1)(a) vests upon acquisition of a special
25 property, even if the seller had not then repudiated or
26 failed to deliver.
27 (3) If the identification creating his special property
28 has been made by the buyer he acquires the right to recover
29 the goods only if they conform to the contract for sale.
30 (Source: Laws 1961, p. 2101.)
31 (810 ILCS 5/2-716) (from Ch. 26, par. 2-716)
32 Sec. 2-716. Buyer's right to specific performance or
SB1231 Enrolled -273- LRB9106284WHdv
1 replevin.
2 (1) Specific performance may be ordered where the goods
3 are unique or in other proper circumstances.
4 (2) The judgment for specific performance may include
5 such terms and conditions as to payment of the price,
6 damages, or other relief as the court may deem just.
7 (3) The buyer has a right of replevin for goods
8 identified to the contract if after reasonable effort he is
9 unable to effect cover for such goods or the circumstances
10 reasonably indicate that such effort will be unavailing or if
11 the goods have been shipped under reservation and
12 satisfaction of the security interest in them has been made
13 or tendered. In the case of goods bought for personal,
14 family, or household purposes, the buyer's right of replevin
15 vests upon acquisition of a special property, even if the
16 seller had not then repudiated or failed to deliver.
17 (Source: P.A. 84-545.)
18 (810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103)
19 Sec. 2A-103. Definitions and index of definitions.
20 (1) In this Article unless the context otherwise
21 requires:
22 (a) "Buyer in ordinary course of business" means a
23 person who, in good faith and without knowledge that the
24 sale to him or her is in violation of the ownership
25 rights or security interest or leasehold interest of a
26 third party in the goods, buys in ordinary course from a
27 person in the business of selling goods of that kind but
28 does not include a pawnbroker. "Buying" may be for cash
29 or by exchange of other property or on secured or
30 unsecured credit and includes receiving goods or
31 documents of title under a pre-existing contract for sale
32 but does not include a transfer in bulk or as security
33 for or in total or partial satisfaction of a money debt.
SB1231 Enrolled -274- LRB9106284WHdv
1 (b) "Cancellation" occurs when either party puts an
2 end to the lease contract for default by the other party.
3 (c) "Commercial unit" means such a unit of goods as
4 by commercial usage is a single whole for purposes of
5 lease and division of which materially impairs its
6 character or value on the market or in use. A commercial
7 unit may be a single article, as a machine, or a set of
8 articles, as a suite of furniture or a line of machinery,
9 or a quantity, as a gross or carload, or any other unit
10 treated in use or in the relevant market as a single
11 whole.
12 (d) "Conforming" goods or performance under a lease
13 contract means goods or performance that are in
14 accordance with the obligations under the lease contract.
15 (e) "Consumer lease" means a lease that a lessor
16 regularly engaged in the business of leasing or selling
17 makes to a lessee who is an individual and who takes
18 under the lease primarily for a personal, family, or
19 household purpose, if the total payments to be made under
20 the lease contract, excluding payments for options to
21 renew or buy, do not exceed $40,000.
22 (f) "Fault" means wrongful act, omission, breach,
23 or default.
24 (g) "Finance lease" means a lease with respect to
25 which:
26 (i) the lessor does not select, manufacture,
27 or supply the goods;
28 (ii) the lessor acquires the goods or the
29 right to possession and use of the goods in
30 connection with the lease; and
31 (iii) one of the following occurs:
32 (A) the lessee receives a copy of the
33 contract by which the lessor acquired the goods
34 or the right to possession and use of the goods
SB1231 Enrolled -275- LRB9106284WHdv
1 before signing the lease contract;
2 (B) the lessee's approval of the contract
3 by which the lessor acquired the goods or the
4 right to possession and use of the goods is a
5 condition to effectiveness of the lease
6 contract;
7 (C) the lessee, before signing the lease
8 contract, receives an accurate and complete
9 statement designating the promises and
10 warranties, and any disclaimers of warranties,
11 limitations or modifications of remedies, or
12 liquidated damages, including those of a third
13 party, such as the manufacturer of the goods,
14 provided to the lessor by the person supplying
15 the goods in connection with or as part of the
16 contract by which the lessor acquired the goods
17 or the right to possession and use of the
18 goods; or
19 (D) if the lease is not a consumer lease,
20 the lessor, before the lessee signs the lease
21 contract, informs the lessee in writing (a) of
22 the identity of the person supplying the goods
23 to the lessor, unless the lessee has selected
24 that person and directed the lessor to acquire
25 the goods or the right to possession and use of
26 the goods from that person, (b) that the lessee
27 is entitled under this Article to the promises
28 and warranties, including those of any third
29 party, provided to the lessor by the person
30 supplying the goods in connection with or as
31 part of the contract by which the lessor
32 acquired the goods or the right to possession
33 and use of the goods, and (c) that the lessee
34 may communicate with the person supplying the
SB1231 Enrolled -276- LRB9106284WHdv
1 goods to the lessor and receive an accurate and
2 complete statement of those promises and
3 warranties, including any disclaimers and
4 limitations of them or of remedies.
5 (h) "Goods" means all things that are movable at
6 the time of identification to the lease contract, or are
7 fixtures (Section 2A-309), but the term does not include
8 money, documents, instruments, accounts, chattel paper,
9 general intangibles, or minerals or the like, including
10 oil and gas, before extraction. The term also includes
11 the unborn young of animals.
12 (i) "Installment lease contract" means a lease
13 contract that authorizes or requires the delivery of
14 goods in separate lots to be separately accepted, even
15 though the lease contract contains a clause "each
16 delivery is a separate lease" or its equivalent.
17 (j) "Lease" means a transfer of the right to
18 possession and use of goods for a term in return for
19 consideration, but a sale, including a sale on approval
20 or a sale or return, or retention or creation of a
21 security interest is not a lease. Unless the context
22 clearly indicates otherwise, the term includes a
23 sublease.
24 (k) "Lease agreement" means the bargain, with
25 respect to the lease, of the lessor and the lessee in
26 fact as found in their language or by implication from
27 other circumstances including course of dealing or usage
28 of trade or course of performance as provided in this
29 Article. Unless the context clearly indicates otherwise,
30 the term includes a sublease agreement.
31 (l) "Lease contract" means the total legal
32 obligation that results from the lease agreement as
33 affected by this Article and any other applicable rules
34 of law. Unless the context clearly indicates otherwise,
SB1231 Enrolled -277- LRB9106284WHdv
1 the term includes a sublease contract.
2 (m) "Leasehold interest" means the interest of the
3 lessor or the lessee under a lease contact.
4 (n) "Lessee" means a person who acquires the right
5 to possession and use of goods under a lease. Unless the
6 context clearly indicates otherwise, the term includes a
7 sublessee.
8 (o) "Lessee in ordinary course of business" means a
9 person who in good faith and without knowledge that the
10 lease to him or her is in violation of the ownership
11 rights or security interest or leasehold interest of a
12 third party in the goods leases in ordinary course from a
13 person in the business of selling or leasing goods of
14 that kind but does not include a pawnbroker. "Leasing"
15 may be for cash or by exchange of other property or on
16 secured or unsecured credit and includes receiving goods
17 or documents of title under a pre-existing lease contract
18 but does not include a transfer in bulk or as security
19 for or in total or partial satisfaction of a money debt.
20 (p) "Lessor" means a person who transfers the right
21 to possession and use of goods under a lease. Unless the
22 context clearly indicates otherwise, the term includes a
23 sublessor.
24 (q) "Lessor's residual interest" means the lessor's
25 interest in the goods after expiration, termination, or
26 cancellation of the lease contract.
27 (r) "Lien" means a charge against or interest in
28 goods to secure payment of a debt or performance of an
29 obligation, but the term does not include a security
30 interest.
31 (s) "Lot" means a parcel or a single article that
32 is the subject matter of a separate lease or delivery,
33 whether or not it is sufficient to perform the lease
34 contract.
SB1231 Enrolled -278- LRB9106284WHdv
1 (t) "Merchant lessee" means a lessee that is a
2 merchant with respect to goods of the kind subject to the
3 lease.
4 (u) "Present value" means the amount as of a date
5 certain of one or more sums payable in the future,
6 discounted to the date certain. The discount is
7 determined by the interest rate specified by the parties
8 if the rate was not manifestly unreasonable at the time
9 the transaction was entered into; otherwise, the discount
10 is determined by a commercially reasonable rate that
11 takes into account the facts and circumstances of each
12 case at the time the transaction was entered into.
13 (v) "Purchase" includes taking by sale, lease,
14 mortgage, security interest, pledge, gift, or any other
15 voluntary transaction creating an interest in goods.
16 (w) "Sublease" means a lease of goods the right to
17 possession and use of which was acquired by the lessor as
18 a lessee under an existing lease.
19 (x) "Supplier" means a person from whom a lessor
20 buys or leases goods to be leased under a finance lease.
21 (y) "Supply contract" means a contract under which
22 a lessor buys or leases goods to be leased.
23 (z) "Termination" occurs when either party pursuant
24 to a power created by agreement or law puts an end to the
25 lease contract otherwise than for default.
26 (2) Other definitions applying to this Article and the
27 Sections in which they appear are:
28 "Accessions". Section 2A-310(1).
29 "Construction mortgage". Section 2A-309(1)(d).
30 "Encumbrance". Section 2A-309(1)(e).
31 "Fixtures". Section 2A-309(1)(a).
32 "Fixture filing". Section 2A-309(1)(b).
33 "Purchase money lease". Section 2A-309(1)(c).
34 (3) The following definitions in other Articles apply to
SB1231 Enrolled -279- LRB9106284WHdv
1 this Article:
2 "Account". Section 9-102(a)(2) 9-106.
3 "Between merchants". Section 2-104(3).
4 "Buyer". Section 2-103(1)(a).
5 "Chattel paper". Section 9-102(a)(11) 9-105 (1)(b).
6 "Consumer goods". Section 9-102(a)(23) 9-109(1).
7 "Document". Section 9-102(a)(30) 9-105 (1)(f).
8 "Entrusting". Section 2-403(3).
9 "General intangible intangibles". Section 9-102(a)(42)
10 9-106.
11 "Good faith". Section 2-103(1)(b).
12 "Instrument". Section 9-102(a)(47) 9-105 (1)(i).
13 "Merchant". Section 2-104(1).
14 "Mortgage". Section 9-102(a)(55) 9-105 (1)(j).
15 "Pursuant to commitment". Section 9-102(a)(68) 9-105
16 (1)(k).
17 "Receipt". Section 2-103(1)(c).
18 "Sale". Section 2-106(1).
19 "Sale on approval". Section 2-326.
20 "Sale or return". Section 2-326.
21 "Seller". Section 2-103(1)(d).
22 (4) In addition, Article 1 contains general definitions
23 and principles of construction and interpretation applicable
24 throughout this Article.
25 (Source: P.A. 87-493.)
26 (810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303)
27 Sec. 2A-303. Alienability of party's interest under
28 lease contract or of lessor's residual interest in goods;
29 delegation of performance; transfer of rights.
30 (1) As used in this Section, "creation of a security
31 interest" includes the sale of a lease contract that is
32 subject to Article 9, Secured Transactions, by reason of
33 Section 9-109(a)(3) 9-102(1)(b).
SB1231 Enrolled -280- LRB9106284WHdv
1 (2) Except as provided in subsection subsections (3) and
2 Section 9-407 (4), a provision in a lease agreement which (i)
3 prohibits the voluntary or involuntary transfer, including a
4 transfer by sale, sublease, creation or enforcement of a
5 security interest, or attachment, levy, or other judicial
6 process, of an interest of a party under the lease contract
7 or of the lessor's residual interest in the goods, or (ii)
8 makes such a transfer an event of default, gives rise to the
9 rights and remedies provided in subsection (4) (5), but a
10 transfer that is prohibited or is an event of default under
11 the lease agreement is otherwise effective.
12 (3) A provision in a lease agreement which (i) prohibits
13 the creation or enforcement of a security interest in an
14 interest of a party under the lease contract or in the
15 lessor's residual interest in the goods, or (ii) makes such a
16 transfer an event of default, is not enforceable unless, and
17 then only to the extent that, there is an actual transfer by
18 the lessee of the lessee's right of possession or use of the
19 goods in violation of the provision or an actual delegation
20 of a material performance of either party to the lease
21 contract in violation of the provision. Neither the granting
22 nor the enforcement of a security interest in (i) the
23 lessor's interest under the lease contract or (ii) the
24 lessor's residual interest in the goods is a transfer that
25 materially impairs the prospect of obtaining return
26 performance by, materially changes the duty of, or materially
27 increases the burden or risk imposed on, the lessee within
28 the purview of subsection (5) unless, and then only to the
29 extent that, there is an actual delegation of a material
30 performance of the lessor.
31 (4) A provision in a lease agreement which (i) prohibits
32 a transfer of a right to damages for default with respect to
33 the whole lease contract or of a right to payment arising out
34 of the transferor's due performance of the transferor's
SB1231 Enrolled -281- LRB9106284WHdv
1 entire obligation, or (ii) makes such a transfer an event of
2 default, is not enforceable, and such a transfer is not a
3 transfer that materially impairs the prospect of obtaining
4 return performance by, materially changes the duty of, or
5 materially increases the burden or risk imposed on, the other
6 party to the lease contract within the purview of subsection
7 (4) (5).
8 (4) (5) Subject to subsection subsections (3) and
9 Section 9-407 (4):
10 (a) if a transfer is made which is made an event of
11 default under a lease agreement, the party to the lease
12 contract not making the transfer, unless that party
13 waives the default or otherwise agrees, has the rights
14 and remedies described in Section 2A-501(2);
15 (b) if paragraph (a) is not applicable and if a
16 transfer is made that (i) is prohibited under a lease
17 agreement or (ii) materially impairs the prospect of
18 obtaining return performance by, materially changes the
19 duty of, or materially increases the burden of risk
20 imposed on, the other party to the lease contract, unless
21 the party not making the transfer agrees at any time to
22 the transfer in the lease contract or otherwise, then,
23 except as limited by contract, (i) the transferor is
24 liable to the party not making the transfer for damages
25 caused by the transfer to the extent that the damages
26 could not reasonably be prevented by the party not making
27 the transfer and (ii) a court having jurisdiction may
28 grant other appropriate relief, including cancellation of
29 the lease contract or an injunction against the transfer.
30 (5) (6) A transfer of "the lease" or of "all my rights
31 under the lease", or a transfer in similar general terms, is
32 a transfer of rights and, unless the language or the
33 circumstances, as in a transfer for security, indicate the
34 contrary, the transfer is a delegation of duties by the
SB1231 Enrolled -282- LRB9106284WHdv
1 transferor to the transferee. Acceptance by the transferee
2 constitutes a promise by the transferee to perform those
3 duties. The promise is enforceable by either the transferor
4 or the other party to the lease contract.
5 (6) (7) Unless otherwise agreed by the lessor and the
6 lessee, a delegation of performance does not relieve the
7 transferor as against the other party of any duty to perform
8 or of any liability for default.
9 (7) (8) In a consumer lease, to prohibit the transfer of
10 an interest of a party under the lease contract or to make a
11 transfer an event of default, the language must be specific,
12 by a writing, and conspicuous.
13 (Source: P.A. 87-493.)
14 (810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307)
15 Sec. 2A-307. Priority of liens arising by attachment or
16 levy on, security interests in, and other claims to goods.
17 (1) Except as otherwise provided in Section 2A-306, a
18 creditor of a lessee takes subject to the lease contract.
19 (2) Except as otherwise provided in subsection
20 subsections (3) and (4) and in Sections 2A-306 and 2A-308, a
21 creditor of a lessor takes subject to the lease contract
22 unless: (a) the creditor holds a lien that attached to the
23 goods before the lease contract became enforceable,
24 (b) the creditor holds a security interest in the
25 goods and the lessee did not give value and receive
26 delivery of the goods without knowledge of the security
27 interest; or
28 (c) the creditor holds a security interest in the
29 goods which was perfected (Section 9-303) before the
30 lease contract became enforceable.
31 (3) Except as otherwise provided in Sections 9-317,
32 9-321, and 9-323, a lessee takes a leasehold interest subject
33 to a security interest held by a creditor of the lessor. A
SB1231 Enrolled -283- LRB9106284WHdv
1 lessee in the ordinary course of business takes the leasehold
2 interest free of a security interest in the goods created by
3 the lessor even though the security interest is perfected
4 (Section 9-303) and the lessee knows of its existence.
5 (4) A lessee other than a lessee in the ordinary course
6 of business takes the leasehold interest free of a security
7 interest to the extent that it secures future advances made
8 after the secured party acquires knowledge of the lease or
9 more than 45 days after the lease contract becomes
10 enforceable, whichever first occurs, unless the future
11 advances are made pursuant to a commitment entered into
12 without knowledge of the lease and before the expiration of
13 the 45-day period.
14 (Source: P.A. 87-493.)
15 (810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309)
16 Sec. 2A-309. Lessor's and lessee's rights when goods
17 become fixtures.
18 (1) In this Section:
19 (a) goods are "fixtures" when they become so
20 related to particular real estate that an interest in
21 them arises under real estate law;
22 (b) a "fixture filing" is the filing, in the office
23 where a mortgage on the real estate would be filed or
24 recorded, of a financing statement covering goods that
25 are or are to become fixtures and conforming to the
26 requirements of Section 9-502(a) and (b) 9-402(5);
27 (c) a lease is a "purchase money lease" unless the
28 lessee has possession or use of the goods or the right to
29 possession or use of the goods before the lease agreement
30 is enforceable;
31 (d) a mortgage is a "construction mortgage" to the
32 extent it secures an obligation incurred for the
33 construction of an improvement on land including the
SB1231 Enrolled -284- LRB9106284WHdv
1 acquisition cost of the land, if the recorded writing so
2 indicates; and
3 (e) "encumbrance" includes real estate mortgages
4 and other liens on real estate and all other rights in
5 real estate that are not ownership interests.
6 (2) Under this Article a lease may be of goods that are
7 fixtures or may continue in goods that become fixtures, but
8 no lease exists under this Article of ordinary building
9 materials incorporated into an improvement on land.
10 (3) This Article does not prevent creation of a lease of
11 fixtures pursuant to real estate law.
12 (4) The perfected interest of a lessor of fixtures has
13 priority over a conflicting interest of an encumbrancer or
14 owner of the real estate if:
15 (a) the lease is a purchase money lease, the
16 conflicting interest of the encumbrancer or owner arises
17 before the goods become fixtures, the interest of the
18 lessor is perfected by a fixture filing before the goods
19 become fixtures or within 10 days thereafter, and the
20 lessee has an interest of record in the real estate or is
21 in possession of the real estate; or
22 (b) the interest of the lessor is perfected by a
23 fixture filing before the interest of the encumbrancer or
24 owner is of record, the lessor's interest has priority
25 over any conflicting interest of a predecessor in title
26 of the encumbrancer or owner, and the lessee has an
27 interest of record in the real estate or is in possession
28 of the real estate.
29 (5) The interest of a lessor of fixtures, whether or not
30 perfected, has priority over the conflicting interest of an
31 encumbrancer or owner of the real estate if:
32 (a) the fixtures are readily removable factory or
33 office machines, readily removable equipment that is not
34 primarily used or leased for use in the operation of the
SB1231 Enrolled -285- LRB9106284WHdv
1 real estate, or readily removable replacements of
2 domestic appliances that are goods subject to a consumer
3 lease, and before the goods become fixtures the lease
4 contract is enforceable; or
5 (b) the conflicting interest is a lien on the real
6 estate obtained by legal or equitable proceedings after
7 the lease contract is enforceable; or
8 (c) the encumbrancer or owner has consented in
9 writing to the lease or has disclaimed an interest in the
10 goods as fixtures; or
11 (d) the lessee has a right to remove the goods as
12 against the encumbrancer or owner. If the lessee's right
13 to remove terminates, the priority of the interest of the
14 lessor continues for a reasonable time.
15 (6) Notwithstanding subsection (4)(a) but otherwise
16 subject to subsections (4) and (5), the interest of a lessor
17 of fixtures, including the lessor's residual interest, is
18 subordinate to the conflicting interest of an encumbrancer of
19 the real estate under a construction mortgage recorded before
20 the goods become fixtures if the goods become fixtures before
21 the completion of the construction. To the extent given to
22 refinance a construction mortgage, the conflicting interest
23 of an encumbrancer of the real estate under a mortgage has
24 this priority to the same extent as the encumbrancer of the
25 real estate under the construction mortgage.
26 (7) In cases not within the preceding subsections,
27 priority between the interest of a lessor of fixtures,
28 including the lessor's residual interest, and the conflicting
29 interest of an encumbrancer or owner of the real estate who
30 is not the lessee is determined by the priority rules
31 governing conflicting interests in real estate.
32 (8) If the interest of a lessor of fixtures, including
33 the lessor's residual interest, has priority over all
34 conflicting interests of all owners and encumbrancers of the
SB1231 Enrolled -286- LRB9106284WHdv
1 real estate, the lessor or the lessee may (i) on default,
2 expiration, termination, or cancellation of the lease
3 agreement but subject to the lease agreement and this
4 Article, or (ii) if necessary to enforce other rights and
5 remedies of the lessor or lessee under this Article, remove
6 the goods from the real estate, free and clear of all
7 conflicting interests of all owners and encumbrancers of the
8 real estate, but the lessor or lessee must reimburse any
9 encumbrancer or owner of the real estate who is not the
10 lessee and who has not otherwise agreed for the cost of
11 repair of any physical injury, but not for any diminution in
12 value of the real estate caused by the absence of the goods
13 removed or by any necessity of replacing them. A person
14 entitled to reimbursement may refuse permission to remove
15 until the party seeking removal gives adequate security for
16 the performance of this obligation.
17 (9) Even though the lease agreement does not create a
18 security interest, the interest of a lessor of fixtures,
19 including the lessor's residual interest, is perfected by
20 filing a financing statement as a fixture filing for leased
21 goods that are or are to become fixtures in accordance with
22 the relevant provisions of the Article on Secured
23 Transactions (Article 9).
24 (Source: P.A. 87-493.)
25 (810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
26 Sec. 4-210. Security interest of collecting bank in
27 items, accompanying documents and proceeds.
28 (a) A collecting bank has a security interest in an item
29 and any accompanying documents or the proceeds of either:
30 (1) in case of an item deposited in an account, to
31 the extent to which credit given for the item has been
32 withdrawn or applied;
33 (2) in case of an item for which it has given
SB1231 Enrolled -287- LRB9106284WHdv
1 credit available for withdrawal as of right, to the
2 extent of the credit given, whether or not the credit is
3 drawn upon or there is a right of charge-back; or
4 (3) if it makes an advance on or against the item.
5 (b) If credit given for several items received at one
6 time or pursuant to a single agreement is withdrawn or
7 applied in part, the security interest remains upon all the
8 items, any accompanying documents or the proceeds of either.
9 For the purpose of this Section, credits first given are
10 first withdrawn.
11 (c) Receipt by a collecting bank of a final settlement
12 for an item is a realization on its security interest in the
13 item, accompanying documents, and proceeds. So long as the
14 bank does not receive final settlement for the item or give
15 up possession of the item or accompanying documents for
16 purposes other than collection, the security interest
17 continues to that extent and is subject to Article 9, but:
18 (1) no security agreement is necessary to make the
19 security interest enforceable Section 9-203(b)(3)(A)
20 9-203 (1)(a);
21 (2) no filing is required to perfect the security
22 interest; and
23 (3) the security interest has priority over
24 conflicting perfected security interests in the item,
25 accompanying documents, or proceeds.
26 (Source: P.A. 87-582; 87-1135.)
27 (810 ILCS 5/5-118 new)
28 Sec. 5-118. Security interest of issuer or nominated
29 person.
30 (a) An issuer or nominated person has a security
31 interest in a document presented under a letter of credit to
32 the extent that the issuer or nominated person honors or
33 gives value for the presentation.
SB1231 Enrolled -288- LRB9106284WHdv
1 (b) So long as and to the extent that an issuer or
2 nominated person has not been reimbursed or has not otherwise
3 recovered the value given with respect to a security interest
4 in a document under subsection (a), the security interest
5 continues and is subject to Article 9, but:
6 (1) a security agreement is not necessary to make
7 the security interest enforceable under Section
8 9-203(b)(3);
9 (2) if the document is presented in a medium other
10 than a written or other tangible medium, the security
11 interest is perfected; and
12 (3) if the document is presented in a written or
13 other tangible medium and is not a certificated security,
14 chattel paper, a document of title, an instrument, or a
15 letter of credit, the security interest is perfected and
16 has priority over a conflicting security interest in the
17 document so long as the debtor does not have possession
18 of the document.
19 (810 ILCS 5/7-503) (from Ch. 26, par. 7-503)
20 Sec. 7-503. Document of title to goods defeated in
21 certain cases.
22 (1) A document of title confers no right in goods
23 against a person who before issuance of the document had a
24 legal interest or a perfected security interest in them and
25 who neither
26 (a) delivered or entrusted them or any document of
27 title covering them to the bailor or his nominee with actual
28 or apparent authority to ship, store, or sell with power to
29 obtain delivery under this Article (Section 7--403) or with
30 power of disposition under this Act (Sections 2--403 and
31 9-320 9--307) or other statute or rule of law; nor
32 (b) acquiesced in the procurement by the bailor or
33 his nominee of any document of title.
SB1231 Enrolled -289- LRB9106284WHdv
1 (2) Title to goods based upon an unaccepted delivery
2 order is subject to the rights of anyone to whom a negotiable
3 warehouse receipt or bill of lading covering the goods has
4 been duly negotiated. Such a title may be defeated under the
5 next section to the same extent as the right of the issuer or
6 a transferee from the issuer.
7 (3) Title to goods based upon a bill of lading issued to
8 a freight forwarder is subject to the rights of anyone to
9 whom a bill issued by the freight forwarder is duly
10 negotiated; but delivery by the carrier in accordance with
11 Part 4 of this Article pursuant to its own bill of lading
12 discharges the carrier's obligation to deliver.
13 (Source: Laws 1961, p. 2101.)
14 (810 ILCS 5/8-103) (from Ch. 26, par. 8-103)
15 Sec. 8-103. Rules for determining whether certain
16 obligations and interests are securities or financial assets.
17 (a) A share or similar equity interest issued by a
18 corporation, business trust, joint stock company, or similar
19 entity is a security.
20 (b) An "investment company security" is a security.
21 "Investment company security" means a share or similar equity
22 interest issued by an entity that is registered as an
23 investment company under the federal investment company laws,
24 an interest in a unit investment trust that is so registered,
25 or a face-amount certificate issued by a face-amount
26 certificate company that is so registered. Investment
27 company security does not include an insurance policy or
28 endowment policy or annuity contract issued by an insurance
29 company.
30 (c) An interest in a partnership or limited liability
31 company is not a security unless it is dealt in or traded on
32 securities exchanges or in securities markets, its terms
33 expressly provide that it is a security governed by this
SB1231 Enrolled -290- LRB9106284WHdv
1 Article, or it is an investment company security. However,
2 an interest in a partnership or limited liability company is
3 a financial asset if it is held in a securities account.
4 (d) A writing that is a security certificate is governed
5 by this Article and not by Article 3, even though it also
6 meets the requirements of that Article. However, a
7 negotiable instrument governed by Article 3 is a financial
8 asset if it is held in a securities account.
9 (e) An option or similar obligation issued by a clearing
10 corporation to its participants is not a security, but is a
11 financial asset.
12 (f) A commodity contract, as defined in Section
13 9-102(a)(15) 9-115, is not a security or a financial asset.
14 (Source: P.A. 89-364, eff. 1-1-96.)
15 (810 ILCS 5/8-106) (from Ch. 26, par. 8-106)
16 Sec. 8-106. Control.
17 (a) A purchaser has "control" of a certificated security
18 in bearer form if the certificated security is delivered to
19 the purchaser.
20 (b) A purchaser has "control" of a certificated security
21 in registered form if the certificated security is delivered
22 to the purchaser, and:
23 (1) the certificate is indorsed to the purchaser or
24 in blank by an effective indorsement; or
25 (2) the certificate is registered in the name of
26 the purchaser, upon original issue or registration of
27 transfer by the issuer.
28 (c) A purchaser has "control" of an uncertificated
29 security if:
30 (1) the uncertificated security is delivered to the
31 purchaser; or
32 (2) the issuer has agreed that it will comply with
33 instructions originated by the purchaser without further
SB1231 Enrolled -291- LRB9106284WHdv
1 consent by the registered owner; or
2 (3) another person has control of the security
3 entitlement on behalf of the purchaser or, having
4 previously acquired control of the security entitlement,
5 acknowledges that it has control on behalf of the
6 purchaser.
7 (d) A purchaser has "control" of a security entitlement
8 if:
9 (1) the purchaser becomes the entitlement holder;
10 or
11 (2) the securities intermediary has agreed that it
12 will comply with entitlement orders originated by the
13 purchaser without further consent by the entitlement
14 holder.
15 (e) If an interest in a security entitlement is granted
16 by the entitlement holder to the entitlement holder's own
17 securities intermediary, the securities intermediary has
18 control.
19 (f) A purchaser who has satisfied the requirements of
20 subsection (c)(2) or (d)(2) has control even if the
21 registered owner in the case of subsection (c)(2) or the
22 entitlement holder in the case of subsection (d)(2) retains
23 the right to make substitutions for the uncertificated
24 security or security entitlement, to originate instructions
25 or entitlement orders to the issuer or securities
26 intermediary, or otherwise to deal with the uncertificated
27 security or security entitlement.
28 (g) An issuer or a securities intermediary may not enter
29 into an agreement of the kind described in subsection (c)(2)
30 or (d)(2) without the consent of the registered owner or
31 entitlement holder, but an issuer or a securities
32 intermediary is not required to enter into such an agreement
33 even though the registered owner or entitlement holder so
34 directs. An issuer or securities intermediary that has
SB1231 Enrolled -292- LRB9106284WHdv
1 entered into such an agreement is not required to confirm the
2 existence of the agreement to another party unless requested
3 to do so by the registered owner or entitlement holder.
4 (Source: P.A. 89-364, eff. 1-1-96.)
5 (810 ILCS 5/8-110)
6 Sec. 8-110. Applicability; choice of law.
7 (a) The local law of the issuer's jurisdiction, as
8 specified in subsection (d), governs:
9 (1) the validity of a security;
10 (2) the rights and duties of the issuer with
11 respect to registration of transfer;
12 (3) the effectiveness of registration of transfer
13 by the issuer;
14 (4) whether the issuer owes any duties to an
15 adverse claimant to a security; and
16 (5) whether an adverse claim can be asserted
17 against a person to whom transfer of a certificated or
18 uncertificated security is registered or a person who
19 obtains control of an uncertificated security.
20 (b) The local law of the securities intermediary's
21 jurisdiction, as specified in subsection (e), governs:
22 (1) acquisition of a security entitlement from the
23 securities intermediary;
24 (2) the rights and duties of the securities
25 intermediary and entitlement holder arising out of a
26 security entitlement;
27 (3) whether the securities intermediary owes any
28 duties to an adverse claimant to a security entitlement;
29 and
30 (4) whether an adverse claim can be asserted
31 against a person who acquires a security entitlement from
32 the securities intermediary or a person who purchases a
33 security entitlement or interest therein from an
SB1231 Enrolled -293- LRB9106284WHdv
1 entitlement holder.
2 (c) The local law of the jurisdiction in which a
3 security certificate is located at the time of delivery
4 governs whether an adverse claim can be asserted against a
5 person to whom the security certificate is delivered.
6 (d) "Issuer's jurisdiction" means the jurisdiction under
7 which the issuer of the security is organized or, if
8 permitted by the law of that jurisdiction, the law of another
9 jurisdiction specified by the issuer. An issuer organized
10 under the law of this State may specify the law of another
11 jurisdiction as the law governing the matters specified in
12 subsection (a)(2) through (5).
13 (e) The following rules determine a "securities
14 intermediary's jurisdiction" for purposes of this Section:
15 (1) If an agreement between the securities
16 intermediary and its entitlement holder governing the
17 securities account expressly provides that a particular
18 jurisdiction is the securities intermediary's
19 jurisdiction for purposes of this Part, this Article, or
20 this Act specifies that it is governed by the law of a
21 particular jurisdiction, that jurisdiction is the
22 securities intermediary's jurisdiction.
23 (2) If paragraph (1) does not apply and an
24 agreement between the securities intermediary and its
25 entitlement holder governing the securities account
26 expressly provides that the agreement is governed by the
27 law of a particular jurisdiction, that jurisdiction is
28 the securities intermediary's jurisdiction.
29 (3) If neither paragraph (1) nor paragraph (2)
30 applies and an agreement between the securities
31 intermediary and its entitlement holder governing the
32 securities account does not specify the governing law as
33 provided in paragraph (1), but expressly provides
34 specifies that the securities account is maintained at an
SB1231 Enrolled -294- LRB9106284WHdv
1 office in a particular jurisdiction, that jurisdiction is
2 the securities intermediary's jurisdiction.
3 (4) (3) If none of the preceding paragraphs applies
4 an agreement between the securities intermediary and its
5 entitlement holder does not specify a jurisdiction as
6 provided in paragraph (1) or (2), the securities
7 intermediary's jurisdiction is the jurisdiction in which
8 is located the office identified in an account statement
9 as the office serving the entitlement holder's account is
10 located.
11 (5) (4) If none of the preceding paragraphs
12 applies, an agreement between the securities intermediary
13 and its entitlement holder does not specify a
14 jurisdiction as provided in paragraph (1) or (2) and an
15 account statement does not identify an office serving the
16 entitlement holder's account as provided in paragraph
17 (3), the securities intermediary's jurisdiction is the
18 jurisdiction in which is located the chief executive
19 office of the securities intermediary is located.
20 (f) A securities intermediary's jurisdiction is not
21 determined by the physical location of certificates
22 representing financial assets, or by the jurisdiction in
23 which is organized the issuer of the financial asset with
24 respect to which an entitlement holder has a security
25 entitlement, or by the location of facilities for data
26 processing or other record keeping concerning the account.
27 (Source: P.A. 89-364, eff. 1-1-96.)
28 (810 ILCS 5/8-301) (from Ch. 26, par. 8-301)
29 Sec. 8-301. Delivery.
30 (a) Delivery of a certificated security to a purchaser
31 occurs when:
32 (1) the purchaser acquires possession of the
33 security certificate;
SB1231 Enrolled -295- LRB9106284WHdv
1 (2) another person, other than a securities
2 intermediary, either acquires possession of the security
3 certificate on behalf of the purchaser or, having
4 previously acquired possession of the certificate,
5 acknowledges that it holds for the purchaser; or
6 (3) a securities intermediary acting on behalf of
7 the purchaser acquires possession of the security
8 certificate, only if the certificate is in registered
9 form and is (i) registered in the name of the purchaser,
10 (ii) payable to the order of the purchaser, or (iii) has
11 been specially indorsed to the purchaser by an effective
12 indorsement and has not been indorsed to the securities
13 intermediary or in blank.
14 (b) Delivery of an uncertificated security to a
15 purchaser occurs when:
16 (1) the issuer registers the purchaser as the
17 registered owner, upon original issue or registration of
18 transfer; or
19 (2) another person, other than a securities
20 intermediary, either becomes the registered owner of the
21 uncertificated security on behalf of the purchaser or,
22 having previously become the registered owner,
23 acknowledges that it holds for the purchaser.
24 (Source: P.A. 89-364, eff. 1-1-96.)
25 (810 ILCS 5/8-302) (from Ch. 26, par. 8-302)
26 Sec. 8-302. Rights of purchaser.
27 (a) Except as otherwise provided in subsections (b) and
28 (c), upon delivery of a certificated or uncertificated
29 security to a purchaser, the purchaser acquires all rights in
30 the security that the transferor had or had power to
31 transfer.
32 (b) A purchaser of a limited interest acquires rights
33 only to the extent of the interest purchased.
SB1231 Enrolled -296- LRB9106284WHdv
1 (c) A purchaser of a certificated security who as a
2 previous holder had notice of an adverse claim does not
3 improve its position by taking from a protected purchaser.
4 (Source: P.A. 89-364, eff. 1-1-96.)
5 (810 ILCS 5/8-510)
6 Sec. 8-510. Rights of purchaser of security entitlement
7 from entitlement holder.
8 (a) In a case not covered by the priority rules in
9 Article 9 or the rules stated in subsection (c), an action
10 based on an adverse claim to a financial asset or security
11 entitlement, whether framed in conversion, replevin,
12 constructive trust, equitable lien, or other theory, may not
13 be asserted against a person who purchases a security
14 entitlement, or an interest therein, from an entitlement
15 holder if the purchaser gives value, does not have notice of
16 the adverse claim, and obtains control.
17 (b) If an adverse claim could not have been asserted
18 against an entitlement holder under Section 8-502, the
19 adverse claim cannot be asserted against a person who
20 purchases a security entitlement, or an interest therein,
21 from the entitlement holder.
22 (c) In a case not covered by the priority rules in
23 Article 9, a purchaser for value of a security entitlement,
24 or an interest therein, who obtains control has priority over
25 a purchaser of a security entitlement, or an interest
26 therein, who does not obtain control. Except as otherwise
27 provided in subsection (d), purchasers who have control rank
28 according to priority in time of:
29 (1) the purchaser's becoming the person for whom
30 the securities account, in which the security entitlement
31 is carried, is maintained, if the purchaser obtained
32 control under Section 8-106(d)(1);
33 (2) the securities intermediary's agreement to
SB1231 Enrolled -297- LRB9106284WHdv
1 comply with the purchaser's entitlement orders with
2 respect to security entitlements carried or to be
3 carried in the securities account in which the security
4 entitlement is carried, if the purchaser obtained control
5 under Section 8-106(d)(2); or
6 (3) if the purchaser obtained control through
7 another person under Section 8-106(d)(3), the time on
8 which priority would be based under this subsection if
9 the other person were the secured party.
10 (d) A equally, except that a securities intermediary as
11 purchaser has priority over a conflicting purchaser who has
12 control unless otherwise agreed by the securities
13 intermediary.
14 (Source: P.A. 89-364, eff. 1-1-96.)
15 Section 15. The Local Records Act is amended by changing
16 Section 14 as follows:
17 (50 ILCS 205/14) (from Ch. 116, par. 43.114)
18 Sec. 14. Part 5 4 of Article 9 of the "Uniform Commercial
19 Code", approved July 31, 1961, as amended, is subject to the
20 provisions of this Act, as now or hereafter amended.
21 (Source: P.A. 76-1708.)
22 Section 20. The Counties Code is amended by changing
23 Section 3-5018 as follows:
24 (55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018)
25 Sec. 3-5018. Fees. The recorder elected as provided for
26 in this Division shall receive such fees as are or may be
27 provided for him by law, in case of provision therefor:
28 otherwise he shall receive the same fees as are or may be
29 provided in this Section, except when increased by county
30 ordinance pursuant to the provisions of this Section, to be
SB1231 Enrolled -298- LRB9106284WHdv
1 paid to the county clerk for his services in the office of
2 recorder for like services. No filing fee shall be charged
3 for providing informational copies of financing statements to
4 the recorder pursuant to subsection (8) of Section 9-403 of
5 the Uniform Commercial Code.
6 For recording deeds or other instruments $12 for the
7 first 4 pages thereof, plus $1 for each additional page
8 thereof, plus $1 for each additional document number therein
9 noted. The aggregate minimum fee for recording any one
10 instrument shall not be less than $12.
11 For recording deeds or other instruments wherein the
12 premises affected thereby are referred to by document number
13 and not by legal description a fee of $1 in addition to that
14 hereinabove referred to for each document number therein
15 noted.
16 For recording assignments of mortgages, leases or liens
17 $12 for the first 4 pages thereof, plus $1 for each
18 additional page thereof. However, except for leases and
19 liens pertaining to oil, gas and other minerals, whenever a
20 mortgage, lease or lien assignment assigns more than one
21 mortgage, lease or lien document, a $7 fee shall be charged
22 for the recording of each such mortgage, lease or lien
23 document after the first one.
24 For recording maps or plats of additions or subdivisions
25 approved by the county or municipality (including the
26 spreading of the same of record in map case or other proper
27 books) or plats of condominiums $50 for the first page, plus
28 $1 for each additional page thereof except that in the case
29 of recording a single page, legal size 8 1/2 x 14, plat of
30 survey in which there are no more than two lots or parcels of
31 land, the fee shall be $12. In each county where such maps
32 or plats are to be recorded, the recorder may require the
33 same to be accompanied by such number of exact, true and
34 legible copies thereof as the recorder deems necessary for
SB1231 Enrolled -299- LRB9106284WHdv
1 the efficient conduct and operation of his office.
2 For certified copies of records the same fees as for
3 recording, but in no case shall the fee for a certified copy
4 of a map or plat of an addition, subdivision or otherwise
5 exceed $10.
6 Each certificate of such recorder of the recording of the
7 deed or other writing and of the date of recording the same
8 signed by such recorder, shall be sufficient evidence of the
9 recording thereof, and such certificate including the
10 indexing of record, shall be furnished upon the payment of
11 the fee for recording the instrument, and no additional fee
12 shall be allowed for the certificate or indexing.
13 The recorder shall charge an additional fee, in an amount
14 equal to the fee otherwise provided by law, for recording a
15 document (other than a document filed under the Plat Act or
16 the Uniform Commercial Code) that does not conform to the
17 following standards:
18 (1) The document shall consist of one or more
19 individual sheets measuring 8.5 inches by 11 inches, not
20 permanently bound and not a continuous form. Graphic
21 displays accompanying a document to be recorded that
22 measure up to 11 inches by 17 inches shall be recorded
23 without charging an additional fee.
24 (2) The document shall be legibly printed in black
25 ink, by hand, type, or computer. Signatures and dates
26 may be in contrasting colors if they will reproduce
27 clearly.
28 (3) The document shall be on white paper of not
29 less than 20-pound weight and shall have a clean margin
30 of at least one-half inch on the top, the bottom, and
31 each side. Margins may be used for non-essential
32 notations that will not affect the validity of the
33 document, including but not limited to form numbers, page
34 numbers, and customer notations.
SB1231 Enrolled -300- LRB9106284WHdv
1 (4) The first page of the document shall contain a
2 blank space, measuring at least 3 inches by 5 inches,
3 from the upper right corner.
4 (5) The document shall not have any attachment
5 stapled or otherwise affixed to any page.
6 A document that does not conform to these standards shall not
7 be recorded except upon payment of the additional fee
8 required under this paragraph. This paragraph, as amended by
9 this amendatory Act of 1995, applies only to documents dated
10 after the effective date of this amendatory Act of 1995.
11 The county board of any county may provide for an
12 additional charge of $3 for filing every instrument, paper,
13 or notice for record, in order to defray the cost of
14 converting the county recorder's document storage system to
15 computers or micrographics.
16 A special fund shall be set up by the treasurer of the
17 county and such funds collected pursuant to Public Act
18 83-1321 shall be used solely for a document storage system to
19 provide the equipment, materials and necessary expenses
20 incurred to help defray the costs of implementing and
21 maintaining such a document records system.
22 The foregoing fees allowed by this Section are the
23 maximum fees that may be collected from any officer, agency,
24 department or other instrumentality of the State. The county
25 board may, however, by ordinance, increase the fees allowed
26 by this Section and collect such increased fees from all
27 persons and entities other than officers, agencies,
28 departments and other instrumentalities of the State if the
29 increase is justified by an acceptable cost study showing
30 that the fees allowed by this Section are not sufficient to
31 cover the cost of providing the service.
32 A statement of the costs of providing each service,
33 program and activity shall be prepared by the county board.
34 All supporting documents shall be public record and subject
SB1231 Enrolled -301- LRB9106284WHdv
1 to public examination and audit. All direct and indirect
2 costs, as defined in the United States Office of Management
3 and Budget Circular A-87, may be included in the
4 determination of the costs of each service, program and
5 activity.
6 (Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.)
7 Section 25. The Public Utilities Act is amended by
8 changing Section 18-107 as follows:
9 (220 ILCS 5/18-107)
10 Sec. 18-107. Security interests in intangible transition
11 property and grantee instruments.
12 (a) Notwithstanding any other provision of law, neither
13 intangible transition property, grantee instruments nor any
14 right, title or interest therein, shall constitute property
15 in which a security interest may be created under the Uniform
16 Commercial Code nor shall any such rights be deemed proceeds
17 of any property which is not intangible transition property
18 or grantee instruments, as the case may be. For purposes of
19 the foregoing, the terms "account", and "general intangible",
20 (as defined under Section 9-106 of the Uniform Commercial
21 Code) and the term "instrument", and "payment intangible" (as
22 defined under Section 9-102 9-105 of the Uniform Commercial
23 Code) shall, as used in the Uniform Commercial Code, be
24 deemed to exclude any such intangible transition property,
25 grantee instruments or any right, title, or interest therein.
26 (b) The granting, perfection and enforcement of security
27 interests in intangible transition property or grantee
28 instruments are governed by this Section rather than by
29 Article 9 of the Uniform Commercial Code.
30 (c) A valid and enforceable security interest in
31 intangible transition property and in grantee instruments
32 shall attach and be perfected only by the means set forth
SB1231 Enrolled -302- LRB9106284WHdv
1 below in this subsection (c) of Section 18-107:
2 (1) To the extent transitional funding instruments
3 or grantee instruments are purported to be secured by
4 intangible transition property or to the extent
5 transitional funding instruments are purported to be
6 secured by grantee instruments, as the case may be, as
7 specified in the applicable transitional funding order,
8 the lien of the transitional funding instruments and
9 grantee instruments, if any, shall attach automatically
10 to such intangible transition property and grantee
11 instruments, if any, from the time of issuance of the
12 transitional funding instruments and grantee instruments,
13 if any. Such lien shall be a valid and enforceable
14 security interest in the intangible transition property
15 or the grantee instruments, as the case may be, securing
16 the transitional funding instruments and grantee
17 instruments, if any, and shall be continuously perfected
18 if, before the date of issuance of the applicable
19 transitional funding instruments or grantee instruments,
20 if any, or within no more than 10 days thereafter, a
21 filing has been made by or on behalf of the holder with
22 the Chief Clerk of the Commission stating that such
23 transitional funding instruments or grantee instruments,
24 if any, have been issued. Any such filing made with the
25 Commission in respect to such transitional funding
26 instruments or grantee instruments shall take precedence
27 over any subsequent filing except as may otherwise be
28 provided in the applicable transitional funding order.
29 (2) The liens under subparagraph (1) are
30 enforceable against the electric utility, any assignee,
31 grantee or issuer, and all third parties, including
32 judicial lien creditors, subject only to the rights of
33 any third parties holding security interests in the
34 intangible transition property or grantee instruments
SB1231 Enrolled -303- LRB9106284WHdv
1 previously perfected in the manner described in this
2 subsection if value has been given by the purchasers of
3 transitional funding instruments or grantee instruments.
4 A perfected lien in intangible transition property and
5 grantee instruments, if any, is a continuously perfected
6 security interest in all then existing or thereafter
7 arising revenues and proceeds arising with respect to the
8 associated intangible transition property or grantee
9 instruments, as the case may be, whether or not the
10 electric power and energy included in the calculation of
11 such revenues and proceeds have been provided. The lien
12 created under this subsection is perfected and ranks
13 prior to any other lien, including any judicial lien,
14 which subsequently attaches to the intangible transition
15 property or grantee instruments, as the case may be, and
16 to any other rights created by the transitional funding
17 order or any revenues or proceeds of the foregoing. The
18 relative priority of a lien created under this subsection
19 is not defeated or adversely affected by changes to the
20 transitional funding order or to the instrument funding
21 charges payable by any retail customer, class of retail
22 customers or other person or group of persons obligated
23 to pay such charges.
24 (3) The relative priority of a lien created under
25 this subsection is not defeated or adversely affected by
26 the commingling of revenues arising with respect to
27 intangible transition property or grantee instruments
28 with funds of the electric utility or other funds of the
29 assignee, issuer or grantee.
30 (4) If an event of default occurs under
31 transitional funding instruments or grantee instruments,
32 the holders thereof or their authorized representatives,
33 as secured parties, may foreclose or otherwise enforce
34 the lien in the grantee instruments or in the intangible
SB1231 Enrolled -304- LRB9106284WHdv
1 transition property securing the transitional funding
2 instruments or grantee instruments, as applicable,
3 subject to the rights of any third parties holding prior
4 security interests in the intangible transition property
5 or grantee instruments previously perfected in the manner
6 provided in this subsection. Upon application by the
7 holders or their authorized representatives, without
8 limiting their other remedies, the Commission shall order
9 the sequestration and payment to the holders or their
10 authorized representatives of revenues arising with
11 respect to the intangible transition property or grantee
12 instruments pledged to the holders. An order under this
13 subsection shall remain in full force and effect
14 notwithstanding any bankruptcy, reorganization, or other
15 insolvency proceedings with respect to the electric
16 utility, grantee, assignee or issuer.
17 (5) The Commission shall maintain segregated
18 records which reflect the date and time of receipt of all
19 filings made under this subsection. The Commission may
20 provide that transfers of intangible transition property
21 or of grantee instruments be filed in accordance with the
22 same system.
23 (Source: P.A. 90-561, eff. 12-16-97.)
24 Section 30. The Illinois Vehicle Code is amended by
25 changing Section 3-114 as follows:
26 (625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114)
27 Sec. 3-114. Transfer by operation of law.
28 (a) If the interest of an owner in a vehicle passes to
29 another other than by voluntary transfer, the transferee
30 shall, except as provided in paragraph (b), promptly mail or
31 deliver within 20 days to the Secretary of State the last
32 certificate of title, if available, proof of the transfer,
SB1231 Enrolled -305- LRB9106284WHdv
1 and his application for a new certificate in the form the
2 Secretary of State prescribes. It shall be unlawful for any
3 person having possession of a certificate of title for a
4 motor vehicle, semi-trailer, or house car by reason of his
5 having a lien or encumbrance on such vehicle, to fail or
6 refuse to deliver such certificate to the owner, upon the
7 satisfaction or discharge of the lien or encumbrance,
8 indicated upon such certificate of title.
9 (b) If the interest of an owner in a vehicle passes to
10 another under the provisions of the Small Estates provisions
11 of the Probate Act of 1975 the transferee shall promptly mail
12 or deliver to the Secretary of State, within 120 days, the
13 last certificate of title, if available, the documentation
14 required under the provisions of the Probate Act of 1975, and
15 an application for certificate of title. The Small Estate
16 Affidavit form shall be furnished by the Secretary of State.
17 The transfer may be to the transferee or to the nominee of
18 the transferee.
19 (c) If the interest of an owner in a vehicle passes to
20 another under other provisions of the Probate Act of 1975, as
21 amended, and the transfer is made by a representative or
22 guardian, such transferee shall promptly mail or deliver to
23 the Secretary of State, the last certificate of title, if
24 available, and a certified copy of the letters of office or
25 guardianship, and an application for certificate of title.
26 Such application shall be made before the estate is closed.
27 The transfer may be to the transferee or to the nominee of
28 the transferee.
29 (d) If the interest of an owner in joint tenancy passes
30 to the other joint tenant with survivorship rights as
31 provided by law, the transferee shall promptly mail or
32 deliver to the Secretary of State, the last certificate of
33 title, if available, proof of death of the one joint tenant
34 and survivorship of the surviving joint tenant, and an
SB1231 Enrolled -306- LRB9106284WHdv
1 application for certificate of title. Such application shall
2 be made within 120 days after the death of the joint tenant.
3 The transfer may be to the transferee or to the nominee of
4 the transferee.
5 (e) The Secretary of State shall transfer a decedent's
6 vehicle title to any legatee, representative or heir of the
7 decedent who submits to the Secretary a death certificate and
8 an affidavit by an attorney at law on the letterhead
9 stationery of the attorney at law stating the facts of the
10 transfer.
11 (f) Repossession with assignment of title. In all cases
12 wherein a lienholder has repossessed a vehicle by other than
13 judicial process and holds it for resale under a security
14 agreement, and the owner of record has executed an assignment
15 of the existing certificate of title after default, the
16 lienholder may proceed to sell or otherwise dispose of the
17 vehicle as authorized under the Uniform Commercial Code.
18 Upon selling the vehicle to another person, the lienholder
19 need not send the certificate of title to the Secretary of
20 State, but shall promptly and within 20 days mail or deliver
21 to the purchaser as transferee the existing certificate of
22 title for the repossessed vehicle, reflecting the release of
23 the lienholder's security interest in the vehicle. The
24 application for a certificate of title made by the purchaser
25 shall comply with subsection (a) of Section 3-104 and be
26 accompanied by the existing certificate of title for the
27 repossessed vehicle. The lienholder shall execute the
28 assignment and warranty of title showing the name and address
29 of the purchaser in the spaces provided therefor on the
30 certificate of title or as the Secretary of State prescribes.
31 The lienholder shall complete the assignment of title in the
32 certificate of title to reflect the transfer of the vehicle
33 to the lienholder and also a reassignment to reflect the
34 transfer from the lienholder to the purchaser. For this
SB1231 Enrolled -307- LRB9106284WHdv
1 purpose, the lienholder is specifically authorized to
2 complete and execute the space reserved in the certificate of
3 title for a dealer reassignment, notwithstanding that the
4 lienholder is not a licensed dealer. Nothing herein shall be
5 construed to mean that the lienholder is taking title to the
6 repossessed vehicle for purposes of liability for retailer
7 occupation, vehicle use, or other tax with respect to the
8 proceeds from the repossession sale. Delivery of the
9 existing certificate of title to the purchaser shall be
10 deemed disclosure to the purchaser of the owner of the
11 vehicle.
12 (f-5) Repossession without assignment of title. In all
13 cases wherein a lienholder has repossessed a vehicle by other
14 than judicial process and holds it for resale under a
15 security agreement, and the owner of record has not executed
16 an assignment of the existing certificate of title, the
17 lienholder shall comply with the following provisions:
18 (1) Prior to sale, the lienholder shall deliver or
19 mail to the owner at the owner's last known address and
20 to any other lienholder of record, a notice of redemption
21 setting forth the following information: (i) the name of
22 the owner of record and in bold type at or near the top
23 of the notice a statement that the owner's vehicle was
24 repossessed on a specified date for failure to make
25 payments on the loan (or other reason), (ii) a
26 description of the vehicle subject to the lien sufficient
27 to identify it, (iii) the right of the owner to redeem
28 the vehicle, (iv) the lienholder's intent to sell or
29 otherwise dispose of the vehicle after the expiration of
30 21 days from the date of mailing or delivery of the
31 notice, and (v) the name, address, and telephone number
32 of the lienholder from whom information may be obtained
33 concerning the amount due to redeem the vehicle and from
34 whom the vehicle may be redeemed under Section 9-623
SB1231 Enrolled -308- LRB9106284WHdv
1 9-506 of the Uniform Commercial Code. At the
2 lienholder's option, the information required to be set
3 forth in this notice of redemption may be made a part of
4 or accompany the notification of sale or other
5 disposition required under subsection (3) of Section
6 9-611 9-504 of the Uniform Commercial Code, but none of
7 the information required by this notice shall be
8 construed to impose any requirement under Article 9 of
9 the Uniform Commercial Code.
10 (2) With respect to the repossession of a vehicle
11 used primarily for personal, family, or household
12 purposes, the lienholder shall also deliver or mail to
13 the owner at the owner's last known address an affidavit
14 of defense. The affidavit of defense shall accompany the
15 notice of redemption required in subdivision (f-5)(1) of
16 this Section. The affidavit of defense shall (i) identify
17 the lienholder, owner, and the vehicle; (ii) provide
18 space for the owner to state the defense claimed by the
19 owner; and (iii) include an acknowledgment by the owner
20 that the owner may be liable to the lienholder for fees,
21 charges, and costs incurred by the lienholder in
22 establishing the insufficiency or invalidity of the
23 owner's defense. To stop the transfer of title, the
24 affidavit of defense must be received by the lienholder
25 no later than 21 days after the date of mailing or
26 delivery of the notice required in subdivision (f-5)(1)
27 of this Section. If the lienholder receives the affidavit
28 from the owner in a timely manner, the lienholder must
29 apply to a court of competent jurisdiction to determine
30 if the lienholder is entitled to possession of the
31 vehicle.
32 (3) Upon selling the vehicle to another person, the
33 lienholder need not send the certificate of title to the
34 Secretary of State, but shall promptly and within 20 days
SB1231 Enrolled -309- LRB9106284WHdv
1 mail or deliver to the purchaser as transferee (i) the
2 existing certificate of title for the repossessed
3 vehicle, reflecting the release of the lienholder's
4 security interest in the vehicle; and (ii) an affidavit
5 of repossession made by or on behalf of the lienholder
6 which provides the following information: that the
7 vehicle was repossessed, a description of the vehicle
8 sufficient to identify it, whether the vehicle has been
9 damaged in excess of 33 1/3% of its fair market value as
10 required under subdivision (b)(3) of Section 3-117.1,
11 that the owner and any other lienholder of record were
12 given the notice required in subdivision (f-5)(1) of this
13 Section, that the owner of record was given the affidavit
14 of defense required in subdivision (f-5)(2) of this
15 Section, that the interest of the owner was lawfully
16 terminated or sold pursuant to the terms of the security
17 agreement, and the purchaser's name and address. If the
18 vehicle is damaged in excess of 33 1/3% of its fair
19 market value, the lienholder shall make application for a
20 salvage certificate under Section 3-117.1 and transfer
21 the vehicle to a person eligible to receive assignments
22 of salvage certificates identified in Section 3-118.
23 (4) The application for a certificate of title made
24 by the purchaser shall comply with subsection (a) of
25 Section 3-104 and be accompanied by the affidavit of
26 repossession furnished by the lienholder and the existing
27 certificate of title for the repossessed vehicle. The
28 lienholder shall execute the assignment and warranty of
29 title showing the name and address of the purchaser in
30 the spaces provided therefor on the certificate of title
31 or as the Secretary of State prescribes. The lienholder
32 shall complete the assignment of title in the certificate
33 of title to reflect the transfer of the vehicle to the
34 lienholder and also a reassignment to reflect the
SB1231 Enrolled -310- LRB9106284WHdv
1 transfer from the lienholder to the purchaser. For this
2 purpose, the lienholder is specifically authorized to
3 execute the assignment on behalf of the owner as seller
4 if the owner has not done so and to complete and execute
5 the space reserved in the certificate of title for a
6 dealer reassignment, notwithstanding that the lienholder
7 is not a licensed dealer. Nothing herein shall be
8 construed to mean that the lienholder is taking title to
9 the repossessed vehicle for purposes of liability for
10 retailer occupation, vehicle use, or other tax with
11 respect to the proceeds from the repossession sale.
12 Delivery of the existing certificate of title to the
13 purchaser shall be deemed disclosure to the purchaser of
14 the owner of the vehicle. In the event the lienholder
15 does not hold the certificate of title for the
16 repossessed vehicle, the lienholder shall make
17 application for and may obtain a new certificate of title
18 in the name of the lienholder upon furnishing information
19 satisfactory to the Secretary of State. Upon receiving
20 the new certificate of title, the lienholder may proceed
21 with the sale described in subdivision (f-5)(3), except
22 that upon selling the vehicle the lienholder shall
23 promptly and within 20 days mail or deliver to the
24 purchaser the new certificate of title reflecting the
25 assignment and transfer of title to the purchaser.
26 (5) Neither the lienholder nor the owner shall file
27 with the Office of the Secretary of State the notice of
28 redemption or affidavit of defense described in
29 subdivisions (f-5)(1) and (f-5)(2) of this Section. The
30 Office of the Secretary of State shall not determine the
31 merits of an owner's affidavit of defense, nor consider
32 any allegations or assertions regarding the validity or
33 invalidity of a lienholder's claim to the vehicle or an
34 owner's asserted defenses to the repossession action.
SB1231 Enrolled -311- LRB9106284WHdv
1 (f-7) Notice of reinstatement in certain cases.
2 (1) If, at the time of repossession by a lienholder
3 that is seeking to transfer title pursuant to subsection
4 (f-5), the owner has paid an amount equal to 30% or more
5 of the deferred payment price or total of payments due,
6 the owner may, within 21 days of the date of
7 repossession, reinstate the contract or loan agreement
8 and recover the vehicle from the lienholder by tendering
9 in a lump sum (i) the total of all unpaid amounts,
10 including any unpaid delinquency or deferral charges due
11 at the date of reinstatement, without acceleration; and
12 (ii) performance necessary to cure any default other than
13 nonpayment of the amounts due; and (iii) all reasonable
14 costs and fees incurred by the lienholder in retaking,
15 holding, and preparing the vehicle for disposition and in
16 arranging for the sale of the vehicle. Reasonable costs
17 and fees incurred by the lienholder include without
18 limitation repossession and storage expenses and, if
19 authorized by the contract or loan agreement, reasonable
20 attorneys' fees and collection agency charges.
21 (2) Tender of payment and performance pursuant to
22 this limited right of reinstatement restores to the owner
23 his rights under the contract or loan agreement as though
24 no default had occurred. The owner has the right to
25 reinstate the contract or loan agreement and recover the
26 vehicle from the lienholder only once under this
27 subsection. The lienholder may, in the lienholder's sole
28 discretion, extend the period during which the owner may
29 reinstate the contract or loan agreement and recover the
30 vehicle beyond the 21 days allowed under this subsection,
31 and the extension shall not subject the lienholder to
32 liability to the owner under the laws of this State.
33 (3) The lienholder shall deliver or mail written
34 notice to the owner at the owner's last known address,
SB1231 Enrolled -312- LRB9106284WHdv
1 within 3 business days of the date of repossession, of
2 the owner's right to reinstate the contract or loan
3 agreement and recover the vehicle pursuant to the limited
4 right of reinstatement described in this subsection. At
5 the lienholder's option, the information required to be
6 set forth in this notice of reinstatement may be made
7 part of or accompany the notice of redemption required in
8 subdivision (f-5)(1) of this Section and the notification
9 of sale or other disposition required under subsection
10 (3) of Section 9-611 9-504 of the Uniform Commercial
11 Code, but none of the information required by this notice
12 of reinstatement shall be construed to impose any
13 requirement under Article 9 of the Uniform Commercial
14 Code.
15 (4) The reinstatement period, if applicable, and
16 the redemption period described in subdivision (f-5)(1)
17 of this Section, shall run concurrently if the
18 information required to be set forth in the notice of
19 reinstatement is part of or accompanies the notice of
20 redemption. In any event, the 21 day redemption period
21 described in subdivision (f-5)(1) of this Section shall
22 commence on the date of mailing or delivery to the owner
23 of the information required to be set forth in the notice
24 of redemption, and the 21 day reinstatement period
25 described in this subdivision, if applicable, shall
26 commence on the date of mailing or delivery to the owner
27 of the information required to be set forth in the notice
28 of reinstatement.
29 (5) The Office of the Secretary of State shall not
30 determine the merits of an owner's claim of right to
31 reinstatement, nor consider any allegations or assertions
32 regarding the validity or invalidity of a lienholder's
33 claim to the vehicle or an owner's asserted right to
34 reinstatement. Where a lienholder is subject to
SB1231 Enrolled -313- LRB9106284WHdv
1 licensing and regulatory supervision by the State of
2 Illinois, the lienholder shall be subject to all of the
3 powers and authority of the lienholder's primary State
4 regulator to enforce compliance with the procedures set
5 forth in this subsection (f-7).
6 (f-10) Repossession by judicial process. In all cases
7 wherein a lienholder has repossessed a vehicle by judicial
8 process and holds it for resale under a security agreement,
9 order for replevin, or other court order establishing the
10 lienholder's right to possession of the vehicle, the
11 lienholder may proceed to sell or otherwise dispose of the
12 vehicle as authorized under the Uniform Commercial Code or
13 the court order. Upon selling the vehicle to another person,
14 the lienholder need not send the certificate of title to the
15 Secretary of State, but shall promptly and within 20 days
16 mail or deliver to the purchaser as transferee (i) the
17 existing certificate of title for the repossessed vehicle
18 reflecting the release of the lienholder's security interest
19 in the vehicle; (ii) a certified copy of the court order; and
20 (iii) a bill of sale identifying the new owner's name and
21 address and the year, make, model, and vehicle identification
22 number of the vehicle. The application for a certificate of
23 title made by the purchaser shall comply with subsection (a)
24 of Section 3-104 and be accompanied by the certified copy of
25 the court order furnished by the lienholder and the existing
26 certificate of title for the repossessed vehicle. The
27 lienholder shall execute the assignment and warranty of title
28 showing the name and address of the purchaser in the spaces
29 provided therefor on the certificate of title or as the
30 Secretary of State prescribes. The lienholder shall complete
31 the assignment of title in the certificate of title to
32 reflect the transfer of the vehicle to the lienholder and
33 also a reassignment to reflect the transfer from the
34 lienholder to the purchaser. For this purpose, the
SB1231 Enrolled -314- LRB9106284WHdv
1 lienholder is specifically authorized to execute the
2 assignment on behalf of the owner as seller if the owner has
3 not done so and to complete and execute the space reserved in
4 the certificate of title for a dealer reassignment,
5 notwithstanding that the lienholder is not a licensed dealer.
6 Nothing herein shall be construed to mean that the lienholder
7 is taking title to the repossessed vehicle for purposes of
8 liability for retailer occupation, vehicle use, or other tax
9 with respect to the proceeds from the repossession sale.
10 Delivery of the existing certificate of title to the
11 purchaser shall be deemed disclosure to the purchaser of the
12 owner of the vehicle. In the event the lienholder does not
13 hold the certificate of title for the repossessed vehicle,
14 the lienholder shall make application for and may obtain a
15 new certificate of title in the name of the lienholder upon
16 furnishing information satisfactory to the Secretary of
17 State. Upon receiving the new certificate of title, the
18 lienholder may proceed with the sale described in this
19 subsection, except that upon selling the vehicle the
20 lienholder shall promptly and within 20 days mail or deliver
21 to the purchaser the new certificate of title reflecting the
22 assignment and transfer of title to the purchaser.
23 (f-15) The Secretary of State shall not issue a
24 certificate of title to a purchaser under subsection (f),
25 (f-5), or (f-10) of this Section, unless the person from whom
26 the vehicle has been repossessed by the lienholder is shown
27 to be the last registered owner of the motor vehicle. The
28 Secretary of State may provide by rule for the standards to
29 be followed by a lienholder in assigning and transferring
30 certificates of title with respect to repossessed vehicles.
31 (f-20) If applying for a salvage certificate or a
32 junking certificate, the lienholder shall within 20 days make
33 an application to the Secretary of State for a salvage
34 certificate or a junking certificate, as set forth in this
SB1231 Enrolled -315- LRB9106284WHdv
1 Code. The Secretary of State shall not issue a salvage
2 certificate or a junking certificate to such lienholder
3 unless the person from whom such vehicle has been repossessed
4 is shown to be the last registered owner of such motor
5 vehicle and such lienholder establishes to the satisfaction
6 of the Secretary of State that he is entitled to such salvage
7 certificate or junking certificate. The Secretary of State
8 may provide by rule for the standards to be followed by a
9 lienholder in order to obtain a salvage certificate or
10 junking certificate for a repossessed vehicle.
11 (g) A person holding a certificate of title whose
12 interest in the vehicle has been extinguished or transferred
13 other than by voluntary transfer shall mail or deliver the
14 certificate, within 20 days upon request of the Secretary of
15 State. The delivery of the certificate pursuant to the
16 request of the Secretary of State does not affect the rights
17 of the person surrendering the certificate, and the action of
18 the Secretary of State in issuing a new certificate of title
19 as provided herein is not conclusive upon the rights of an
20 owner or lienholder named in the old certificate.
21 (h) The Secretary of State may decline to process any
22 application for a transfer of an interest in a vehicle
23 hereunder if any fees or taxes due under this Act from the
24 transferor or the transferee have not been paid upon
25 reasonable notice and demand.
26 (i) The Secretary of State shall not be held civilly or
27 criminally liable to any person because any purported
28 transferor may not have had the power or authority to make a
29 transfer of any interest in any vehicle or because a
30 certificate of title issued in error is subsequently used to
31 commit a fraudulent act.
32 (Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.)
33 Section 31. The Illinois Vehicle Code is amended by
SB1231 Enrolled -316- LRB9106284WHdv
1 changing Section 3-202 as follows:
2 (625 ILCS 5/3-202) (from Ch. 95 1/2, par. 3-202)
3 Sec. 3-202. Perfection of security interest.
4 (a) Unless excepted by Section 3-201, a security
5 interest in a vehicle of a type for which a certificate of
6 title is required is not valid against subsequent transferees
7 or lienholders of the vehicle unless perfected as provided in
8 this Act.
9 (b) A security interest is perfected by the delivery to
10 the Secretary of State of the existing certificate of title,
11 if any, an application for a certificate of title containing
12 the name and address of the lienholder and the required fee.
13 The security interest It is perfected as of the time of its
14 creation if the delivery to the Secretary of State is
15 completed within 21 days after the creation of the security
16 interest or receipt by the new lienholder of the existing
17 certificate of title from a prior lienholder or licensed
18 dealer thereafter, otherwise as of the time of the delivery.
19 (c) If a vehicle is subject to a security interest when
20 brought into this State, the validity of the security
21 interest is determined by the law of the jurisdiction where
22 the vehicle was when the security interest attached, subject
23 to the following:
24 1. If the parties understood at the time the security
25 interest attached that the vehicle would be kept in this
26 State and it was brought into this State within 30 days
27 thereafter for purposes other than transportation through
28 this State, the validity of the security interest in this
29 State is determined by the law of this State.
30 2. If the security interest was perfected under the law
31 of the jurisdiction where the vehicle was when the security
32 interest attached, the following rules apply:
33 (A) If the name of the lienholder is shown on an
SB1231 Enrolled -317- LRB9106284WHdv
1 existing certificate of title issued by that jurisdiction,
2 his security interest continues perfected in this State.
3 (B) If the name of the lienholder is not shown on an
4 existing certificate of title issued by that jurisdiction, a
5 security interest may be perfected by the lienholder
6 delivering to the Secretary of State the prescribed notice
7 and by payment of the required fee. Such security interest is
8 perfected as of the time of delivery of the prescribed notice
9 and payment of the required fee.
10 3. If the security interest was not perfected under the
11 law of the jurisdiction where the vehicle was when the
12 security interest attached, it may be perfected in this
13 State; in that case perfection dates from the time of
14 perfection in this State.
15 4. A security interest may be perfected under paragraph
16 3 of this subsection either as provided in subsection (b) or
17 by the lienholder delivering to the Secretary of State a
18 notice of security interest in the form the Secretary of
19 State prescribes and the required fee.
20 (Source: P.A. 81-557.)
21 Section 33. The Code of Civil Procedure is amended by
22 changing Section 9-316 as follows:
23 (735 ILCS 5/9-316) (from Ch. 110, par. 9-316)
24 Sec. 9-316. Lien upon crops. Every landlord shall have a
25 lien upon the crops grown or growing upon the demised
26 premises for the rent thereof, whether the same is payable
27 wholly or in part in money or specific articles of property
28 or products of the premises, or labor, and also for the
29 faithful performance of the terms of the lease. Such lien
30 shall continue for the period of 6 months after the
31 expiration of the term for which the premises are demised,
32 and may be enforced by distraint as provided in Part 3 of
SB1231 Enrolled -318- LRB9106284WHdv
1 Article IX of this Act.
2 A good faith purchaser shall, however, take such crops
3 free of any landlord's lien unless, within 6 months prior to
4 the purchase, the landlord provides written notice of his
5 lien to the purchaser by registered or certified mail. Such
6 notice shall contain the names and addresses of the landlord
7 and tenant, and clearly identify the leased property.
8 A landlord may require that, prior to his tenant's
9 selling any crops grown on the demised premises, the tenant
10 disclose the name of the person to whom the tenant intends to
11 sell those crops. Where such a requirement has been imposed,
12 the tenant shall not sell the crops to any person other than
13 a person who has been disclosed to the landlord as a
14 potential buyer of the crops.
15 A lien arising under this Section and duly perfected
16 under Article 9 of the Uniform Commercial Code shall have
17 priority over any other agricultural lien as defined in, and
18 over any security interest arising under, provisions of
19 Article 9 of the Uniform Commercial Code.
20 (Source: P.A. 83-70.)
21 Section 35. The Uniform Federal Lien Registration Act is
22 amended by changing Section 4 as follows:
23 (770 ILCS 110/4) (from Ch. 82, par. 404)
24 Sec. 4. (a) If a notice of federal lien, a refiling of a
25 notice of federal lien or a notice of revocation of any
26 certificate described in subsection (b) is presented to a
27 filing officer who is:
28 (1) the Secretary of State, he shall cause the notice to
29 be marked, held and indexed in accordance with the provisions
30 of Section 9-519 9-403(4) of the Uniform Commercial Code as
31 if the notice were a financing statement within the meaning
32 of that Code; or
SB1231 Enrolled -319- LRB9106284WHdv
1 (2) any other officer described in Section 2, he shall
2 endorse thereon his identification and the date and time of
3 receipt and forthwith file it alphabetically or enter it in
4 an alphabetical index showing the name and address of the
5 person named in the notice, the date and time of receipt, the
6 title and address of the official or entity certifying the
7 lien, the total amount appearing on the notice of lien, and
8 in the case of federal tax liens, the collector's serial
9 number of the notice.
10 (b) If a certificate of release, nonattachment,
11 discharge or subordination of any lien is presented to the
12 Secretary of State for filing he shall:
13 (1) cause a certificate of release or nonattachment to
14 be marked, held and indexed as if the certificate were a
15 termination statement within the meaning of the Uniform
16 Commercial Code, but the notice of lien to which the
17 certificate relates may not be removed from the files; and
18 (2) cause a certificate of discharge or subordination to
19 be marked, held and indexed as if the certificate were a
20 release of collateral within the meaning of the Uniform
21 Commercial Code.
22 (c) If a refiled notice of federal lien referred to in
23 subsection (a) or any of the certificates or notices referred
24 to in subsection (b) is presented for filing to any other
25 filing officer specified in Section 2, he shall permanently
26 attach the refiled notice or the certificate to the original
27 notice of lien and enter the refiled notice or the
28 certificate with the date of filing in any alphabetical lien
29 index on the line where the original notice of lien is
30 entered.
31 (d) Upon request of any person, the filing officer shall
32 issue his certificate showing whether there is on file, on
33 the date and hour stated therein, any notice of lien or
34 certificate or notice affecting any lien filed under this Act
SB1231 Enrolled -320- LRB9106284WHdv
1 or "An Act in relation to liens of the United States of
2 America", approved June 27, 1923, as amended, naming a
3 particular person, and if a notice or certificate is on file,
4 giving the date and hour of filing of each notice or
5 certificate. The fee for a certificate is $5. Upon request,
6 the filing officer shall furnish a copy of any notice of
7 federal lien, or notice or certificate affecting a federal
8 lien, for a fee of 50¢ per page.
9 (Source: P.A. 86-254.)
10 Section 37. The Uniform Commercial Code is amended by
11 adding Section 9-404.5 as follows:
12 (810 ILCS 5/9-404.5 new)
13 Sec. 9-404.5. Termination statement; duties of filing
14 officer.
15 (1) If a financing statement covering consumer goods is
16 filed on or after July 1, 1973, then within one month or
17 within 10 days following written demand by the debtor after
18 there is no outstanding secured obligation and no commitment
19 to make advances, incur obligations or otherwise give value,
20 the secured party must file with each filing officer with
21 whom the financing statement was filed, a termination
22 statement to the effect that he no longer claims a security
23 interest under the financing statement, which shall be
24 identified by file number. In other cases whenever there is
25 no outstanding secured obligation and no commitment to make
26 advances, incur obligations or otherwise give value, the
27 secured party must on written demand by the debtor send the
28 debtor, for each filing officer with whom the financing
29 statement was filed, a termination statement to the effect
30 that he no longer claims a security interest under the
31 financing statement, which shall be identified by file
32 number. A termination statement signed by a person other than
SB1231 Enrolled -321- LRB9106284WHdv
1 the secured party of record must be accompanied by a separate
2 written statement of assignment signed by the secured party
3 of record. If the affected secured party fails to file such
4 a termination statement as required by this subsection, or to
5 send such a termination statement within 10 days after proper
6 demand therefor, he shall be liable to the debtor for $100
7 and in addition for any loss caused to the debtor by such
8 failure.
9 (2) On presentation to the filing officer of such a
10 termination statement he must note it in the index. If he has
11 received the termination statement in duplicate, he shall
12 return one copy of the termination statement to the secured
13 party stamped to show the time of receipt thereof. If the
14 filing officer has a microfilm or other photographic record
15 of the financing statement, and of any related continuation
16 statement, statement of assignment and statement of release,
17 he may remove the originals from the files at any time after
18 receipt of the termination statement, or if he has no such
19 record, he may remove them from the files at any time after
20 one year after receipt of the termination statement.
21 (3) If the termination statement is in the standard form
22 prescribed by the Secretary of State, the uniform fee for
23 filing and indexing the termination statement in the office
24 of a county recorder shall be $5 and otherwise shall be $10,
25 plus in each case an additional fee of $5 for each name more
26 than one at each address listed against which the termination
27 statement is required to be indexed.
28 Section 40. The Toxic Substances Disclosure to Employees
29 Act is amended by changing Section 6 as follows:
30 (820 ILCS 255/6) (from Ch. 48, par. 1406)
31 Sec. 6. Exemptions. This Act shall not apply to:
32 (a) Use of toxic substances, compounds or mixtures
SB1231 Enrolled -322- LRB9106284WHdv
1 regulated by this Act which are:
2 (1) Intended for personal consumption by employees in
3 the workplace.
4 (2) Consumer goods used, stored or sold by an employer,
5 manufacturer, importer, retailer or supplier in the same
6 form, approximate amount, concentration and manner as they
7 are sold to consumers, provided that employee exposure to
8 such consumer goods is not significantly greater than
9 consumer exposure occurring during the principal consumer
10 uses of the consumer goods. For purposes of this Act,
11 "consumer goods" shall be defined as in Section 9-102 9-109.1
12 of the Uniform Commercial Code.
13 (3) Present in a concentration of less than 1%. In the
14 cases of carcinogens, mutagens or teratogens, only those
15 substances shall be exempt which are present in a
16 concentration of 0.1% or less. No substance shall be exempt
17 under this paragraph which is present in concentrations
18 exceeding threshold concentrations established by regulation
19 of the Department.
20 (b) Laboratories in which a toxic substance, compound or
21 mixture regulated by this Act is used by or under the direct
22 supervision of a technically qualified individual, provided
23 that the toxic substance or mixture is not produced in the
24 laboratories for commercial sale. The Department shall
25 promulgate rules prescribing the standards used in
26 determining whether a laboratory is under the direct
27 supervision of a technically qualified individual.
28 (c) All retail trade establishments as listed in the
29 "Standard Industrial Classification Manual" Division G,
30 Retail Trade, published by the U.S. Government Printing
31 Office, except the Act shall apply to those retail trade
32 establishments listed within Major Groups: 52 - Building
33 Materials, Hardware, Garden Supply, and Mobile Home Dealers;
34 and 55 - Automotive Dealers and Gasoline Service Stations,
SB1231 Enrolled -323- LRB9106284WHdv
1 except for those activities involving the retail sales of
2 gasoline motor fuels or lubricants, or if the retail trade
3 establishments are engaged in any of the following specific
4 activities, this Act shall apply only to the retail trade
5 establishments' involvement in such specific activities:
6 paint mixing, other than the tinting of consumer sized
7 containers of paint; finishing or refinishing operations
8 using paint or paint related products; automobile battery
9 servicing, photo finishing operations; and dry cleaning
10 operations.
11 (Source: P.A. 85-506.)
12 Section 99. Effective date. This Act takes effect on
13 July 1, 2001, except that this Section and Sections 31 and 37
14 take effect upon becoming law.
[ Top ]