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Public Act 91-0893
SB1231 Enrolled LRB9106284WHdv
AN ACT in relation to secured transactions.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Uniform Commercial Code is amended by
changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106,
9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115,
9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1,
9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305,
9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308,
9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316,
9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405,
9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504,
9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections
9-209, 9-210, 9-315.01, 9-315.02, 9-319, 9-320, 9-320.1,
9-320.2, 9-321, 9-322, 9-323, 9-324, 9-325, 9-326, 9-327,
9-328, 9-329, 9-330, 9-331, 9-332, 9-333, 9-334, 9-335,
9-336, 9-337, 9-338, 9-339, 9-340, 9-341, 9-342, 9-409,
9-508, 9-509, 9-510, 9-511, 9-512, 9-513, 9-514, 9-515,
9-516, 9-517, 9-518, 9-519, 9-520, 9-521, 9-522, 9-523,
9-524, 9-525, 9-526, 9-527, 9-601, 9-602, 9-603, 9-604,
9-605, 9-606, 9-607, 9-608, 9-609, 9-610, 9-611, 9-612,
9-613, 9-614, 9-615, 9-616, 9-617, 9-618, 9-619, 9-620,
9-621, 9-622, 9-623, 9-624, 9-625, 9-626, 9-627, 9-628,
9-701, 9-702, 9-703, 9-704, 9-705, 9-706, 9-707, 9-708,
9-709, and 9-710, changing the headings of Article 9 and
Parts 1, 2, 3, 4, 5, and 99 of Article 9, and adding headings
of Parts 6 and 7 of Article 9, Subparts 1 and 2 of Part 1 of
Article 9, Subparts 1 and 2 of Part 2 of Article 9, Subparts
1, 2, 3, and 4 of Part 3 of Article 9, Subparts 1 and 2 of
Part 5 of Article 9, and Subparts 1 and 2 of Part 6 of
Article 9 as follows:
(810 ILCS 5/Art. 9 heading)
ARTICLE 9
SECURED TRANSACTIONS: SALES OF ACCOUNTS,
CONTRACT RIGHTS AND CHATTEL PAPER
(810 ILCS 5/Art. 9, Part 1 heading)
PART 1. GENERAL PROVISIONS
SHORT TITLE, APPLICABILITY AND DEFINITIONS
(810 ILCS 5/Art. 9, Part 1, Subpart 1 heading new)
SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
(810 ILCS 5/9-101) (from Ch. 26, par. 9-101)
Sec. 9-101. Short title. This Article may be cited as
Uniform Commercial Code-Secured Transactions. Short title.
This Article shall be known and may be cited as Uniform
Commercial Code--Secured Transactions.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-102) (from Ch. 26, par. 9-102)
Sec. 9-102. Definitions and index of definitions.
(a) Article 9 definitions. In this Article:
(1) "Accession" means goods that are physically
united with other goods in such a manner that the
identity of the original goods is not lost.
(2) "Account", except as used in "account for",
means a right to payment of a monetary obligation,
whether or not earned by performance, (i) for property
that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, (ii) for services
rendered or to be rendered, (iii) for a policy of
insurance issued or to be issued, (iv) for a secondary
obligation incurred or to be incurred, (v) for energy
provided or to be provided, (vi) for the use or hire of a
vessel under a charter or other contract, (vii) arising
out of the use of a credit or charge card or information
contained on or for use with the card, or (viii) as
winnings in a lottery or other game of chance operated or
sponsored by a State, governmental unit of a State, or
person licensed or authorized to operate the game by a
State or governmental unit of a State. The term includes
health-care-insurance receivables. The term does not
include (i) rights to payment evidenced by chattel paper
or an instrument, (ii) commercial tort claims, (iii)
deposit accounts, (iv) investment property, (v)
letter-of-credit rights or letters of credit, or (vi)
rights to payment for money or funds advanced or sold,
other than rights arising out of the use of a credit or
charge card or information contained on or for use with
the card.
(3) "Account debtor" means a person obligated on an
account, chattel paper, or general intangible. The term
does not include persons obligated to pay a negotiable
instrument, even if the instrument constitutes part of
chattel paper.
(4) "Accounting", except as used in "accounting
for", means a record:
(A) authenticated by a secured party;
(B) indicating the aggregate unpaid secured
obligations as of a date not more than 35 days
earlier or 35 days later than the date of the
record; and
(C) identifying the components of the
obligations in reasonable detail.
(5) "Agricultural lien" means an interest, other
than a security interest, in farm products:
(A) which secures payment or performance of an
obligation for:
(i) goods or services furnished in
connection with a debtor's farming operation;
or
(ii) rent on real property leased by a
debtor in connection with its farming
operation;
(B) which is created by statute in favor of a
person that:
(i) in the ordinary course of its
business furnished goods or services to a
debtor in connection with a debtor's farming
operation; or
(ii) leased real property to a debtor in
connection with the debtor's farming operation;
and
(C) whose effectiveness does not depend on the
person's possession of the personal property.
(6) "As-extracted collateral" means:
(A) oil, gas, or other minerals that are
subject to a security interest that:
(i) is created by a debtor having an
interest in the minerals before extraction; and
(ii) attaches to the minerals as
extracted; or
(B) accounts arising out of the sale at the
wellhead or minehead of oil, gas, or other minerals
in which the debtor had an interest before
extraction.
(7) "Authenticate" means:
(A) to sign; or
(B) to execute or otherwise adopt a symbol, or
encrypt or similarly process a record in whole or in
part, with the present intent of the authenticating
person to identify the person and adopt or accept a
record.
(8) "Bank" means an organization that is engaged in
the business of banking. The term includes savings
banks, savings and loan associations, credit unions, and
trust companies.
(9) "Cash proceeds" means proceeds that are money,
checks, deposit accounts, or the like.
(10) "Certificate of title" means a certificate of
title with respect to which a statute provides for the
security interest in question to be indicated on the
certificate as a condition or result of the security
interest's obtaining priority over the rights of a lien
creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that
evidence both a monetary obligation and a security
interest in specific goods, a security interest in
specific goods and software used in the goods, a security
interest in specific goods and license of software used
in the goods, a lease of specific goods, or a lease of
specified goods and a license of software used in the
goods. In this paragraph, "monetary obligation" means a
monetary obligation secured by the goods or owed under a
lease of the goods and includes a monetary obligation
with respect to software used in the goods. The term
does not include (i) charters or other contracts
involving the use or hire of a vessel or (ii) records
that evidence a right to payment arising out of the use
of a credit or charge card or information contained on or
for use with the card. If a transaction is evidenced by
records that include an instrument or series of
instruments, the group of records taken together
constitutes chattel paper.
(12) "Collateral" means the property subject to a
security interest or agricultural lien. The term
includes:
(A) proceeds to which a security interest
attaches;
(B) accounts, chattel paper, payment
intangibles, and promissory notes that have been
sold; and
(C) goods that are the subject of a
consignment.
(13) "Commercial tort claim" means a claim arising
in tort with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the
claim:
(i) arose in the course of the claimant's
business or profession; and
(ii) does not include damages arising out
of personal injury to or the death of an
individual.
(14) "Commodity account" means an account
maintained by a commodity intermediary in which a
commodity contract is carried for a commodity customer.
(15) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a
commodity option, or another contract if the contract or
option is:
(A) traded on or subject to the rules of a
board of trade that has been designated as a
contract market for such a contract pursuant to
federal commodities laws; or
(B) traded on a foreign commodity board of
trade, exchange, or market, and is carried on the
books of a commodity intermediary for a commodity
customer.
(16) "Commodity customer" means a person for which
a commodity intermediary carries a commodity contract on
its books.
(17) "Commodity intermediary" means a person that:
(A) is registered as a futures commission
merchant under federal commodities law; or
(B) in the ordinary course of its business
provides clearance or settlement services for a
board of trade that has been designated as a
contract market pursuant to federal commodities law.
(18) "Communicate" means:
(A) to send a written or other tangible
record;
(B) to transmit a record by any means agreed
upon by the persons sending and receiving the
record; or
(C) in the case of transmission of a record to
or by a filing office, to transmit a record by any
means prescribed by filing-office rule.
(19) "Consignee" means a merchant to which goods
are delivered in a consignment.
(20) "Consignment" means a transaction, regardless
of its form, in which a person delivers goods to a
merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a
name other than the name of the person making
delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its
creditors to be substantially engaged in
selling the goods of others;
(B) with respect to each delivery, the
aggregate value of the goods is $1,000 or more at
the time of delivery;
(C) the goods are not consumer goods
immediately before delivery; and
(D) the transaction does not create a security
interest that secures an obligation.
(21) "Consignor" means a person that delivers goods
to a consignee in a consignment.
(22) "Consumer debtor" means a debtor in a consumer
transaction.
(23) "Consumer goods" means goods that are used or
bought for use primarily for personal, family, or
household purposes.
(24) "Consumer-goods transaction" means a consumer
transaction in which:
(A) an individual incurs an obligation
primarily for personal, family, or household
purposes; and
(B) a security interest in consumer goods
secures the obligation.
(25) "Consumer obligor" means an obligor who is an
individual and who incurred the obligation as part of a
transaction entered into primarily for personal, family,
or household purposes.
(26) "Consumer transaction" means a transaction in
which (i) an individual incurs an obligation primarily
for personal, family, or household purposes, (ii) a
security interest secures the obligation, and (iii) the
collateral is held or acquired primarily for personal,
family, or household purposes. The term includes
consumer-goods transactions.
(27) "Continuation statement" means an amendment of
a financing statement which:
(A) identifies, by its file number, the
initial financing statement to which it relates; and
(B) indicates that it is a continuation
statement for, or that it is filed to continue the
effectiveness of, the identified financing
statement.
(28) "Debtor" means:
(A) a person having an interest, other than a
security interest or other lien, in the collateral,
whether or not the person is an obligor;
(B) a seller of accounts, chattel paper,
payment intangibles, or promissory notes; or
(C) a consignee.
(29) "Deposit account" means a demand, time,
savings, passbook, nonnegotiable certificates of deposit,
uncertificated certificates of deposit, nontransferrable
certificates of deposit, or similar account maintained
with a bank. The term does not include investment
property or accounts evidenced by an instrument.
(30) "Document" means a document of title or a
receipt of the type described in Section 7-201(2).
(31) "Electronic chattel paper" means chattel paper
evidenced by a record or records consisting of
information stored in an electronic medium.
(32) "Encumbrance" means a right, other than an
ownership interest, in real property. The term includes
mortgages and other liens on real property.
(33) "Equipment" means goods other than inventory,
farm products, or consumer goods.
(34) "Farm products" means goods, other than
standing timber, with respect to which the debtor is
engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown,
including:
(i) crops produced on trees, vines, and
bushes; and
(ii) aquatic goods produced in
aquacultural operations;
(B) livestock, born or unborn, including
aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming
operation; or
(D) products of crops or livestock in their
unmanufactured states.
(35) "Farming operation" means raising,
cultivating, propagating, fattening, grazing, or any
other farming, livestock, or aquacultural operation.
(36) "File number" means the number assigned to an
initial financing statement pursuant to Section 9-519(a).
(37) "Filing office" means an office designated in
Section 9-501 as the place to file a financing statement.
(38) "Filing-office rule" means a rule adopted
pursuant to Section 9-526.
(39) "Financing statement" means a record or
records composed of an initial financing statement and
any filed record relating to the initial financing
statement.
(40) "Fixture filing" means the filing of a
financing statement covering goods that are or are to
become fixtures and satisfying Section 9-502(a) and (b).
The term includes the filing of a financing statement
covering goods of a transmitting utility which are or are
to become fixtures.
(41) "Fixtures" means goods that have become so
related to particular real property that an interest in
them arises under real property law.
(42) "General intangible" means any personal
property, including things in action, other than
accounts, chattel paper, commercial tort claims, deposit
accounts, documents, goods, instruments, investment
property, letter-of-credit rights, letters of credit,
money, and oil, gas, or other minerals before extraction.
The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the
observance of reasonable commercial standards of fair
dealing.
(44) "Goods" means all things that are movable when
a security interest attaches. The term includes (i)
fixtures, (ii) standing timber that is to be cut and
removed under a conveyance or contract for sale, (iii)
the unborn young of animals, (iv) crops grown, growing,
or to be grown, even if the crops are produced on trees,
vines, or bushes, and (v) manufactured homes. The term
also includes a computer program embedded in goods and
any supporting information provided in connection with a
transaction relating to the program if (i) the program is
associated with the goods in such a manner that it
customarily is considered part of the goods, or (ii) by
becoming the owner of the goods, a person acquires a
right to use the program in connection with the goods.
The term does not include a computer program embedded in
goods that consist solely of the medium in which the
program is embedded. The term also does not include
accounts, chattel paper, commercial tort claims, deposit
accounts, documents, general intangibles, instruments,
investment property, letter-of-credit rights, letters of
credit, money, or oil, gas, or other minerals before
extraction.
(45) "Governmental unit" means a subdivision,
agency, department, county, parish, municipality, or
other unit of the government of the United States, a
State, or a foreign country. The term includes an
organization having a separate corporate existence if the
organization is eligible to issue debt on which interest
is exempt from income taxation under the laws of the
United States.
(46) "Health-care-insurance receivable" means an
interest in or claim under a policy of insurance which is
a right to payment of a monetary obligation for
health-care goods or services provided.
(47) "Instrument" means a negotiable instrument or
any other writing that evidences a right to the payment
of a monetary obligation, is not itself a security
agreement or lease, and is of a type that in ordinary
course of business is transferred by delivery with any
necessary indorsement or assignment. The term does not
include (i) investment property, (ii) letters of credit,
(iii) nonnegotiable certificates of deposit, (iv)
uncertificated certificates of deposit, (v)
nontransferrable certificates of deposit, or (vi)
writings that evidence a right to payment arising out of
the use of a credit or charge card or information
contained on or for use with the card.
(48) "Inventory" means goods, other than farm
products, which:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or
to be furnished under a contract of service;
(C) are furnished by a person under a contract
of service; or
(D) consist of raw materials, work in process,
or materials used or consumed in a business.
(49) "Investment property" means a security,
whether certificated or uncertificated, security
entitlement, securities account, commodity contract, or
commodity account.
(50) "Jurisdiction of organization", with respect
to a registered organization, means the jurisdiction
under whose law the organization is organized.
(51) "Letter-of-credit right" means a right to
payment or performance under a letter of credit, whether
or not the beneficiary has demanded or is at the time
entitled to demand payment or performance. The term does
not include the right of a beneficiary to demand payment
or performance under a letter of credit.
(52) "Lien creditor" means:
(A) a creditor that has acquired a lien on the
property involved by attachment, levy, or the like;
(B) an assignee for benefit of creditors from
the time of assignment;
(C) a trustee in bankruptcy from the date of
the filing of the petition; or
(D) a receiver in equity from the time of
appointment.
(53) "Manufactured home" means a structure,
transportable in one or more sections, which, in the
traveling mode, is eight body feet or more in width or 40
body feet or more in length, or, when erected on site, is
320 or more square feet, and which is built on a
permanent chassis and designed to be used as a dwelling
with or without a permanent foundation when connected to
the required utilities, and includes the plumbing,
heating, air-conditioning, and electrical systems
contained therein. The term includes any structure that
meets all of the requirements of this paragraph except
the size requirements and with respect to which the
manufacturer voluntarily files a certification required
by the United States Secretary of Housing and Urban
Development and complies with the standards established
under Title 42 of the United States Code.
(54) "Manufactured-home transaction" means a
secured transaction:
(A) that creates a purchase-money security
interest in a manufactured home, other than a
manufactured home held as inventory; or
(B) in which a manufactured home, other than a
manufactured home held as inventory, is the primary
collateral.
(55) "Mortgage" means a consensual interest in real
property, including fixtures, which secures payment or
performance of an obligation.
(56) "New debtor" means a person that becomes bound
as debtor under Section 9-203(d) by a security agreement
previously entered into by another person.
(57) "New value" means (i) money, (ii) money's
worth in property, services, or new credit, or (iii)
release by a transferee of an interest in property
previously transferred to the transferee. The term does
not include an obligation substituted for another
obligation.
(58) "Noncash proceeds" means proceeds other than
cash proceeds.
(59) "Obligor" means a person that, with respect to
an obligation secured by a security interest in or an
agricultural lien on the collateral, (i) owes payment or
other performance of the obligation, (ii) has provided
property other than the collateral to secure payment or
other performance of the obligation, or (iii) is
otherwise accountable in whole or in part for payment or
other performance of the obligation. The term does not
include issuers or nominated persons under a letter of
credit.
(60) "Original debtor", except as used in Section
9-310(c), means a person that, as debtor, entered into a
security agreement to which a new debtor has become bound
under Section 9-203(d).
(61) "Payment intangible" means a general
intangible under which the account debtor's principal
obligation is a monetary obligation.
(62) "Person related to", with respect to an
individual, means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister, or
sister-in-law of the individual;
(C) an ancestor or lineal descendant of the
individual or the individual's spouse; or
(D) any other relative, by blood or marriage,
of the individual or the individual's spouse who
shares the same home with the individual.
(63) "Person related to", with respect to an
organization, means:
(A) a person directly or indirectly
controlling, controlled by, or under common control
with the organization;
(B) an officer or director of, or a person
performing similar functions with respect to, the
organization;
(C) an officer or director of, or a person
performing similar functions with respect to, a
person described in subparagraph (A);
(D) the spouse of an individual described in
subparagraph (A), (B), or (C); or
(E) an individual who is related by blood or
marriage to an individual described in subparagraph
(A), (B), (C), or (D) and shares the same home with
the individual.
(64) "Proceeds", except as used in Section
9-609(b), means the following property:
(A) whatever is acquired upon the sale, lease,
license, exchange, or other disposition of
collateral;
(B) whatever is collected on, or distributed
on account of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral,
claims arising out of the loss, nonconformity, or
interference with the use of, defects or
infringement of rights in, or damage to, the
collateral; or
(E) to the extent of the value of collateral
and to the extent payable to the debtor or the
secured party, insurance payable by reason of the
loss or nonconformity of, defects or infringement of
rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that
evidences a promise to pay a monetary obligation, does
not evidence an order to pay, and does not contain an
acknowledgment by a bank that the bank has received for
deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a
secured party which includes the terms on which the
secured party is willing to accept collateral in full or
partial satisfaction of the obligation it secures
pursuant to Sections 9-620, 9-621, and 9-622.
(67) "Public-finance transaction" means a secured
transaction in connection with which:
(A) debt securities are issued;
(B) all or a portion of the securities issued
have an initial stated maturity of at least 20
years; and
(C) the debtor, obligor, secured party,
account debtor or other person obligated on
collateral, assignor or assignee of a secured
obligation, or assignor or assignee of a security
interest is a State or a governmental unit of a
State.
(68) "Pursuant to commitment", with respect to an
advance made or other value given by a secured party,
means pursuant to the secured party's obligation, whether
or not a subsequent event of default or other event not
within the secured party's control has relieved or may
relieve the secured party from its obligation.
(69) "Record", except as used in "for record", "of
record", "record or legal title", and "record owner",
means information that is inscribed on a tangible medium
or which is stored in an electronic or other medium and
is retrievable in perceivable form.
(70) "Registered organization" means an
organization organized solely under the law of a single
State or the United States and as to which the State or
the United States must maintain a public record showing
the organization to have been organized.
(71) "Secondary obligor" means an obligor to the
extent that:
(A) the obligor's obligation is secondary; or
(B) the obligor has a right of recourse with
respect to an obligation secured by collateral
against the debtor, another obligor, or property of
either.
(72) "Secured party" means:
(A) a person in whose favor a security
interest is created or provided for under a security
agreement, whether or not any obligation to be
secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper,
payment intangibles, or promissory notes have been
sold;
(E) a trustee, indenture trustee, agent,
collateral agent, or other representative in whose
favor a security interest or agricultural lien is
created or provided for; or
(F) a person that holds a security interest
arising under Section 2-401, 2-505, 2-711(3),
2A-508(5), 4-210, or 5-118.
(73) "Security agreement" means an agreement that
creates or provides for a security interest.
(74) "Send", in connection with a record or
notification, means:
(A) to deposit in the mail, deliver for
transmission, or transmit by any other usual means
of communication, with postage or cost of
transmission provided for, addressed to any address
reasonable under the circumstances; or
(B) to cause the record or notification to be
received within the time that it would have been
received if properly sent under subparagraph (A).
(75) "Software" means a computer program and any
supporting information provided in connection with a
transaction relating to the program. The term does not
include a computer program that is included in the
definition of goods.
(76) "State" means a State of the United States,
the District of Columbia, Puerto Rico, the United States
Virgin Islands, or any territory or insular possession
subject to the jurisdiction of the United States.
(77) "Supporting obligation" means a
letter-of-credit right or secondary obligation that
supports the payment or performance of an account,
chattel paper, a document, a general intangible, an
instrument, or investment property.
(78) "Tangible chattel paper" means chattel paper
evidenced by a record or records consisting of
information that is inscribed on a tangible medium.
(79) "Termination statement" means an amendment of
a financing statement which:
(A) identifies, by its file number, the
initial financing statement to which it relates; and
(B) indicates either that it is a termination
statement or that the identified financing statement
is no longer effective.
(80) "Transmitting utility" means a person
primarily engaged in the business of:
(A) operating a railroad, subway, street
railway, or trolley bus;
(B) transmitting communications electrically,
electromagnetically, or by light;
(C) transmitting goods by pipeline or sewer;
or
(D) transmitting or producing and transmitting
electricity, steam, gas, or water.
(b) Definitions in other Articles. The following
definitions in other Articles apply to this Article:
"Applicant". Section 5-102.
"Beneficiary". Section 5-102.
"Broker". Section 8-102.
"Certificated security". Section 8-102.
"Check". Section 3-104.
"Clearing corporation". Section 8-102.
"Contract for sale". Section 2-106.
"Customer". Section 4-104.
"Entitlement holder". Section 8-102.
"Financial asset". Section 8-102.
"Holder in due course". Section 3-302.
"Issuer" (with respect to a letter of credit or
letter-of-credit right). Section 5-102.
"Issuer" (with respect to a security). Section 8-201.
"Lease". Section 2A-103.
"Lease agreement". Section 2A-103.
"Lease contract". Section 2A-103.
"Leasehold interest". Section 2A-103.
"Lessee". Section 2A-103.
"Lessee in ordinary course of business". Section 2A-103.
"Lessor". Section 2A-103.
"Lessor's residual interest". Section 2A-103.
"Letter of credit". Section 5-102.
"Merchant". Section 2-104.
"Negotiable instrument". Section 3-104.
"Nominated person". Section 5-102.
"Note". Section 3-104.
"Proceeds of a letter of credit". Section 5-114.
"Prove". Section 3-103.
"Sale". Section 2-106.
"Securities account". Section 8-501.
"Securities intermediary". Section 8-102.
"Security". Section 8-102.
"Security certificate". Section 8-102.
"Security entitlement". Section 8-102.
"Uncertificated security". Section 8-102.
(c) Article 1 definitions and principles. Article 1
contains general definitions and principles of construction
and interpretation applicable throughout this Article. Policy
and Subject Matter of Article.
(1) Except as otherwise provided in Section 9--104 on
excluded transactions, this Article applies
(a) to any transaction (regardless of its form)
which is intended to create a security interest in personal
property or fixtures including goods, documents, instruments,
general intangibles, chattel paper or accounts; and also
(b) to any sale of accounts or chattel paper.
(2) This Article applies to security interests created
by contract including pledge, assignment, chattel mortgage,
chattel trust, trust deed, factor's lien, equipment trust,
conditional sale, trust receipt, other lien or title
retention contract and lease or consignment intended as
security. This Article does not apply to statutory liens
except as provided in Section 9--310.
(3) The application of this Article to a security
interest in a secured obligation is not affected by the fact
that the obligation is itself secured by a transaction or
interest to which this Article does not apply.
(4) The application of this Article to a security
interest in a deposit account shall not displace a common law
right of set-off of the secured party as to a deposit account
maintained with the secured party.
(Source: P.A. 87-1037.)
(810 ILCS 5/9-103) (from Ch. 26, par. 9-103)
Sec. 9-103. Purchase-money security interest; application
of payments; burden of establishing.
(a) Definitions. In this Section:
(1) "purchase-money collateral" means goods or
software that secures a purchase-money obligation
incurred with respect to that collateral; and
(2) "purchase-money obligation" means an obligation
of an obligor incurred as all or part of the price of the
collateral or for value given to enable the debtor to
acquire rights in or the use of the collateral if the
value is in fact so used.
(b) Purchase-money security interest in goods. A
security interest in goods is a purchase-money security
interest:
(1) to the extent that the goods are purchase-money
collateral with respect to that security interest;
(2) if the security interest is in inventory that
is or was purchase-money collateral, also to the extent
that the security interest secures a purchase-money
obligation incurred with respect to other inventory in
which the secured party holds or held a purchase-money
security interest; and
(3) also to the extent that the security interest
secures a purchase-money obligation incurred with respect
to software in which the secured party holds or held a
purchase-money security interest.
(c) Purchase-money security interest in software. A
security interest in software is a purchase-money security
interest to the extent that the security interest also
secures a purchase-money obligation incurred with respect to
goods in which the secured party holds or held a
purchase-money security interest if:
(1) the debtor acquired its interest in the
software in an integrated transaction in which it
acquired an interest in the goods; and
(2) the debtor acquired its interest in the
software for the principal purpose of using the software
in the goods.
(d) Consignor's inventory purchase-money security
interest. The security interest of a consignor in goods that
are the subject of a consignment is a purchase-money security
interest in inventory.
(e) Application of payment in non-consumer-goods
transaction. In a transaction other than a consumer-goods
transaction, if the extent to which a security interest is a
purchase-money security interest depends on the application
of a payment to a particular obligation, the payment must be
applied:
(1) in accordance with any reasonable method of
application to which the parties agree;
(2) in the absence of the parties' agreement to a
reasonable method, in accordance with any intention of
the obligor manifested at or before the time of payment;
or
(3) in the absence of an agreement to a reasonable
method and a timely manifestation of the obligor's
intention, in the following order:
(A) to obligations that are not secured; and
(B) if more than one obligation is secured, to
obligations secured by purchase-money security
interests in the order in which those obligations
were incurred.
(f) No loss of status of purchase-money security
interest in non-consumer-goods transaction. In a transaction
other than a consumer-goods transaction, a purchase-money
security interest does not lose its status as such, even if:
(1) the purchase-money collateral also secures an
obligation that is not a purchase-money obligation;
(2) collateral that is not purchase-money
collateral also secures the purchase-money obligation; or
(3) the purchase-money obligation has been renewed,
refinanced, consolidated, or restructured.
(g) Burden of proof in non-consumer-goods transaction.
In a transaction other than a consumer-goods transaction, a
secured party claiming a purchase-money security interest has
the burden of establishing the extent to which the security
interest is a purchase-money security interest.
(h) Non-consumer-goods transactions; no inference. The
limitation of the rules in subsections (e), (f), and (g) to
transactions other than consumer-goods transactions is
intended to leave to the court the determination of the
proper rules in consumer-goods transactions. The court may
not infer from that limitation the nature of the proper rule
in consumer-goods transactions and may continue to apply
established approaches. Perfection of Security Interests in
Multiple State Transactions.
(1) Documents, instruments, letters of credit, and
ordinary goods.
(a) This subsection applies to documents,
instruments, rights to proceeds of written letters of
credit, and goods other than those covered by a
certificate of title described in subsection (2), mobile
goods described in subsection (3), and minerals described
in subsection (5).
(b) Except as otherwise provided in this
subsection, perfection and the effect of perfection or
non-perfection of a security interest in collateral are
governed by the law of the jurisdiction where the
collateral is when the last event occurs on which is
based the assertion that the security interest is
perfected or unperfected.
(c) If the parties to a transaction creating a
purchase money security interest in goods in one
jurisdiction understand at the time that the security
interest attaches that the goods will be kept in another
jurisdiction, then the law of the other jurisdiction
governs the perfection and the effect of perfection or
non-perfection of the security interest from the time it
attaches until 30 days after the debtor receives
possession of the goods and thereafter if the goods are
taken to the other jurisdiction before the end of the
30-day period.
(d) When collateral is brought into and kept in
this State while subject to a security interest perfected
under the law of the jurisdiction from which the
collateral was removed, the security interest remains
perfected, but if action is required by Part 3 of this
Article to perfect the security interest,
(i) if the action is not taken before the
expiration of the period of perfection in the other
jurisdiction or the end of 4 months after the
collateral is brought into this State, whichever
period first expires, the security interest becomes
unperfected at the end of that period and is
thereafter deemed to have been unperfected as
against a person who became a purchaser after
removal;
(ii) if the action is taken before the
expiration of the period specified in subparagraph
(i), the security interest continues perfected
thereafter;
(iii) for the purpose of priority over a buyer
of consumer goods (subsection (2) of Section 9-307),
the period of the effectiveness of a filing in the
jurisdiction from which the collateral is removed is
governed by the rules with respect to perfection in
subparagraphs (i) and (ii).
(2) Certificate of title.
(a) This subsection applies to goods covered by a
certificate of title issued under a statute of this State
or of another jurisdiction under the law of which
indication of a security interest on the certificate is
required as a condition of perfection.
(b) Except as otherwise provided in this
subsection, perfection and the effect of perfection or
non-perfection of the security interest are governed by
the law (including the conflict of laws rules) of the
jurisdiction issuing the certificate until 4 months after
the goods are removed from that jurisdiction and
thereafter until the goods are registered in another
jurisdiction, but in any event not beyond surrender of
the certificate. After the expiration of that period,
the goods are not covered by the certificate of title
within the meaning of this Section.
(c) Except with respect to the rights of a buyer
described in the next paragraph, a security interest,
perfected in another jurisdiction otherwise than by
notation on a certificate of title, in goods brought into
this State and thereafter covered by a certificate of
title issued by this State is subject to the rules stated
in paragraph (d) of subsection (1).
(d) If goods are brought into this State while a
security interest therein is perfected in any manner
under the law of the jurisdiction from which the goods
are removed and a certificate of title is issued by this
State and the certificate does not show that the goods
are subject to the security interest or that they may be
subject to security interests not shown on the
certificate, the security interest is subordinate to the
rights of a buyer of the goods to the extent that he
gives value and receives delivery of the goods after
issuance of the certificate and without knowledge of the
security interest.
(3) Accounts, general intangibles and mobile goods.
(a) This subsection applies to accounts (other than
an account described in subsection (5) on minerals) and
general intangibles (other than uncertificated
securities) and to goods which are mobile and which are
of a type normally used in more than one jurisdiction,
such as motor vehicles, trailers, rolling stock,
airplanes, shipping containers, road building and
construction machinery and commercial harvesting
machinery and the like, if the goods are equipment or are
inventory leased or held for lease by the debtor to
others, and are not covered by a certificate of title
described in subsection (2).
(b) The law (including the conflict of laws rules)
of the jurisdiction in which the debtor is located
governs the perfection and the effect of perfection or
non-perfection of the security interest.
(c) If, however, the debtor is located in a
jurisdiction which is not a part of the United States,
and which does not provide for perfection of the security
interest by filing or recording in that jurisdiction, the
law of the jurisdiction in the United States in which the
debtor has its major executive office in the United
States governs the perfection and the effect of
perfection or non-perfection of the security interest
through filing. In the alternative, if the debtor is
located in a jurisdiction which is not a part of the
United States or Canada and the collateral is accounts or
general intangibles for money due or to become due, the
security interest may be perfected by notification to the
account debtor. As used in this paragraph, "United
States" includes its territories and possessions and the
Commonwealth of Puerto Rico.
(d) A debtor shall be deemed located at his place
of business if he has one, at his chief executive office
if he has more than one place of business, otherwise at
his residence. If, however, the debtor is a foreign air
carrier under the Federal Aviation Act of 1958, as
amended, it shall be deemed located at the designated
office of the agent upon whom service of process may be
made on behalf of the foreign air carrier.
(e) A security interest perfected under the law of
the jurisdiction of the location of the debtor is
perfected until the expiration of 4 months after a change
of the debtor's location to another jurisdiction, or
until perfection would have ceased by the law of the
first jurisdiction, whichever period first expires.
Unless perfected in the new jurisdiction before the end
of that period, it becomes unperfected thereafter and is
deemed to have been unperfected as against a person who
became a purchaser after the change.
(4) Chattel paper. The rules stated for goods in
subsection (1) apply to a possessory security interest in
chattel paper. The rules stated for accounts in subsection
(3) apply to a non-possessory security interest in chattel
paper, but the security interest may not be perfected by
notification to the account debtor.
(5) Minerals. Perfection and the effect of perfection
or non-perfection of a security interest which is created by
a debtor who has an interest in minerals or the like
(including oil and gas) before extraction and which attaches
thereto as extracted, or which attaches to an account
resulting from the sale thereof at the wellhead or minehead
are governed by the law (including the conflict of laws
rules) of the jurisdiction wherein the wellhead or minehead
is located.
(6) Investment property.
(a) This subsection applies to investment property.
(b) Except as otherwise provided in paragraph (f),
during the time that a security certificate is located in
a jurisdiction, perfection of a security interest, the
effect of perfection or non-perfection, and the priority
of a security interest in the certificated security
represented thereby are governed by the local law of that
jurisdiction.
(c) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of
perfection or non-perfection, and the priority of a
security interest in an uncertificated security are
governed by the local law of the issuer's jurisdiction as
specified in Section 8-110(d).
(d) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of
perfection or non-perfection, and the priority of a
security interest in a security entitlement or securities
account are governed by the local law of the securities
intermediary's jurisdiction as specified in Section
8-110(e).
(e) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of
perfection or non-perfection, and the priority of a
security interest in a commodity contract or commodity
account are governed by the local law of the commodity
intermediary's jurisdiction. The following rules
determine a "commodity intermediary's jurisdiction" for
purposes of this paragraph:
(i) If an agreement between the commodity
intermediary and commodity customer specifies that
it is governed by the law of a particular
jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(ii) If an agreement between the commodity
intermediary and commodity customer does not specify
the governing law as provided in subparagraph (i),
but expressly specifies that the commodity account
is maintained at an office in a particular
jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(iii) If an agreement between the commodity
intermediary and commodity customer does not specify
a jurisdiction as provided in subparagraphs (i) or
(ii), the commodity intermediary's jurisdiction is
the jurisdiction in which is located the office
identified in an account statement as the office
serving the commodity customer's account.
(iv) If an agreement between the commodity
intermediary and commodity customer does not specify
a jurisdiction as provided in subparagraphs (i) or
(ii) and an account statement does not identify an
office serving the commodity customer's account as
provided in subparagraph (iii), the commodity
intermediary's jurisdiction is the jurisdiction in
which is located the chief executive office of the
commodity intermediary.
(f) Perfection of a security interest by filing,
automatic perfection of a security interest in investment
property granted by a broker or securities intermediary,
and automatic perfection of a security interest in a
commodity contract or commodity account granted by a
commodity intermediary are governed by the local law of
the jurisdiction in which the debtor is located.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
89-626, eff. 8-9-96.)
(810 ILCS 5/9-104) (from Ch. 26, par. 9-104)
Sec. 9-104. Control of deposit account.
(a) Requirements for control. A secured party has
control of a deposit account if:
(1) the secured party is the bank with which the
deposit account is maintained;
(2) the debtor, secured party, and bank have agreed
in an authenticated record that the bank will comply with
instructions originated by the secured party directing
disposition of the funds in the deposit account without
further consent by the debtor; or
(3) the secured party becomes the bank's customer
with respect to the deposit account.
(b) Debtor's right to direct disposition. A secured
party that has satisfied subsection (a) has control, even if
the debtor retains the right to direct the disposition of
funds from the deposit account. Transactions excluded from
Article.
This Article does not apply
(a) to a security interest subject to any statute
of the United States to the extent that such statute
governs the rights of parties to and third parties
affected by transactions in particular types of property;
or
(b) to a landlord's lien; or
(c) to a lien given by statute or other rule of law
for services or materials except as provided in Section
9-310 on priority of such liens; or
(d) to a transfer of a claim for wages, salary or
other compensation of an employee; or
(e) to a transfer by a government or governmental
subdivision or agency; or
(f) to a sale of accounts or chattel paper as part
of a sale of the business out of which they arose, or an
assignment of accounts or chattel paper which is for the
purpose of collection only, or a transfer of a right to
payment under a contract to an assignee who is also to do
the performance under the contract or a transfer of a
single account to an assignee in whole or partial
satisfaction of a preexisting indebtedness; or
(g) to a transfer of an interest or claim in or
under any policy of insurance, except as provided with
respect to proceeds (Section 9-306) and priorities in
proceeds (Section 9-312); or
(h) to a right represented by a judgment (other
than a judgment taken on a right to payment which was
collateral); or
(i) to any right of set-off; or
(j) except to the extent that provision is made for
fixtures in Section 9-313, to the creation or transfer of
an interest in or lien on real estate, including a lease
or rents thereunder; or
(k) to a transfer in whole or in part of any claim
arising out of tort; or
(l) to a transfer of an interest in a letter of
credit other than the rights to proceeds of a written
letter of credit.
(Source: P.A. 89-534, eff. 1-1-97.)
(810 ILCS 5/9-105) (from Ch. 26, par. 9-105)
Sec. 9-105. Control of electronic chattel paper. A
secured party has control of electronic chattel paper if the
record or records comprising the chattel paper are created,
stored, and assigned in such a manner that:
(1) a single authoritative copy of the record or
records exists which is unique, identifiable and, except
as otherwise provided in paragraphs (4), (5), and (6),
unalterable;
(2) the authoritative copy identifies the secured
party as the assignee of the record or records;
(3) the authoritative copy is communicated to and
maintained by the secured party or its designated
custodian;
(4) copies or revisions that add or change an
identified assignee of the authoritative copy can be made
only with the participation of the secured party;
(5) each copy of the authoritative copy and any
copy of a copy is readily identifiable as a copy that is
not the authoritative copy; and
(6) any revision of the authoritative copy is
readily identifiable as an authorized or unauthorized
revision. Definitions and index of definitions.
(1) In this Article unless the context otherwise
requires:
(a) "Account debtor" means the person who is
obligated on an account, chattel paper or general
intangible;
(b) "Chattel paper" means a writing or writings
which evidence both a monetary obligation and a security
interest in or a lease of specific goods, but a charter
or other contract involving the use or hire of a vessel
is not chattel paper. When a transaction is evidenced
both by such a security agreement or a lease and by an
instrument or a series of instruments, the group of
writings taken together constitutes chattel paper;
(c) "Collateral" means the property subject to a
security interest, and includes accounts and chattel
paper which have been sold;
(d) "Debtor" means the person who owes payment or
other performance of the obligation secured, whether or
not he owns or has rights in the collateral, and includes
the seller of accounts or chattel paper. Where the debtor
and the owner of the collateral are not the same person,
the term "debtor" means the owner of the collateral in
any provision of the Article dealing with the collateral,
the obligor in any provision dealing with the obligation,
and may include both where the context so requires;
(e) "Deposit account" means a demand, time,
savings, passbook or like account maintained with a bank,
as defined in subsection (1) of Section 4-105, other than
an account evidenced by a certificate of deposit;
(f) "Document" means document of title as defined
in the general definitions of Article 1 (Section 1-201),
and a receipt of the kind described in subsection (2) of
Section 7-201;
(g) "Encumbrance" includes real estate mortgages
and other liens on real estate and all other rights in
real estate that are not ownership interests;
(h) "Goods" includes all things which are movable
at the time the security interest attaches or which are
fixtures (Section 9-313), but does not include money,
documents, instruments, investment property, commodity
contracts, accounts, chattel paper, general intangibles,
or minerals or the like (including oil and gas) before
extraction. "Goods" also includes standing timber which
is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops;
(i) "Instrument" means a negotiable instrument
(defined in Section 3-104), a non-transferable
certificate of deposit, a non-negotiable certificate of
deposit, or any other writing which evidences a right to
the payment of money and is not itself a security
agreement or lease and is of a type which is in ordinary
course of business transferred by delivery with any
necessary indorsement or assignment. The term does not
include investment property;
(j) "Mortgage" means a consensual interest created
by a real estate mortgage, a trust deed on real estate,
or the like;
(j-5) "Non-negotiable certificate of deposit" means
a written document issued by a bank, as defined in
subsection (1) of Section 4-105, that contains an
acknowledgement that a sum of money has been received by
the issuer and a promise by the issuer to repay the sum
of money, and is not a negotiable instrument as defined
in Section 3-104;
(j-7) "Non-transferable certificate of deposit"
means a non-negotiable certificate of deposit which may
not be transferred except on the books of the issuer,
with the consent of the issuer, or is subject to other
restrictions or conditions of the issuer on transfer;
(k) An advance is made "pursuant to commitment" if
the secured party has bound himself to make it, whether
or not a subsequent event of default or other event not
within his control has relieved or may relieve him from
his obligation;
(l) "Security agreement" means an agreement which
creates or provides for a security interest;
(m) "Secured party" means a lender, seller or other
person in whose favor there is a security interest,
including a person to whom accounts or chattel paper have
been sold. When the holders of obligations issued under
an indenture of trust, equipment trust agreement or the
like are represented by a trustee or other person, the
representative is the secured party;
-10t(n) "Transmitting utility" means any person primarily
engaged in the railroad, street railway or trolley bus
business, the electric or electronics communications
transmission business, the transmission of goods by
pipeline, or the distribution, transmission, or the
production and transmission of electricity, steam, gas or
water, or the provision of sewer service.
(o) "Uncertificated certificate of deposit" means an
obligation of a bank, as defined in subsection (1) of Section
4-105, to repay a sum of money it has received, that is not a
deposit account and is not represented by a writing, but only
by an entry on the books of the bank and any documentation
given to the customer by the bank.
(2) Other definitions applying to this Article and the
Sections in which they appear are:
"Account". Section 9-106.
"Attach". Section 9-203.
"Commodity contract". Section 9-115.
"Commodity customer". Section 9-115.
"Commodity intermediary". Section 9-115.
"Construction mortgage". Section 9-313 (1).
"Consumer goods". Section 9-109 (1).
"Control". Section 9-115.
"Equipment". Section 9-109 (2).
"Farm products". Section 9-109 (3).
"Fixture". Section 9-313 (1).
"Fixture filing". Section 9-313 (1).
"General intangibles". Section 9-106.
"Inventory". Section 9-109 (4).
"Investment property". Section 9-115.
"Lien creditor". Section 9-301 (3).
"Proceeds". Section 9-306 (1).
"Purchase money security interest". Section 9-107.
"United States". Section 9-103.
(3) The following definitions in other Articles apply to
this Article:
"Bank". Section 4-105.
"Broker". Section 8-102.
"Certificated security". Section 8-102.
"Check". Section 3-104.
"Clearing corporation". Section 8-102.
"Contract for sale". Section 2-106.
"Control". Section 8-106.
"Delivery". Section 8-301.
"Entitlement holder". Section 8-102.
"Financial asset". Section 8-102.
"Holder in due course". Section 3-302.
"Letter of credit". Section 5-102.
"Note". Section 3-104.
"Proceeds of a letter of credit". Section 5-114(a).
"Sale". Section 2-106.
"Securities intermediary". Section 8-102.
"Security". Section 8-102.
"Security certificate". Section 8-102.
"Security entitlement". Section 8-102.
"Uncertificated security". Section 8-102.
(4) In addition Article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this Article.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
90-665, eff. 7-30-98.)
(810 ILCS 5/9-106) (from Ch. 26, par. 9-106)
Sec. 9-106. Control of investment property.
(a) Control under Section 8-106. A person has control
of a certificated security, uncertificated security, or
security entitlement as provided in Section 8-106.
(b) Control of commodity contract. A secured party has
control of a commodity contract if:
(1) the secured party is the commodity intermediary
with which the commodity contract is carried; or
(2) the commodity customer, secured party, and
commodity intermediary have agreed that the commodity
intermediary will apply any value distributed on account
of the commodity contract as directed by the secured
party without further consent by the commodity customer.
(c) Effect of control of securities account or commodity
account. A secured party having control of all security
entitlements or commodity contracts carried in a securities
account or commodity account has control over the securities
account or commodity account. Definitions: "account";
"general intangibles". "Account" means any right to payment
for goods sold or leased or for services rendered which is
not evidenced by an instrument or chattel paper, whether or
not it has been earned by performance. "General intangibles"
means any personal property (including things in action)
other than goods, accounts, chattel paper, documents,
instruments, investment property, rights to proceeds of
written letters of credit, deposit accounts, uncertificated
certificates of deposit, and money. All rights to payment
earned or unearned under a charter or other contract
involving the use or hire of a vessel and all rights incident
to the charter or contract are accounts.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
90-665, eff. 7-30-98.)
(810 ILCS 5/9-107) (from Ch. 26, par. 9-107)
Sec. 9-107. Control of letter-of-credit right. A
secured party has control of a letter-of-credit right to the
extent of any right to payment or performance by the issuer
or any nominated person if the issuer or nominated person has
consented to an assignment of proceeds of the letter of
credit under Section 5-114(c) or otherwise applicable law or
practice. Definitions: "purchase money security interest".
A security interest is a "purchase money security
interest" to the extent that it is
(a) taken or retained by the seller of the
collateral to secure all or part of its price; or
(b) taken by a person who by making advances or
incurring an obligation gives value to enable the debtor to
acquire rights in or the use of collateral if such value is
in fact so used.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-108) (from Ch. 26, par. 9-108)
Sec. 9-108. Sufficiency of description.
(a) Sufficiency of description. Except as otherwise
provided in subsections (c), (d), and (e), a description of
personal or real property is sufficient, whether or not it is
specific, if it reasonably identifies what is described.
(b) Examples of reasonable identification. Except as
otherwise provided in subsection (d), a description of
collateral reasonably identifies the collateral if it
identifies the collateral by:
(1) specific listing;
(2) category;
(3) except as otherwise provided in subsection (e),
a type of collateral defined in the Uniform Commercial
Code;
(4) quantity;
(5) computational or allocational formula or
procedure; or
(6) except as otherwise provided in subsection (c),
any other method, if the identity of the collateral is
objectively determinable.
(c) Supergeneric description not sufficient. A
description of collateral as "all the debtor's assets" or
"all the debtor's personal property" or using words of
similar import does not reasonably identify the collateral.
(d) Investment property. Except as otherwise provided
in subsection (e), a description of a security entitlement,
securities account, or commodity account is sufficient if it
describes:
(1) the collateral by those terms or as investment
property; or
(2) the underlying financial asset or commodity
contract.
(e) When description by type insufficient. A
description only by type of collateral defined in the Uniform
Commercial Code is an insufficient description of:
(1) a commercial tort claim; or
(2) in a consumer transaction, consumer goods, a
security entitlement, a securities account, or a
commodity account. When after-acquired collateral not
security for antecedent debt.
Where a secured party makes an advance, incurs an
obligation, releases a perfected security interest, or
otherwise gives new value which is to be secured in whole or
in part by after-acquired property his security interest in
the after-acquired collateral shall be deemed to be taken for
new value and not as security for an antecedent debt if the
debtor acquires his rights in such collateral either in the
ordinary course of his business or under a contract of
purchase made pursuant to the security agreement within a
reasonable time after new value is given.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/Art. 9, Part 1, Subpart 2 heading new)
SUBPART 2. APPLICABILITY OF ARTICLE
(810 ILCS 5/9-109) (from Ch. 26, par. 9-109)
Sec. 9-109. Scope.
(a) General scope of Article. Except as otherwise
provided in subsections (c) and (d), this Article applies to:
(1) a transaction, regardless of its form, that
creates a security interest in personal property or
fixtures by contract;
(2) an agricultural lien;
(3) a sale of accounts, chattel paper, payment
intangibles, or promissory notes;
(4) a consignment;
(5) a security interest arising under Section
2-401, 2-505, 2-711(3), or 2A-508(5), as provided in
Section 9-110; and
(6) a security interest arising under Section 4-210
or 5-118.
(b) Security interest in secured obligation. The
application of this Article to a security interest in a
secured obligation is not affected by the fact that the
obligation is itself secured by a transaction or interest to
which this Article does not apply.
(c) Extent to which Article does not apply. This
Article does not apply to the extent that:
(1) a statute, regulation, or treaty of the United
States preempts this Article;
(2) another statute of this State expressly governs
the creation, perfection, priority, or enforcement of a
security interest created by this State or a governmental
unit of this State;
(3) a statute of another State, a foreign country,
or a governmental unit of another State or a foreign
country, other than a statute generally applicable to
security interests, expressly governs creation,
perfection, priority, or enforcement of a security
interest created by the State, country, or governmental
unit;
(4) the rights of a transferee beneficiary or
nominated person under a letter of credit are independent
and superior under Section 5-114;
(5) this Article is in conflict with Section
205-410 of the Department of Agriculture Law of the Civil
Administrative Code of Illinois or the Grain Code; or
(6) this Article is in conflict with Section 18-107
of the Public Utilities Act.
(d) Inapplicability of Article. This Article does not
apply to:
(1) a landlord's lien, other than an agricultural
lien;
(2) a lien, other than an agricultural lien, given
by statute or other rule of law for services or
materials, but Section 9-333 applies with respect to
priority of the lien;
(3) an assignment of a claim for wages, salary, or
other compensation of an employee;
(4) a sale of accounts, chattel paper, payment
intangibles, or promissory notes as part of a sale of the
business out of which they arose;
(5) an assignment of accounts, chattel paper,
payment intangibles, or promissory notes which is for the
purpose of collection only;
(6) an assignment of a right to payment under a
contract to an assignee that is also obligated to perform
under the contract;
(7) an assignment of a single account, payment
intangible, or promissory note to an assignee in full or
partial satisfaction of a preexisting indebtedness;
(8) a transfer of an interest in or an assignment
of a claim under a policy of insurance, other than an
assignment by or to a health-care provider of a
health-care-insurance receivable and any subsequent
assignment of the right to payment, but Sections 9-315
and 9-322 apply with respect to proceeds and priorities
in proceeds;
(9) an assignment of a right represented by a
judgment, other than a judgment taken on a right to
payment that was collateral;
(10) a right of recoupment or set-off, but:
(A) Section 9-340 applies with respect to the
effectiveness of rights of recoupment or set-off
against deposit accounts; and
(B) Section 9-404 applies with respect to
defenses or claims of an account debtor;
(11) the creation or transfer of an interest in or
lien on real property, including a lease or rents
thereunder, except to the extent that provision is made
for:
(A) liens on real property in Sections 9-203
and 9-308;
(B) fixtures in Section 9-334;
(C) fixture filings in Sections 9-501, 9-502,
9-512, 9-516, and 9-519; and
(D) security agreements covering personal and
real property in Section 9-604;
(12) an assignment of a claim arising in tort,
other than a commercial tort claim, but Sections 9-315
and 9-322 apply with respect to proceeds and priorities
in proceeds;
(13) a transfer by a government or governmental
subdivision or agency;
(14) a claim or a right to receive compensation for
injuries or sickness as described in Section 104(a)(1) or
(2) of Title 26 of the United States Code, as amended
from time to time; or
(15) a claim or right to receive benefits under a
special needs trust as described in Section 1396p(d)(4)
of Title 42 of the United States Code, as amended from
time to time. Classification of goods; "consumer goods";
"equipment"; "farm products"; "inventory". Goods are
(1) "consumer goods" if they are used or bought for use
primarily for personal, family or household purposes;
(2) "equipment" if they are used or bought for use
primarily in business (including farming or a profession) or
by a debtor who is a non-profit organization or a
governmental subdivision or agency or if the goods are not
included in the definitions of inventory, farm products or
consumer goods;
(3) "farm products" if they are crops or livestock or
supplies used or produced in farming operations or if they
are products of crops or livestock in their unmanufactured
states (such as ginned cotton, wool-clip, maple syrup, milk
and eggs) or if they are aquatic products as defined in the
Aquaculture Development Act, and if they are in the
possession of a debtor engaged in raising, fattening, grazing
or other farming or aquacultural operations. If goods are
farm products they are neither equipment nor inventory;
(4) "inventory" if they are held by a person who holds
them for sale or lease or to be furnished under contracts of
service or if he has so furnished them, or if they are raw
materials, work in process or materials used or consumed in a
business. Inventory of a person is not to be classified as
his equipment.
(Source: P.A. 85-856.)
(810 ILCS 5/9-110) (from Ch. 26, par. 9-110)
Sec. 9-110. Security interests arising under Article 2
or 2A. A security interest arising under Section 2-401,
2-505, 2-711(3), or 2A-508(5) is subject to this Article.
However, until the debtor obtains possession of the goods:
(1) the security interest is enforceable, even if
Section 9-203(b)(3) has not been satisfied;
(2) filing is not required to perfect the security
interest;
(3) the rights of the secured party after default
by the debtor are governed by Article 2 or 2A; and
(4) the security interest has priority over a
conflicting security interest created by the debtor.
Sufficiency of description.
For the purposes of this Article any description of
personal property or real estate is sufficient whether or not
it is specific if it reasonably identifies what is described.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-112) (from Ch. 26, par. 9-112)
Sec. 9-112. (Blank). Where collateral is not owned by
debtor.
Unless otherwise agreed, when a secured party knows that
collateral is owned by a person who is not the debtor, the
owner of the collateral is entitled to receive from the
secured party any surplus under Section 9-- 502(2) or under
Section 9--504(1), and is not liable for the debt or for any
deficiency after resale, and he has the same right as the
debtor
(a) to receive statements under Section 9--208;
(b) to receive notice of and to object to a secured
party's proposal to retain the collateral in satisfaction of
the indebtedness under Section 9--505;
(c) to redeem the collateral under Section 9--506;
(d) to obtain injunctive or other relief under
Section 9--507(1); and
(e) to recover losses caused to him under Section
9--208(2).
(Source: Laws 1961, 1st S.S., p. 7.)
(810 ILCS 5/9-113) (from Ch. 26, par. 9-113)
Sec. 9-113. (Blank). Security interests arising under
Article on Sales or under Article on Leases.
A security interest arising solely under the Article on
Sales (Article 2) or the Article on Leases (Article 2A) is
subject to the provisions of this Article except that to the
extent that and so long as the debtor does not have or does
not lawfully obtain possession of the goods
(a) no security agreement is necessary to make the
security interest enforceable; and
(b) no filing is required to perfect the security
interest; and
(c) the rights of the secured party on default by
the debtor are governed (i) by the Article on Sales
(Article 2) in the case of a security interest arising
solely under such Article or (ii) by the Article on
Leases (Article 2A) in the case of a security interest
arising solely under such Article.
(Source: P.A. 87-493.)
(810 ILCS 5/9-114) (from Ch. 26, par. 9-114)
Sec. 9-114. (Blank). Consignment.
(1) A person who delivers goods under a consignment
which is not a security interest and who would be required to
file under this Article by paragraph (3) (c) of Section 2-326
has priority over a secured party who is or becomes a
creditor of the consignee and who would have a perfected
security interest in the goods if they were the property of
the consignee, and also has priority with respect to
identifiable cash proceeds received on or before delivery of
the goods to a buyer, if
(a) the consignor complies with the filing provision of
the Article on Sales with respect to consignments (paragraph
(3) (c) of Section 2-326 before the consignee receives
possession of the goods; and
(b) the consignor gives notification in writing to the
holder of the security interest if the holder has filed a
financing statement covering the same types of goods before
the date of the filing made by the consignor; and
(c) the holder of the security interest receives the
notification within 5 years before the consignee receives
possession of the goods; and
(d) the notification states that the consignor expects
to deliver goods on consignment to the consignee, describing
the goods by item or type.
(2) In the case of a consignment which is not a security
interest and in which the requirements of the preceding
subsection have not been met, a person who delivers goods to
another is subordinate to a person who would have a perfected
security interest in the goods if they were the property of
the debtor.
(Source: P. A. 78-238.)
(810 ILCS 5/9-115) (from Ch. 26, par. 9-115)
Sec. 9-115. (Blank). Investment property.
(1) In this Article:
(a) "Commodity account" means an account maintained
by a commodity intermediary in which a commodity contract
is carried for a commodity customer.
(b) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a
commodity option, or other contract that, in each case,
is:
(i) traded on or subject to the rules of a
board of trade that has been designated as a
contract market for such a contract pursuant to the
federal commodities laws; or
(ii) traded on a foreign commodity board of
trade, exchange, or market, and is carried on the
books of a commodity intermediary for a commodity
customer.
(c) "Commodity customer" means a person for whom a
commodity intermediary carries a commodity contract on
its books.
(d) "Commodity intermediary" means:
(i) a person who is registered as a futures
commission merchant under the federal commodities
laws; or
(ii) a person who in the ordinary course of
its business provides clearance or settlement
services for a board of trade that has been
designated as a contract market pursuant to the
federal commodities laws.
(e) "Control" with respect to a certificated
security, uncertificated security, or security
entitlement has the meaning specified in Section 8-106.
A secured party has control over a commodity contract if
by agreement among the commodity customer, the commodity
intermediary, and the secured party, the commodity
intermediary has agreed that it will apply any value
distributed on account of the commodity contract as
directed by the secured party without further consent by
the commodity customer. If a commodity customer grants a
security interest in a commodity contract to its own
commodity intermediary, the commodity intermediary as
secured party has control. A secured party has control
over a securities account or commodity account if the
secured party has control over all security entitlements
or commodity contracts carried in the securities account
or commodity account.
(f) "Investment property" means:
(i) a security, whether certificated or
uncertificated;
(ii) a security entitlement;
(iii) a securities account;
(iv) a commodity contract; or
(v) a commodity account.
(2) Attachment or perfection of a security interest in a
securities account is also attachment or perfection of a
security interest in all security entitlements carried in the
securities account. Attachment or perfection of a security
interest in a commodity account is also attachment or
perfection of a security interest in all commodity contracts
carried in the commodity account.
(3) A description of collateral in a security agreement
or financing statement is sufficient to create or perfect a
security interest in a certificated security, uncertificated
security, security entitlement, securities account, commodity
contract, or commodity account whether it describes the
collateral by those terms, or as investment property, or by
description of the underlying security, financial asset, or
commodity contract. A description of investment property
collateral in a security agreement or financing statement is
sufficient if it identifies the collateral by specific
listing, by category, by quantity, by a computational or
allocational formula or procedure, or by any other method, if
the identity of the collateral is objectively determinable.
(4) Perfection of a security interest in investment
property is governed by the following rules:
(a) A security interest in investment property may
be perfected by control.
(b) Except as otherwise provided in paragraphs (c)
and (d), a security interest in investment property may
be perfected by filing.
(c) If the debtor is a broker or securities
intermediary a security interest in investment property
is perfected when it attaches. The filing of a financing
statement with respect to a security interest in
investment property granted by a broker or securities
intermediary has no effect for purposes of perfection or
priority with respect to that security interest.
(d) If a debtor is a commodity intermediary, a
security interest in a commodity contract or a commodity
account is perfected when it attaches. The filing of a
financing statement with respect to a security interest
in a commodity contract or a commodity account granted by
a commodity intermediary has no effect for purposes of
perfection or priority with respect to that security
interest.
(5) Priority between conflicting security interests in
the same investment property is governed by the following
rules:
(a) A security interest of a secured party who has
control over investment property has priority over a
security interest of a secured party who does not have
control over the investment property.
(b) Except as otherwise provided in paragraphs (c)
and (d), conflicting security interests of secured
parties each of whom has control rank equally.
(c) Except as otherwise agreed by the securities
intermediary, a security interest in a security
entitlement or a securities account granted to the
debtor's own securities intermediary has priority over
any security interest granted by the debtor to another
secured party.
(d) Except as otherwise agreed by the commodity
intermediary, a security interest in a commodity contract
or a commodity account granted to the debtor's own
commodity intermediary has priority over any security
interest granted by the debtor to another secured party.
(e) Conflicting security interests granted by a
broker, a securities intermediary, or a commodity
intermediary which are perfected without control rank
equally.
(f) In all other cases, priority between
conflicting security interests in investment property is
governed by Section 9-312(5), (6), and (7). Section
9-312(4) does not apply to investment property.
(6) If a security certificate in registered form is
delivered to a secured party pursuant to agreement, a written
security agreement is not required for attachment or
enforceability of the security interest, delivery suffices
for perfection of the security interest, and the security
interest has priority over a conflicting security interest
perfected by means other than control, even if a necessary
indorsement is lacking.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-116)
Sec. 9-116. (Blank). Security interest arising in
purchase or delivery of financial asset.
(1) If a person buys a financial asset through a
securities intermediary in a transaction in which the buyer
is obligated to pay the purchase price to the securities
intermediary at the time of the purchase, and the securities
intermediary credits the financial asset to the buyer's
securities account before the buyer pays the securities
intermediary, the securities intermediary has a security
interest in the buyer's security entitlement securing the
buyer's obligation to pay. A security agreement is not
required for attachment or enforceability of the security
interest, and the security interest is automatically
perfected.
(2) If a certificated security, or other financial asset
represented by a writing which in the ordinary course of
business is transferred by delivery with any necessary
indorsement or assignment is delivered pursuant to an
agreement between persons in the business of dealing with
such securities or financial assets and the agreement calls
for delivery versus payment, the person delivering the
certificate or other financial asset has a security interest
in the certificated security or other financial asset
securing the seller's right to receive payment. A security
agreement is not required for attachment or enforceability of
the security interest, and the security interest is
automatically perfected.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-150)
Sec. 9-150. (Blank). Secretary of State; rules. The
Secretary of State, under the Illinois Administrative
Procedure Act, may adopt rules necessary to administer the
Secretary of State's responsibilities under this Article.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/Art. 9, Part 2 heading)
PART 2. EFFECTIVENESS OF SECURITY AGREEMENT;
ATTACHMENT OF SECURITY INTEREST;
RIGHTS OF PARTIES TO SECURITY AGREEMENT
VALIDITY OF SECURITY AGREEMENT
AND RIGHTS OF PARTIES THERETO
(810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new)
SUBPART 1. EFFECTIVENESS AND ATTACHMENT
(810 ILCS 5/9-201) (from Ch. 26, par. 9-201)
Sec. 9-201. General effectiveness of security agreement.
(a) General effectiveness. Except as otherwise provided
in the Uniform Commercial Code, a security agreement is
effective according to its terms between the parties, against
purchasers of the collateral, and against creditors.
(b) Applicable consumer laws and other law. A
transaction subject to this Article is subject to any
applicable rule of law, statute, or regulation which
establishes a different rule for consumers, including:
(1) the Retail Installment Sales Act;
(2) the Motor Vehicle Retail Installment Sales Act;
(3) Article II of Chapter 3 of the Illinois Vehicle
Code;
(4) Article IIIB of the Boat Registration and
Safety Act;
(5) the Pawnbroker Regulation Act;
(6) the Motor Vehicle Leasing Act;
(7) the Consumer Installment Loan Act; and
(8) the Consumer Deposit Security Act of 1987.
(c) Other applicable law controls. In case of conflict
between this Article and a rule of law, statute, or
regulation described in subsection (b), the rule of law,
statute, or regulation controls. Failure to comply with a
rule of law, statute, or regulation described in subsection
(b) has only the effect such rule of law, statute, or
regulation specifies.
(d) Further deference to other applicable law. This
Article does not:
(1) validate any rate, charge, agreement, or
practice that violates a rule of law, statute, or
regulation described in subsection (b); or
(2) extend the application of the rule of law,
statute, or regulation to a transaction not otherwise
subject to it. General validity of security agreement.
Except as otherwise provided by this Act a security
agreement is effective according to its terms between the
parties, against purchasers of the collateral and against
creditors. Nothing in this Article validates any charge or
practice illegal under any statute or regulation thereunder
governing usury, small loans, retail installment sales, or
the like, or extends the application of any such statute or
regulation to any transaction not otherwise subject thereto.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-202) (from Ch. 26, par. 9-202)
Sec. 9-202. Title to collateral immaterial. Except as
otherwise provided with respect to consignments or sales of
accounts, chattel paper, payment intangibles, or promissory
notes, the provisions of this Article with regard to rights
and obligations apply whether title to collateral is in the
secured party or the debtor.
Each provision of this Article with regard to rights,
obligations and remedies applies whether title to collateral
is in the secured party or in the debtor.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-203) (from Ch. 26, par. 9-203)
Sec. 9-203. Attachment and enforceability of security
interest; proceeds; supporting obligations; formal
requisites.
(a) Attachment. A security interest attaches to
collateral when it becomes enforceable against the debtor
with respect to the collateral, unless an agreement expressly
postpones the time of attachment.
(b) Enforceability. Except as otherwise provided in
subsections (c) through (i), a security interest is
enforceable against the debtor and third parties with respect
to the collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the
power to transfer rights in the collateral to a secured
party; and
(3) one of the following conditions is met:
(A) the debtor has authenticated a security
agreement that provides a description of the
collateral and, if the security interest covers
timber to be cut, a description of the land
concerned;
(B) the collateral is not a certificated
security and is in the possession of the secured
party under Section 9-313 pursuant to the debtor's
security agreement;
(C) the collateral is a certificated security
in registered form and the security certificate has
been delivered to the secured party under Section
8-301 pursuant to the debtor's security agreement;
or
(D) the collateral is deposit accounts,
electronic chattel paper, investment property, or
letter-of-credit rights, and the secured party has
control under Section 9-104, 9-105, 9-106, or 9-107
pursuant to the debtor's security agreement.
(c) Other UCC provisions. Subsection (b) is subject to
Section 4-210 on the security interest of a collecting bank,
Section 5-118 on the security interest of a letter-of-credit
issuer or nominated person, Section 9-110 on a security
interest arising under Article 2 or 2A, and Section 9-206 on
security interests in investment property.
(d) When person becomes bound by another person's
security agreement. A person becomes bound as debtor by a
security agreement entered into by another person if, by
operation of law other than this Article or by contract:
(1) the security agreement becomes effective to
create a security interest in the person's property; or
(2) the person becomes generally obligated for the
obligations of the other person, including the obligation
secured under the security agreement, and acquires or
succeeds to all or substantially all of the assets of the
other person.
(e) Effect of new debtor becoming bound. If a new
debtor becomes bound as debtor by a security agreement
entered into by another person:
(1) the agreement satisfies subsection (b)(3) with
respect to existing or after-acquired property of the new
debtor to the extent the property is described in the
agreement; and
(2) another agreement is not necessary to make a
security interest in the property enforceable.
(f) Proceeds and supporting obligations. The attachment
of a security interest in collateral gives the secured party
the rights to proceeds provided by Section 9-315 and is also
attachment of a security interest in a supporting obligation
for the collateral.
(g) Lien securing right to payment. The attachment of a
security interest in a right to payment or performance
secured by a security interest or other lien on personal or
real property is also attachment of a security interest in
the security interest, mortgage, or other lien.
(h) Security entitlement carried in securities account.
The attachment of a security interest in a securities account
is also attachment of a security interest in the security
entitlements carried in the securities account.
(i) Commodity contracts carried in commodity account.
The attachment of a security interest in a commodity account
is also attachment of a security interest in the commodity
contracts carried in the commodity account. Attachment and
Enforceability of Security Interest; Proceeds; Requisites.
(1) Subject to the provisions of Section 4-208 on the
security interest of a collecting bank, Sections 9-115 and
9-116 on security interests in investment property, and
Section 9-113 on a security interest arising under the
Article on Sales, a security interest is not enforceable
against the debtor or third parties with respect to the
collateral and does not attach unless:
(a) the collateral is in the possession of the
secured party pursuant to agreement, the collateral is
investment property and the secured party has control
pursuant to agreement, or the debtor has signed a
security agreement which contains a description of the
collateral and, in addition, a description of the land
when the security agreement covers (i) crops growing or
to be grown and is signed by the debtor prior to January
1, 1996, or (ii) timber to be cut;
(b) value has been given; and
(c) the debtor has rights in the collateral.
(2) A security interest attaches when it becomes
enforceable against the debtor with respect to the
collateral. Attachment occurs as soon as all of the events
specified in subsection (1) have taken place unless explicit
agreement postpones the time of attaching.
(3) Unless otherwise agreed a security agreement gives
the secured party the rights to proceeds provided by Section
9-306.
(4) A transaction, although subject to this Article, is
also subject to the "Consumer Finance Act", approved July 10,
1935, as now or hereafter amended; the "Retail Installment
Sales Act", approved July 28, 1967, as now or hereafter
amended; the "Motor Vehicle Retail Installment Sales Act",
approved July 28, 1967, as now or hereafter amended; Article
II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of
the "Boat Registration and Safety Act", as now or hereafter
amended; and "An Act for the regulation of pawnbrokers, and
repealing a certain act therein named", approved June 9,
1909, as now or hereafter amended; and in the case of
conflict between the provisions of this Article and any such
statute, the provisions of such statute control. Failure to
comply with any applicable statute has only the effect which
is specified therein.
(Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96;
89-626, eff. 8-9-96.)
(810 ILCS 5/9-204) (from Ch. 26, par. 9-204)
Sec. 9-204. After-acquired property; future advances.
(a) After-acquired collateral. Except as otherwise
provided in subsection (b), a security agreement may create
or provide for a security interest in after-acquired
collateral.
(b) When after-acquired property clause not effective.
A security interest does not attach under a term constituting
an after-acquired property clause to:
(1) consumer goods, other than an accession when
given as additional security, unless the debtor acquires
rights in them within 10 days after the secured party
gives value; or
(2) a commercial tort claim.
(c) Future advances and other value. A security
agreement may provide that collateral secures, or that
accounts, chattel paper, payment intangibles, or promissory
notes are sold in connection with, future advances or other
value, whether or not the advances or value are given
pursuant to commitment. After-acquired property; future
advances.
(1) Except as provided in Subsection (2), a security
agreement may provide that any obligations covered by the
security agreement are to be secured by after-acquired
collateral.
(2) No security interest attaches under an
after-acquired property clause to consumer goods other than
accessions (Section 9-314) when given as additional security
unless the debtor acquires rights in them within 10 days
after the secured party gives value.
(3) Obligations covered by a security agreement may
include future advances or other value whether or not the
advances or value are given pursuant to commitment
(subsection (1) of Section 9-105).
(Source: P. A. 77-2810.)
(810 ILCS 5/9-205) (from Ch. 26, par. 9-205)
Sec. 9-205. Use or disposition of collateral
permissible.
(a) When security interest not invalid or fraudulent. A
security interest is not invalid or fraudulent against
creditors solely because:
(1) the debtor has the right or ability to:
(A) use, commingle, or dispose of all or part
of the collateral, including returned or repossessed
goods;
(B) collect, compromise, enforce, or otherwise
deal with collateral;
(C) accept the return of collateral or make
repossessions; or
(D) use, commingle, or dispose of proceeds; or
(2) the secured party fails to require the debtor
to account for proceeds or replace collateral.
(b) Requirements of possession not relaxed. This
Section does not relax the requirements of possession if
attachment, perfection, or enforcement of a security interest
depends upon possession of the collateral by the secured
party. Use or Disposition of Collateral Without Accounting
Permissible.
A security interest is not invalid or fraudulent against
creditors by reason of liberty in the debtor to use,
commingle or dispose of all or part of the collateral
(including returned or repossessed goods) or to collect or
compromise accounts or chattel paper, or to accept the return
of goods or make repossessions, or to use, commingle or
dispose of proceeds, or by reason of the failure of the
secured party to require the debtor to account for proceeds
or replace collateral. This Section does not relax the
requirements of possession where perfection of a security
interest depends upon possession of the collateral by the
secured party or by a bailee.
(Source: P.A. 77-2810.)
(810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1)
Sec. 9-205.1. Listing by debtor of purchasers or
receivers of collateral. A secured party may require that
the debtor include as part of the security agreement a list
of persons to whom the debtor desires to sell or otherwise
dispose of the collateral. The debtor shall not sell or
otherwise dispose of the collateral to a person not included
in that list unless the debtor has notified the secured party
of his desire to sell or otherwise dispose of the collateral
to such person at least 7 days prior to the sale or other
disposition.
(Source: P.A. 83-69.)
(810 ILCS 5/9-206) (from Ch. 26, par. 9-206)
Sec. 9-206. Security interest arising in purchase or
delivery of financial asset.
(a) Security interest when person buys through
securities intermediary. A security interest in favor of a
securities intermediary attaches to a person's security
entitlement if:
(1) the person buys a financial asset through the
securities intermediary in a transaction in which the
person is obligated to pay the purchase price to the
securities intermediary at the time of the purchase; and
(2) the securities intermediary credits the
financial asset to the buyer's securities account before
the buyer pays the securities intermediary.
(b) Security interest secures obligation to pay for
financial asset. The security interest described in
subsection (a) secures the person's obligation to pay for the
financial asset.
(c) Security interest in payment against delivery
transaction. A security interest in favor of a person that
delivers a certificated security or other financial asset
represented by a writing attaches to the security or other
financial asset if:
(1) the security or other financial asset:
(A) in the ordinary course of business is
transferred by delivery with any necessary
indorsement or assignment; and
(B) is delivered under an agreement between
persons in the business of dealing with such
securities or financial assets; and
(2) the agreement calls for delivery against
payment.
(d) Security interest secures obligation to pay for
delivery. The security interest described in subsection (c)
secures the obligation to make payment for the delivery.
Agreement not to assert defenses against assignee;
modification of sales warranties where security agreement
exists.
(1) Subject to any statute or decision which establishes
a different rule for buyers or lessees of consumer goods, an
agreement by a buyer or lessee that he will not assert
against an assignee any claim or defense which he may have
against the seller or lessor is enforceable by an assignee
who takes his assignment for value, in good faith and without
notice of a claim or defense, except as to defenses of a type
which may be asserted against a holder in due course of a
negotiable instrument under the Article on Commercial Paper
(Article 3). A buyer who as part of one transaction signs
both a negotiable instrument and a security agreement makes
such an agreement.
(2) When a seller retains a purchase money security
interest in goods the Article on Sales (Article 2) governs
the sale and any disclaimer, limitation or modification of
the seller's warranties.
(Source: Laws 1965, p. 803.)
(810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new)
SUBPART 2. RIGHTS AND DUTIES
(810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
Sec. 9-207. Rights and duties of secured party having
possession or control of collateral.
(a) Duty of care when secured party in possession.
Except as otherwise provided in subsection (d), a secured
party shall use reasonable care in the custody and
preservation of collateral in the secured party's possession.
In the case of chattel paper or an instrument, reasonable
care includes taking necessary steps to preserve rights
against prior parties unless otherwise agreed.
(b) Expenses, risks, duties, and rights when secured
party in possession. Except as otherwise provided in
subsection (d), if a secured party has possession of
collateral:
(1) reasonable expenses, including the cost of
insurance and payment of taxes or other charges, incurred
in the custody, preservation, use, or operation of the
collateral are chargeable to the debtor and are secured
by the collateral;
(2) the risk of accidental loss or damage is on the
debtor to the extent of a deficiency in any effective
insurance coverage;
(3) the secured party shall keep the collateral
identifiable, but fungible collateral may be commingled;
and
(4) the secured party may use or operate the
collateral:
(A) for the purpose of preserving the
collateral or its value;
(B) as permitted by an order of a court having
competent jurisdiction; or
(C) except in the case of consumer goods, in
the manner and to the extent agreed by the debtor.
(c) Duties and rights when secured party in possession
or control. Except as otherwise provided in subsection (d), a
secured party having possession of collateral or control of
collateral under Section 9-104, 9-105, 9-106, or 9-107:
(1) may hold as additional security any proceeds,
except money or funds, received from the collateral;
(2) shall apply money or funds received from the
collateral to reduce the secured obligation, unless
remitted to the debtor; and
(3) may create a security interest in the
collateral.
(d) Buyer of certain rights to payment. If the secured
party is a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor:
(1) subsection (a) does not apply unless the
secured party is entitled under an agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse
against the debtor or a secondary obligor based on
the nonpayment or other default of an account debtor
or other obligor on the collateral; and
(2) subsections (b) and (c) do not apply. Rights
and duties when collateral is in secured party's
possession.
(1) A secured party must use reasonable care in the
custody and preservation of collateral in his possession. In
the case of an instrument or chattel paper reasonable care
includes taking necessary steps to preserve rights against
prior parties unless otherwise agreed.
(2) Unless otherwise agreed, when collateral is in the
secured party's possession
(a) reasonable expenses (including the cost of any
insurance and payment of taxes or other charges) incurred in
the custody, preservation, use or operation of the collateral
are chargeable to the debtor and are secured by the
collateral;
(b) the risk of accidental loss or damage is on the
debtor to the extent of any deficiency in any effective
insurance coverage;
(c) the secured party may hold as additional
security any increase or profits (except money) received from
the collateral, but money so received, unless remitted to the
debtor, shall be applied in reduction of the secured
obligation;
(d) the secured party must keep the collateral
identifiable but fungible collateral may be commingled;
(e) the secured party may repledge the collateral
upon terms which do not impair the debtor's right to redeem
it.
(3) A secured party is liable for any loss caused by his
failure to meet any obligation imposed by the preceding
subsections but does not lose his security interest.
(4) A secured party may use or operate the collateral
for the purpose of preserving the collateral or its value or
pursuant to the order of a court of appropriate jurisdiction
or, except in the case of consumer goods, in the manner and
to the extent provided in the security agreement.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-208) (from Ch. 26, par. 9-208)
Sec. 9-208. Additional duties of secured party having
control of collateral.
(a) Applicability of Section. This Section applies to
cases in which there is no outstanding secured obligation and
the secured party is not committed to make advances, incur
obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from
debtor. Within 10 days after receiving an authenticated
demand by the debtor:
(1) a secured party having control of a deposit
account under Section 9-104(a)(2) shall send to the bank
with which the deposit account is maintained an
authenticated statement that releases the bank from any
further obligation to comply with instructions originated
by the secured party;
(2) a secured party having control of a deposit
account under Section 9-104(a)(3) shall:
(A) pay the debtor the balance on deposit in
the deposit account; or
(B) transfer the balance on deposit into a
deposit account in the debtor's name;
(3) a secured party, other than a buyer, having
control of electronic chattel paper under Section 9-105
shall:
(A) communicate the authoritative copy of the
electronic chattel paper to the debtor or its
designated custodian;
(B) if the debtor designates a custodian that
is the designated custodian with which the
authoritative copy of the electronic chattel paper
is maintained for the secured party, communicate to
the custodian an authenticated record releasing the
designated custodian from any further obligation to
comply with instructions originated by the secured
party and instructing the custodian to comply with
instructions originated by the debtor; and
(C) take appropriate action to enable the
debtor or its designated custodian to make copies of
or revisions to the authoritative copy which add or
change an identified assignee of the authoritative
copy without the consent of the secured party;
(4) a secured party having control of investment
property under Section 8-106(d)(2) or 9-106(b) shall send
to the securities intermediary or commodity intermediary
with which the security entitlement or commodity contract
is maintained an authenticated record that releases the
securities intermediary or commodity intermediary from
any further obligation to comply with entitlement orders
or directions originated by the secured party; and
(5) a secured party having control of a
letter-of-credit right under Section 9-107 shall send to
each person having an unfulfilled obligation to pay or
deliver proceeds of the letter of credit to the secured
party an authenticated release from any further
obligation to pay or deliver proceeds of the letter of
credit to the secured party. Request for statement of
account or list of collateral.
(1) A debtor may sign a statement indicating what he
believes to be the aggregate amount of unpaid indebtedness as
of a specified date and may send it to the secured party with
a request that the statement be approved or corrected and
returned to the debtor. When the security agreement or any
other record kept by the secured party identifies the
collateral a debtor may similarly request the secured party
to approve or correct a list of the collateral.
(2) The secured party must comply with such a request
within two weeks after receipt by sending a written
correction or approval. If the secured party claims a
security interest in all of a particular type of collateral
owned by the debtor he may indicate that fact in his reply
and need not approve or correct an itemized list of such
collateral. If the secured party without reasonable excuse
fails to comply he is liable for any loss caused to the
debtor thereby; and if the debtor has properly included in
his request a good faith statement of the obligation or a
list of the collateral or both the secured party may claim a
security interest only as shown in the statement against
persons misled by his failure to comply. If he no longer has
an interest in the obligation or collateral at the time the
request is received he must disclose the name and address of
any successor in interest known to him and he is liable for
any loss caused to the debtor as a result of failure to
disclose. A successor in interest is not subject to this
Section until a request is received by him.
(3) A debtor is entitled to such a statement once every
6 months without charge. The secured party may require
payment of a charge not exceeding $10 for each additional
statement furnished.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-209 new)
Sec. 9-209. Duties of secured party if account debtor
has been notified of assignment.
(a) Applicability of Section. Except as otherwise
provided in subsection (c), this Section applies if:
(1) there is no outstanding secured obligation; and
(2) the secured party is not committed to make
advances, incur obligations, or otherwise give value.
(b) Duties of secured party after receiving demand from
debtor. Within 10 days after receiving an authenticated
demand by the debtor, a secured party shall send to an
account debtor that has received notification of an
assignment to the secured party as assignee under Section
9-406(a) an authenticated record that releases the account
debtor from any further obligation to the secured party.
(c) Inapplicability to sales. This Section does not
apply to an assignment constituting the sale of an account,
chattel paper, or payment intangible.
(810 ILCS 5/9-210 new)
Sec. 9-210. Request for accounting; request regarding
list of collateral or statement of account.
(a) Definitions. In this Section:
(1) "Request" means a record of a type described in
paragraph (2), (3), or (4).
(2) "Request for an accounting" means a record
authenticated by a debtor requesting that the recipient
provide an accounting of the unpaid obligations secured
by collateral and reasonably identifying the transaction
or relationship that is the subject of the request.
(3) "Request regarding a list of collateral" means
a record authenticated by a debtor requesting that the
recipient approve or correct a list of what the debtor
believes to be the collateral securing an obligation and
reasonably identifying the transaction or relationship
that is the subject of the request.
(4) "Request regarding a statement of account"
means a record authenticated by a debtor requesting that
the recipient approve or correct a statement indicating
what the debtor believes to be the aggregate amount of
unpaid obligations secured by collateral as of a
specified date and reasonably identifying the transaction
or relationship that is the subject of the request.
(b) Duty to respond to requests. Subject to subsections
(c), (d), (e), and (f), a secured party, other than a buyer
of accounts, chattel paper, payment intangibles, or
promissory notes or a consignor, shall comply with a request
within 14 days after receipt:
(1) in the case of a request for an accounting, by
authenticating and sending to the debtor an accounting;
and
(2) in the case of a request regarding a list of
collateral or a request regarding a statement of account,
by authenticating and sending to the debtor an approval
or correction.
(c) Request regarding list of collateral; statement
concerning type of collateral. A secured party that claims a
security interest in all of a particular type of collateral
owned by the debtor may comply with a request regarding a
list of collateral by sending to the debtor an authenticated
record including a statement to that effect within 14 days
after receipt.
(d) Request regarding list of collateral; no interest
claimed. A person that receives a request regarding a list
of collateral, claims no interest in the collateral when it
receives the request, and claimed an interest in the
collateral at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an
authenticated record:
(1) disclaiming any interest in the collateral; and
(2) if known to the recipient, providing the name
and mailing address of any assignee of or successor to
the recipient's interest in the collateral.
(e) Request for accounting or regarding statement of
account; no interest in obligation claimed. A person that
receives a request for an accounting or a request regarding a
statement of account, claims no interest in the obligations
when it receives the request, and claimed an interest in the
obligations at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an
authenticated record:
(1) disclaiming any interest in the obligations;
and
(2) if known to the recipient, providing the name
and mailing address of any assignee of or successor to
the recipient's interest in the obligations.
(f) Charges for responses. A debtor is entitled without
charge to one response to a request under this Section during
any six-month period. The secured party may require payment
of a charge not exceeding $25 for each additional response.
(810 ILCS 5/Art. 9, Part 3 heading)
PART 3. PERFECTION AND PRIORITY
RIGHTS OF THIRD PARTIES;
PERFECTED AND UNPERFECTED SECURITY
INTERESTS: RULES OF PRIORITY
(810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new)
SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
(810 ILCS 5/9-301) (from Ch. 26, par. 9-301)
Sec. 9-301. Law governing perfection and priority of
security interests. Except as otherwise provided in Sections
9-303 through 9-306, the following rules determine the law
governing perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral:
(1) Except as otherwise provided in this Section,
while a debtor is located in a jurisdiction, the local
law of that jurisdiction governs perfection, the effect
of perfection or nonperfection, and the priority of a
security interest in collateral.
(2) While collateral is located in a jurisdiction,
the local law of that jurisdiction governs perfection,
the effect of perfection or nonperfection, and the
priority of a possessory security interest in that
collateral.
(3) Except as otherwise provided in paragraph (4),
while negotiable documents, goods, instruments, money, or
tangible chattel paper is located in a jurisdiction, the
local law of that jurisdiction governs:
(A) perfection of a security interest in the
goods by filing a fixture filing;
(B) perfection of a security interest in
timber to be cut; and
(C) the effect of perfection or nonperfection
and the priority of a nonpossessory security
interest in the collateral.
(4) The local law of the jurisdiction in which the
wellhead or minehead is located governs perfection, the
effect of perfection or nonperfection, and the priority
of a security interest in as-extracted collateral.
Persons Who Take Priority Over Unperfected Security
Interests; Rights of "Lien Creditor".
(1) Except as otherwise provided in subsection (2), an
unperfected security interest is subordinate to the rights of
(a) persons entitled to priority under Section
9-312;
(b) a person who becomes a lien creditor before the
security interest is perfected;
(c) in the case of goods, instruments, documents,
and chattel paper, a person who is not a secured party
and who is a transferee in bulk or other buyer not in
ordinary course of business or is a buyer of farm
products in ordinary course of business, to the extent
that he gives value and receives delivery of the
collateral without knowledge of the security interest and
before it is perfected;
(d) in the case of accounts, general intangibles,
and investment property, a person who is not a secured
party and who is a transferee to the extent that he gives
value without knowledge of the security interest and
before it is perfected;
provided, however, that an unperfected security interest
shall take priority over the rights of a lien creditor if (i)
the lien creditor is a trustee or receiver of a state or
federally chartered financial institution acting in
furtherance of its supervisory authority over the financial
institution and (ii) a security interest is granted by the
financial institution to secure a deposit of public funds
with the financial institution or a repurchase agreement with
the financial institution pursuant to the Government
Securities Act of 1986, as amended.
(2) If the secured party files with respect to a
purchase money security interest before or within 20 days
after the debtor receives possession of the collateral, he
takes priority over the rights of a transferee in bulk or of
a lien creditor which arise between the time the security
interest attaches and the time of filing.
(3) A "lien creditor" means a creditor who has acquired
a lien on the property involved by attachment, levy or the
like and includes an assignee for benefit of creditors from
the time of assignment, and a trustee in bankruptcy from the
date of the filing of the petition or a receiver in equity
from the time of appointment.
(4) A person who becomes a lien creditor while a
security interest is perfected takes subject to the security
interest only to the extent that it secures advances made
before he becomes a lien creditor or within 45 days
thereafter or made without knowledge of the lien or pursuant
to a commitment entered into without knowledge of the lien.
(Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.)
(810 ILCS 5/9-302) (from Ch. 26, par. 9-302)
Sec. 9-302. Law governing perfection and priority of
agricultural liens. While farm products are located in a
jurisdiction, the local law of that jurisdiction governs
perfection, the effect of perfection or nonperfection, and
the priority of an agricultural lien on the farm products.
When filing is required to perfect security interest;
security interests to which filing provisions of this Article
do not apply.
(1) A financing statement must be filed to perfect all
security interests except the following:
(a) a security interest in collateral in possession
of the secured party under Section 9-305;
(b) a security interest temporarily perfected in
instruments, certificated securities, or documents
without delivery under Section 9-304 or in proceeds for a
20 day period under Section 9-306;
(c) a security interest created by an assignment of
a beneficial interest in a trust or a decedent's estate;
(d) a purchase money security interest in consumer
goods; but filing is required for a motor vehicle
required to be registered; and fixture filing is required
for priority over conflicting interests in fixtures to
the extent provided in Section 9-313;
(e) an assignment of accounts which does not alone
or in conjunction with other assignments to the same
assignee transfer a significant part of the outstanding
accounts of the assignor;
(f) a security interest of a collecting bank
(Section 4-208) or arising under the Article on Sales
(see Section 9-113) or covered in subsection (3) of this
Section;
(g) an assignment for the benefit of all creditors
of the transferor, and subsequent transfers by the
assignee thereunder;
(h) a security interest in investment property
which is perfected without filing under Section 9-115 or
Section 9-116;
(i) a security interest in a deposit account. Such
a security interest is perfected:
(i) as to a deposit account maintained with
the secured party, when the security agreement is
executed;
(ii) as to a deposit account maintained with
any organization other than the secured party, when
notice thereof is given in writing to the
organization with whom the deposit account is
maintained and that organization provides written
acknowledgement of and consent to the notice of the
secured party.
(j) a security interest in an uncertificated
certificate of deposit. Such a security interest is
perfected;
(i) as to an uncertificated certificate of
deposit issued by the secured party, when the
security agreement is executed;
(ii) as to an uncertificated certificate of
deposit issued by any organization other than the
secured party, when notice thereof is given in
writing to the issuer of the uncertificated
certificate of deposit and the issuer provides
written acknowledgement of and consent to the notice
of the secured party.
(2) If a secured party assigns a perfected security
interest, no filing under this Article is required in order
to continue the perfected status of the security interest
against creditors of and transferees from the original
debtor.
(3) The filing of a financing statement otherwise
required by this Article is not necessary or effective to
perfect a security interest in property subject to
(a) a statute or treaty of the United States which
provides for a national or international registration or
a national or international certificate of title or which
specifies a place of filing different from that specified
in this Article for filing of the security interest; or
(b) the following statutes of this State: the
Illinois Vehicle Code; the Boat Registration and Safety
Act; but during any period in which collateral is
inventory held for sale by a person who is in the
business of selling goods of that kind, the filing
provisions of this Article (Part 4) apply to a security
interest in that collateral created by him as debtor; or
(c) a certificate of title statute of another
jurisdiction under the law of which indication of a
security interest on the certificate is required as a
condition of perfection (subsection (2) of Section
9-103).
(4) Compliance with a statute or treaty described in
subsection (3) is equivalent to the filing of a financing
statement under this Article, and a security interest in
property subject to the statute or treaty can be perfected
only by compliance therewith except as provided in Section
9-103 on multiple state transactions. Duration and renewal of
perfection of a security interest perfected by compliance
with the statute or treaty are governed by the provisions of
the statute or treaty; in other respects the security
interest is subject to this Article.
(Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.)
(810 ILCS 5/9-303) (from Ch. 26, par. 9-303)
Sec. 9-303. Law governing perfection and priority of
security interests in goods covered by a certificate of
title.
(a) Applicability of Section. This Section applies to
goods covered by a certificate of title, even if there is no
other relationship between the jurisdiction under whose
certificate of title the goods are covered and the goods or
the debtor.
(b) When goods covered by certificate of title. Goods
become covered by a certificate of title when a valid
application for the certificate of title and the applicable
fee are delivered to the appropriate authority. Goods cease
to be covered by a certificate of title at the earlier of the
time the certificate of title ceases to be effective under
the law of the issuing jurisdiction or the time the goods
become covered subsequently by a certificate of title issued
by another jurisdiction.
(c) Applicable law. The local law of the jurisdiction
under whose certificate of title the goods are covered
governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
goods covered by a certificate of title from the time the
goods become covered by the certificate of title until the
goods cease to be covered by the certificate of title. When
security interest is perfected; continuity of perfection.
(1) A security interest is perfected when it has
attached and when all of the applicable steps required for
perfection have been taken. Such steps are specified in
Sections 9--302, 9--304, 9--305 and 9--306. If such steps are
taken before the security interest attaches, it is perfected
at the time when it attaches.
(2) If a security interest is originally perfected in
any way permitted under this Article and is subsequently
perfected in some other way under this Article, without an
intermediate period when it was unperfected, the security
interest shall be deemed to be perfected continuously for the
purposes of this Article.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-304) (from Ch. 26, par. 9-304)
Sec. 9-304. Law governing perfection and priority of
security interests in deposit accounts.
(a) Law of bank's jurisdiction governs. The local law
of a bank's jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in a deposit account maintained with that bank.
(b) Bank's jurisdiction. The following rules determine
a bank's jurisdiction for purposes of this Part:
(1) If an agreement between the bank and the debtor
governing the deposit account expressly provides that a
particular jurisdiction is the bank's jurisdiction for
purposes of this Part, this Article, or the Uniform
Commercial Code, that jurisdiction is the bank's
jurisdiction.
(2) If paragraph (1) does not apply and an
agreement between the bank and its customer governing the
deposit account expressly provides that the agreement is
governed by the law of a particular jurisdiction, that
jurisdiction is the bank's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2)
applies and an agreement between the bank and its
customer governing the deposit account expressly provides
that the deposit account is maintained at an office in a
particular jurisdiction, that jurisdiction is the bank's
jurisdiction.
(4) If none of the preceding paragraphs applies,
the bank's jurisdiction is the jurisdiction in which the
office identified in an account statement as the office
serving the customer's account is located.
(5) If none of the preceding paragraphs applies,
the bank's jurisdiction is the jurisdiction in which the
chief executive office of the bank is located. Perfection
of security interest in instruments, documents, proceeds
of a written letter of credit, and goods covered by
documents; perfection by permissive filing; temporary
perfection without filing or transfer of possession.
(1) A security interest in chattel paper or negotiable
documents may be perfected by filing. A security interest in
the rights to proceeds of a written letter of credit can be
perfected only by the secured party's taking possession of
the letter of credit. A security interest in money or
instruments (other than instruments which constitute part of
chattel paper) can be perfected only by the secured party's
taking possession, except as provided in subsections (4) and
(5) of this Section and subsections (2) and (3) of Section
9-306 on proceeds.
(2) During the period that goods are in the possession
of the issuer of a negotiable document therefor, a security
interest in the goods is perfected by perfecting a security
interest in the document, and any security interest in the
goods otherwise perfected during such period is subject
thereto.
(3) A security interest in goods in the possession of a
bailee other than one who has issued a negotiable document
therefor is perfected by issuance of a document in the name
of the secured party or by the bailee's receipt of
notification of the secured party's interest or by filing as
to the goods.
(4) A security interest in instruments, certificated
securities, or negotiable documents is perfected without
filing or the taking of possession for a period of 21 days
from the time it attaches to the extent that it arises for
new value given under a written security agreement.
(5) A security interest remains perfected for a period
of 21 days without filing where a secured party having a
perfected security interest in an instrument, a certificated
security, a negotiable document, or goods in possession of a
bailee other than one who has issued a negotiable document
therefor.
(a) makes available to the debtor the goods or
documents representing the goods for the purpose of
ultimate sale or exchange or for the purpose of loading,
unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with them
in a manner preliminary to their sale or exchange, but
priority between conflicting security interests in the
goods is subject to subsection (3) of Section 9-312; or
(b) delivers the instrument or certificated
security to the debtor for the purpose of ultimate sale
or exchange or of presentation, collection, renewal or
registration of transfer.
(6) After the 21 day period in subsections (4) and (5)
perfection depends upon compliance with applicable provisions
of this Article.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
(810 ILCS 5/9-305) (from Ch. 26, par. 9-305)
Sec. 9-305. Law governing perfection and priority of
security interests in investment property.
(a) Governing law: general rules. Except as otherwise
provided in subsection (c), the following rules apply:
(1) While a security certificate is located in a
jurisdiction, the local law of that jurisdiction governs
perfection, the effect of perfection or nonperfection,
and the priority of a security interest in the
certificated security represented thereby.
(2) The local law of the issuer's jurisdiction as
specified in Section 8-110(d) governs perfection, the
effect of perfection or nonperfection, and the priority
of a security interest in an uncertificated security.
(3) The local law of the securities intermediary's
jurisdiction as specified in Section 8-110(e) governs
perfection, the effect of perfection or nonperfection,
and the priority of a security interest in a security
entitlement or securities account.
(4) The local law of the commodity intermediary's
jurisdiction governs perfection, the effect of perfection
or nonperfection, and the priority of a security interest
in a commodity contract or commodity account.
(b) Commodity intermediary's jurisdiction. The
following rules determine a commodity intermediary's
jurisdiction for purposes of this Part:
(1) If an agreement between the commodity
intermediary and commodity customer governing the
commodity account expressly provides that a particular
jurisdiction is the commodity intermediary's jurisdiction
for purposes of this Part, this Article, or the Uniform
Commercial Code, that jurisdiction is the commodity
intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an
agreement between the commodity intermediary and
commodity customer governing the commodity account
expressly provides that the agreement is governed by the
law of a particular jurisdiction, that jurisdiction is
the commodity intermediary's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2)
applies and an agreement between the commodity
intermediary and commodity customer governing the
commodity account expressly provides that the commodity
account is maintained at an office in a particular
jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(4) If none of the preceding paragraphs applies,
the commodity intermediary's jurisdiction is the
jurisdiction in which the office identified in an account
statement as the office serving the commodity customer's
account is located.
(5) If none of the preceding paragraphs applies,
the commodity intermediary's jurisdiction is the
jurisdiction in which the chief executive office of the
commodity intermediary is located.
(c) When perfection governed by law of jurisdiction
where debtor located. The local law of the jurisdiction in
which the debtor is located governs:
(1) perfection of a security interest in investment
property by filing;
(2) automatic perfection of a security interest in
investment property created by a broker or securities
intermediary; and
(3) automatic perfection of a security interest in
a commodity contract or commodity account created by a
commodity intermediary. When possession by secured party
perfects security interest without filing. A security
interest in goods, instruments, money, negotiable
documents, or chattel paper may be perfected by the
secured party's taking possession of the collateral. A
security interest in the right to proceeds of a written
letter of credit may be perfected by the secured party's
taking possession of the letter of credit. If such
collateral other than goods covered by a negotiable
document is held by a bailee, the secured party is deemed
to have possession from the time the bailee receives
notification of the secured party's interest. A security
interest is perfected by possession from the time
possession is taken without relation back and continues
only so long as possession is retained, unless otherwise
specified in this Article. The security interest may be
otherwise perfected as provided in this Article before or
after the period of possession by the secured party.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
(810 ILCS 5/9-306) (from Ch. 26, par. 9-306)
Sec. 9-306. Law governing perfection and priority of
security interests in letter-of-credit rights.
(a) Governing law: issuer's or nominated person's
jurisdiction. Subject to subsection (c), the local law of the
issuer's jurisdiction or a nominated person's jurisdiction
governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in a
letter-of-credit right if the issuer's jurisdiction or
nominated person's jurisdiction is a State.
(b) Issuer's or nominated person's jurisdiction. For
purposes of this Part, an issuer's jurisdiction or nominated
person's jurisdiction is the jurisdiction whose law governs
the liability of the issuer or nominated person with respect
to the letter-of-credit right as provided in Section 5-116.
(c) When Section not applicable. This Section does not
apply to a security interest that is perfected only under
Section 9-308(d). "Proceeds"; Secured Party's Rights on
Disposition of Collateral.
(1) "Proceeds" includes whatever is received upon the
sale, exchange, collection or other disposition of collateral
or proceeds. Insurance payable by reason of loss or damage to
the collateral is proceeds, except to the extent that it is
payable to a person other than a party to the security
agreement. Any payments or distributions made with respect to
investment property collateral are proceeds. Money, checks,
deposit accounts, and the like are "cash proceeds". All other
proceeds are "non-cash proceeds".
(2) Except where this Article otherwise provides, a
security interest continues in collateral notwithstanding
sale, exchange or other disposition thereof unless the
disposition was authorized by the secured party in the
security agreement or otherwise, and also continues in any
identifiable proceeds including collections received by the
debtor.
(3) The security interest in proceeds is a continuously
perfected security interest if the interest in the original
collateral was perfected but it ceases to be a perfected
security interest and becomes unperfected 20 days after
receipt of the proceeds by the debtor unless
(a) a filed financing statement covers the original
collateral and the proceeds are collateral in which a
security interest may be perfected by filing in the
office or offices where the financing statement has been
filed and, if the proceeds are acquired with cash
proceeds, the description of collateral in the financing
statement indicates the types of property constituting
the proceeds; or
(b) a filed financing statement covers the original
collateral and the proceeds are identifiable cash
proceeds;
(c) the original collateral was investment property
and the proceeds are identifiable cash proceeds; or
(d) the security interest in the proceeds is
perfected before the expiration of the 20 day period.
Except as provided in this Section, a security interest
in proceeds can be perfected only by the methods or under the
circumstances permitted in this Article for original
collateral of the same type.
(4) In the event of insolvency proceedings instituted by
or against a debtor, a secured party with a perfected
security interest in proceeds has a perfected security
interest only in the following proceeds:
(a) in identifiable non-cash proceeds and in
separate deposit accounts containing only proceeds;
(b) in identifiable cash proceeds in the form of
money which is neither commingled with other money nor
deposited in a deposit account prior to the insolvency
proceedings;
(c) in identifiable cash proceeds in the form of
checks and the like which are not deposited in a deposit
account prior to the insolvency proceedings; and
(d) in all cash and deposit accounts of the debtor
in which proceeds have been commingled with other funds,
but the perfected security interest under this paragraph
(d) is
(i) subject to any right to set-off; and
(ii) limited to an amount not greater than the
amount of any cash proceeds received by the debtor
within 20 days before the institution of the
insolvency proceedings less the sum of (I) the
payments to the secured party on account of cash
proceeds received by the debtor during such period
and (II) the cash proceeds received by the debtor
during such period to which the secured party is
entitled under paragraphs (a) through (c) of this
subsection (4).
(5) If a sale of goods results in an account or chattel
paper which is transferred by the seller to a secured party,
and if the goods are returned to or are repossessed by the
seller or the secured party, the following rules determine
priorities:
(a) If the goods were collateral at the time of
sale, for an indebtedness of the seller which is still
unpaid, the original security interest attaches again to
the goods and continues as a perfected security interest
if it was perfected at the time when the goods were sold.
If the security interest was originally perfected by a
filing which is still effective, nothing further is
required to continue the perfected status; in any other
case, the secured party must take possession of the
returned or repossessed goods or must file.
(b) An unpaid transferee of the chattel paper has a
security interest in the goods against the transferor.
Such security interest is prior to a security interest
asserted under paragraph (a) to the extent that the
transferee of the chattel paper was entitled to priority
under Section 9-308.
(c) An unpaid transferee of the account has a
security interest in the goods against the transferor.
Such security interest is subordinate to a security
interest asserted under paragraph (a).
(d) A security interest of an unpaid transferee
asserted under paragraph (b) or (c) must be perfected for
protection against creditors of the transferor and
purchasers of the returned or repossessed goods.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01)
Sec. 9-306.01. (Blank). Debtor disposing of collateral
and failing to pay secured party amount due under security
agreement; penalties for violation.
(1) It is unlawful for a debtor under the terms of a
security agreement (a) who has no right of sale or other
disposition of the collateral or (b) who has a right of sale
or other disposition of the collateral and is to account to
the secured party for the proceeds of any sale or other
disposition of the collateral, to sell or otherwise dispose
of the collateral and willfully and wrongfully to fail to pay
the secured party the amount of said proceeds due under the
security agreement. Failure to pay such proceeds to the
secured party within 10 days after the sale or other
disposition of the collateral is prima facie evidence of a
willful and wanton failure to pay.
(2) An individual convicted of a violation of this
Section shall be guilty of a Class 3 felony.
(3) A corporation convicted of a violation of this
Section shall be guilty of a business offense and shall be
fined not less than two thousand dollars nor more than ten
thousand dollars.
(4) In the event the debtor under the terms of a
security agreement is a corporation or a partnership, any
officer, director, manager, or managerial agent of the debtor
who violates this Section or causes the debtor to violate
this Section shall be guilty of a Class 3 felony.
(Source: P.A. 83-69.)
(810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02)
Sec. 9-306.02. (Blank). (1) Where, pursuant to Section
9-205.1, a secured party has required that before the debtor
sells or otherwise disposes of collateral in the debtor's
possession he disclose to the secured party the persons to
whom he desires to sell or otherwise dispose of such
collateral, it is unlawful for the debtor to sell or
otherwise dispose of the collateral to a person other than a
person so disclosed to the secured party.
(2) An individual convicted of a violation of this
Section shall be guilty of a Class A misdemeanor.
(3) A corporation convicted of a violation of this
Section shall be guilty of a business offense and shall be
fined not less than $2,000 nor more than $10,000.
(4) In the event the debtor under the terms of a
security agreement is a corporation or a partnership, any
officer, director, manager or managerial agent of the debtor
who violates this Section or causes the debtor to violate
this Section shall be guilty of a Class A misdemeanor.
(5) It is an affirmative defense to a prosecution for
the violation of this Section that the debtor has paid to the
secured party the proceeds from the sale or other disposition
of the collateral within 10 days after such sale or
disposition.
(Source: P.A. 84-1372.)
(810 ILCS 5/9-307) (from Ch. 26, par. 9-307)
Sec. 9-307. Location of debtor.
(a) "Place of business." In this Section, "place of
business" means a place where a debtor conducts its affairs.
(b) Debtor's location: general rules. Except as
otherwise provided in this Section, the following rules
determine a debtor's location:
(1) A debtor who is an individual is located at the
individual's principal residence.
(2) A debtor that is an organization and has only
one place of business is located at its place of
business.
(3) A debtor that is an organization and has more
than one place of business is located at its chief
executive office.
(c) Limitation of applicability of subsection (b).
Subsection (b) applies only if a debtor's residence, place of
business, or chief executive office, as applicable, is
located in a jurisdiction whose law generally requires
information concerning the existence of a nonpossessory
security interest to be made generally available in a filing,
recording, or registration system as a condition or result of
the security interest's obtaining priority over the rights of
a lien creditor with respect to the collateral. If
subsection (b) does not apply, the debtor is located in the
District of Columbia.
(d) Continuation of location: cessation of existence,
etc. A person that ceases to exist, have a residence, or
have a place of business continues to be located in the
jurisdiction specified by subsections (b) and (c).
(e) Location of registered organization organized under
State law. A registered organization that is organized under
the law of a State is located in that State.
(f) Location of registered organization organized under
federal law; bank branches and agencies. Except as otherwise
provided in subsection (i), a registered organization that is
organized under the law of the United States and a branch or
agency of a bank that is not organized under the law of the
United States or a State are located:
(1) in the State that the law of the United States
designates, if the law designates a State of location;
(2) in the State that the registered organization,
branch, or agency designates, if the law of the United
States authorizes the registered organization, branch, or
agency to designate its State of location; or
(3) in the District of Columbia, if neither
paragraph (1) nor paragraph (2) applies.
(g) Continuation of location: change in status of
registered organization. A registered organization continues
to be located in the jurisdiction specified by subsection (e)
or (f) notwithstanding:
(1) the suspension, revocation, forfeiture, or
lapse of the registered organization's status as such in
its jurisdiction of organization; or
(2) the dissolution, winding up, or cancellation of
the existence of the registered organization.
(h) Location of United States. The United States is
located in the District of Columbia.
(i) Location of foreign bank branch or agency if
licensed in only one State. A branch or agency of a bank
that is not organized under the law of the United States or a
State is located in the State in which the branch or agency
is licensed, if all branches and agencies of the bank are
licensed in only one State.
(j) Location of foreign air carrier. A foreign air
carrier under the Federal Aviation Act of 1958, as amended,
is located at the designated office of the agent upon which
service of process may be made on behalf of the carrier.
(k) Section applies only to this Part. This Section
applies only for purposes of this Part. Protection of Buyers
of Goods.
(1) Except as provided in subsection (4), a buyer in the
ordinary course of business, as defined in subsection (9) of
Section 1-201, takes free of a security interest created by
his seller even though the security interest is perfected and
even though the buyer knows of its existence.
(2) In the case of consumer goods, a buyer takes free of
a security interest even though perfected if he buys without
knowledge of the security interest, for value and for his own
personal, family or household purposes unless prior to the
purchase the secured party has filed a financing statement
covering such goods.
(3) A buyer other than a buyer in ordinary course of
business (subsection (1) of this Section) takes free of a
security interest to the extent that it secures future
advances made after the secured party acquires knowledge of
the purchase, or more than 45 days after the purchase,
whichever first occurs, unless made pursuant to a commitment
entered into without knowledge of the purchase and before the
expiration of the 45 day period.
(4) A buyer of farm products takes subject to a security
interest created by the seller if:
(a) within one year before the sale of the farm
products, the buyer has received from the secured party
or the seller written notice of the security interest
organized according to farm products that:
(i) is an original or reproduced copy thereof;
(ii) contains,
(I) the name and address of the secured
party;
(II) the name and address of the person
indebted to the secured party;
(III) the social security number of the
debtor or, in the case of a debtor doing
business other than as an individual, the
Internal Revenue Service taxpayer
identification number of such debtor;
(IV) a description of the farm products
subject to the security interest created by the
debtor, including the amount of such products
where applicable, crop year, county, and a
reasonable description of the property;
(iii) must be amended in writing, within 3
months, similarly signed and transmitted, to reflect
material changes;
(iv) will lapse on either the expiration
period of the statement or the transmission of a
notice signed by the secured party that the
statement has lapsed, whichever occurs first; and
(v) sets forth any payment obligations imposed
on the buyer by the secured party as conditions for
waiver or release of the security interest; and
(b) the buyer has failed to perform the payment
obligations.
For the purposes of this subsection (4), a buyer of farm
products has received notice from the secured party or seller
when written notice of the security interest is sent to the
buyer by registered or certified mail.
(Source: P.A. 84-1372; revised 10-31-98.)
(810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1)
Sec. 9-307.1. (Blank). A commission merchant or selling
agent who sells a farm product for others shall be subject to
a security interest created by the seller in such farm
product if-
(a) within one year before the sale of the farm
products, the buyer has received from the secured party or
the seller written notice of the security interest organized
according to farm products that:
(i) is an original or reproduced copy thereof;
(ii) contains,
(I) the name and address of the secured party;
(II) the name and address of the person indebted to the
secured party;
(III) the social security number of the debtor or, in
the case of a debtor doing business other than as an
individual, the Internal Revenue Service taxpayer
identification number of such debtor;
(IV) a description of the farm products subject to the
security interest created by the debtor, including the amount
of such products where applicable, crop year, county, and a
reasonable description of the property;
(iii) must be amended in writing, within 3 months,
similarly signed and transmitted, to reflect material
changes;
(iv) will lapse on either the expiration period of the
statement or the transmission of a notice signed by the
secured party that the statement has lapsed, whichever occurs
first; and
(v) sets forth any payment obligations imposed on the
buyer by the secured party as conditions for waiver or
release of the security interest; and
(b) the commission merchant or selling agent has failed
to perform the payment obligations.
For the purposes of this Section, a commission merchant
or selling agent has received notice from the secured party
or seller when written notice of the security interest is
sent to the commission merchant or selling agent by
registered or certified mail.
(Source: P.A. 84-1372.)
(810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2)
Sec. 9-307.2. (Blank). A commission merchant or
selling agent who sells farm products for others, and
any person buying farm products in the ordinary course
of business from a person engaged in farming operations,
shall post at each licensed location where said
merchant, agent or person buying farm products in the
ordinary course of business does business a notice
which shall read as follows:
"NOTICE TO SELLERS OF FARM PRODUCTS
It is a criminal offense to sell farm products subject to
a security interest without making payment to the secured
party. You should notify the purchaser if there is a security
interest in the farm products you are selling."
Such notice shall be posted in a conspicuous manner and
shall be in contrasting type, large enough to be read from a
distance of 10 feet.
(Source: P.A. 83-69.)
(810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new)
SUBPART 2. PERFECTION
(810 ILCS 5/9-308) (from Ch. 26, par. 9-308)
Sec. 9-308. When security interest or agricultural lien
is perfected; continuity of perfection.
(a) Perfection of security interest. Except as
otherwise provided in this Section and Section 9-309, a
security interest is perfected if it has attached and all of
the applicable requirements for perfection in Sections 9-310
through 9-316 have been satisfied. A security interest is
perfected when it attaches if the applicable requirements are
satisfied before the security interest attaches.
(b) Perfection of agricultural lien. An agricultural
lien is perfected if it has become effective and all of the
applicable requirements for perfection in Section 9-310 have
been satisfied. An agricultural lien is perfected when it
becomes effective if the applicable requirements are
satisfied before the agricultural lien becomes effective.
(c) Continuous perfection; perfection by different
methods. A security interest or agricultural lien is
perfected continuously if it is originally perfected by one
method under this Article and is later perfected by another
method under this Article, without an intermediate period
when it was unperfected.
(d) Supporting obligation. Perfection of a security
interest in collateral also perfects a security interest in a
supporting obligation for the collateral.
(e) Lien securing right to payment. Perfection of a
security interest in a right to payment or performance also
perfects a security interest in a security interest,
mortgage, or other lien on personal or real property securing
the right.
(f) Security entitlement carried in securities account.
Perfection of a security interest in a securities account
also perfects a security interest in the security
entitlements carried in the securities account.
(g) Commodity contract carried in commodity account.
Perfection of a security interest in a commodity account also
perfects a security interest in the commodity contracts
carried in the commodity account. Purchase of Chattel Paper
and Instruments.
A purchaser of chattel paper or an instrument who gives
new value and takes possession of it in the ordinary course
of his business has priority over a security interest in the
chattel paper or instrument
(a) which is perfected under Section 9-304 (permissive
filing and temporary perfection) or under Section 9-306
(perfection as to proceeds) if he acts without knowledge that
the specific paper or instrument is subject to a security
interest; or
(b) which is claimed merely as proceeds of inventory
subject to a security interest (Section 9-306) even though he
knows that the specific paper or instrument is subject to the
security interest.
(Source: P. A. 77-2810.)
(810 ILCS 5/9-309) (from Ch. 26, par. 9-309)
Sec. 9-309. Security interest perfected upon attachment.
The following security interests are perfected when they
attach:
(1) a purchase-money security interest in consumer
goods, except as otherwise provided in Section 9-311(b)
with respect to consumer goods that are subject to a
statute or treaty described in Section 9-311(a);
(2) an assignment of accounts or payment
intangibles which does not by itself or in conjunction
with other assignments to the same assignee transfer a
significant part of the assignor's outstanding accounts
or payment intangibles;
(3) a sale of a payment intangible;
(4) a sale of a promissory note;
(5) a security interest created by the assignment
of a health-care-insurance receivable to the provider of
the health-care goods or services;
(6) a security interest arising under Section
2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor
obtains possession of the collateral;
(7) a security interest of a collecting bank
arising under Section 4-210;
(8) a security interest of an issuer or nominated
person arising under Section 5-118;
(9) a security interest arising in the delivery of
a financial asset under Section 9-206(c);
(10) a security interest in investment property
created by a broker or securities intermediary;
(11) a security interest in a commodity contract or
a commodity account created by a commodity intermediary;
(12) an assignment for the benefit of all creditors
of the transferor and subsequent transfers by the
assignee thereunder; and
(13) a security interest created by an assignment
of a beneficial interest in a decedent's estate.
Protection of purchasers of instruments, documents and
securities. Nothing in this Article limits the rights of
a holder in due course of a negotiable instrument
(Section 3-302) or a holder to whom a negotiable document
of title has been duly negotiated (Section 7-501) or a
protected purchaser of a security (Section 8-303) and
such holders or purchasers take priority over an earlier
security interest even though perfected. Filing under
this Article does not constitute notice of the security
interest to such holders or purchasers.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-310) (from Ch. 26, par. 9-310)
Sec. 9-310. When filing required to perfect security
interest or agricultural lien; security interests and
agricultural liens to which filing provisions do not apply.
(a) General rule: perfection by filing. Except as
otherwise provided in subsection (b) and Section 9-312(b), a
financing statement must be filed to perfect all security
interests and agricultural liens.
(b) Exceptions: filing not necessary. The filing of a
financing statement is not necessary to perfect a security
interest:
(1) that is perfected under Section 9-308(d), (e),
(f), or (g);
(2) that is perfected under Section 9-309 when it
attaches;
(3) in property subject to a statute, regulation,
or treaty described in Section 9-311(a);
(4) in goods in possession of a bailee which is
perfected under Section 9-312(d)(1) or (2);
(5) in certificated securities, documents, goods,
or instruments which is perfected without filing or
possession under Section 9-312(e), (f), or (g);
(6) in collateral in the secured party's possession
under Section 9-313;
(7) in a certificated security which is perfected
by delivery of the security certificate to the secured
party under Section 9-313;
(8) in deposit accounts, electronic chattel paper,
investment property, or letter-of-credit rights which is
perfected by control under Section 9-314;
(9) in proceeds which is perfected under Section
9-315; or
(10) that is perfected under Section 9-316.
(c) Assignment of perfected security interest. If a
secured party assigns a perfected security interest or
agricultural lien, a filing under this Article is not
required to continue the perfected status of the security
interest against creditors of and transferees from the
original debtor. Priority of certain liens arising by
operation of law.
When a person in the ordinary course of his business
furnishes services or materials with respect to goods subject
to a security interest, a lien upon goods in the possession
of such person given by statute or rule of law for such
materials or services takes priority over a perfected
security interest unless the lien is statutory and the
statute expressly provides otherwise.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-311) (from Ch. 26, par. 9-311)
Sec. 9-311. Perfection of security interests in property
subject to certain statutes, regulations, and treaties.
(a) Security interest subject to other law. Except as
otherwise provided in subsection (d), the filing of a
financing statement is not necessary or effective to perfect
a security interest in property subject to:
(1) a statute, regulation, or treaty of the United
States whose requirements for a security interest's
obtaining priority over the rights of a lien creditor
with respect to the property preempt Section 9-310(a);
(2) the Illinois Vehicle Code or the Boat
Registration and Safety Act; or
(3) a certificate-of-title statute of another
jurisdiction which provides for a security interest to be
indicated on the certificate as a condition or result of
the security interest's obtaining priority over the
rights of a lien creditor with respect to the property.
(b) Compliance with other law. Compliance with the
requirements of a statute, regulation, or treaty described in
subsection (a) for obtaining priority over the rights of a
lien creditor is equivalent to the filing of a financing
statement under this Article. Except as otherwise provided
in subsection (d) and Sections 9-313 and 9-316(d) and (e) for
goods covered by a certificate of title, a security interest
in property subject to a statute, regulation, or treaty
described in subsection (a) may be perfected only by
compliance with those requirements, and a security interest
so perfected remains perfected notwithstanding a change in
the use or transfer of possession of the collateral.
(c) Duration and renewal of perfection. Except as
otherwise provided in subsection (d) and Section 9-316(d) and
(e), duration and renewal of perfection of a security
interest perfected by compliance with the requirements
prescribed by a statute, regulation, or treaty described in
subsection (a) are governed by the statute, regulation, or
treaty. In other respects, the security interest is subject
to this Article.
(d) Inapplicability to certain inventory. During any
period in which collateral subject to a statute specified in
subsection (a)(2) is inventory held for sale or lease by a
person or leased by that person as lessor and that person is
in the business of selling or leasing goods of that kind,
this Section does not apply to a security interest in that
collateral created by that person as debtor. Alienability of
debtor's rights: judicial process.
The debtor's rights in collateral may be voluntarily or
involuntarily transferred (by way of sale, creation of a
security interest, attachment, levy, garnishment or other
judicial process) notwithstanding a provision in the security
agreement prohibiting any transfer or making the transfer
constitute a default.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-312) (from Ch. 26, par. 9-312)
Sec. 9-312. Perfection of security interests in chattel
paper, deposit accounts, documents, goods covered by
documents, instruments, investment property, letter-of-credit
rights, and money; perfection by permissive filing; temporary
perfection without filing or transfer of possession.
(a) Perfection by filing permitted. A security interest
in chattel paper, negotiable documents, instruments, or
investment property may be perfected by filing.
(b) Control or possession of certain collateral. Except
as otherwise provided in Section 9-315(c) and (d) for
proceeds:
(1) a security interest in a deposit account may be
perfected only by control under Section 9-314;
(2) and except as otherwise provided in Section
9-308(d), a security interest in a letter-of-credit right
may be perfected only by control under Section 9-314; and
(3) a security interest in money may be perfected
only by the secured party's taking possession under
Section 9-313.
(c) Goods covered by negotiable document. While goods
are in the possession of a bailee that has issued a
negotiable document covering the goods:
(1) a security interest in the goods may be
perfected by perfecting a security interest in the
document; and
(2) a security interest perfected in the document
has priority over any security interest that becomes
perfected in the goods by another method during that
time.
(d) Goods covered by nonnegotiable document. While
goods are in the possession of a bailee that has issued a
nonnegotiable document covering the goods, a security
interest in the goods may be perfected by:
(1) issuance of a document in the name of the
secured party;
(2) the bailee's receipt of notification of the
secured party's interest; or
(3) filing as to the goods.
(e) Temporary perfection: new value. A security
interest in certificated securities, negotiable documents, or
instruments is perfected without filing or the taking of
possession for a period of 20 days from the time it attaches
to the extent that it arises for new value given under an
authenticated security agreement.
(f) Temporary perfection: goods or documents made
available to debtor. A perfected security interest in a
negotiable document or goods in possession of a bailee, other
than one that has issued a negotiable document for the goods,
remains perfected for 20 days without filing if the secured
party makes available to the debtor the goods or documents
representing the goods for the purpose of:
(1) ultimate sale or exchange; or
(2) loading, unloading, storing, shipping,
transshipping, manufacturing, processing, or otherwise
dealing with them in a manner preliminary to their sale
or exchange.
(g) Temporary perfection: delivery of security
certificate or instrument to debtor. A perfected security
interest in a certificated security or instrument remains
perfected for 20 days without filing if the secured party
delivers the security certificate or instrument to the debtor
for the purpose of:
(1) ultimate sale or exchange; or
(2) presentation, collection, enforcement, renewal,
or registration of transfer.
(h) Expiration of temporary perfection. After the
20-day period specified in subsection (e), (f), or (g)
expires, perfection depends upon compliance with this
Article. Priorities Among Conflicting Security Interests in
the Same Collateral.
(1) The rules of priority stated in other Sections of
this Part and in the following Sections shall govern when
applicable: Section 4-210 with respect to the security
interests of collecting banks in items being collected,
accompanying documents and proceeds; Section 9-103 on
security interests related to other jurisdictions; Section
9-114 on consignments; Section 9-115 on security interests in
investment property.
(2) A perfected security interest in crops for new value
given to enable the debtor to produce the crops during the
production season and given not more than three months before
the crops become growing crops by planting or otherwise takes
priority over an earlier perfected security interest to the
extent that such earlier interest secures obligations due
more than six months before the crops become growing crops by
planting or otherwise, even though the person giving new
value had knowledge of the earlier security interest.
(3) A perfected purchase money security interest in
inventory has priority over a conflicting security interest
in the same inventory and also has priority in identifiable
cash proceeds received on or before the delivery of the
inventory to a buyer if
(a) the purchase money security interest is
perfected at the time the debtor receives possession of
the inventory; and
(b) the purchase money secured party gives
notification in writing to the holder of the conflicting
security interest if the holder had filed a financing
statement covering the same types of inventory (i) before
the date of the filing made by the purchase money secured
party, or (ii) before the beginning of the 21 day period
where the purchase money security interest is temporarily
perfected without filing or possession (subsection (5) of
Section 9-304); and
(c) the holder of the conflicting security interest
receives the notification within 5 years before the
debtor receives possession of the inventory; and
(d) the notification states that the person giving
the notice has or expects to acquire a purchase money
security interest in inventory of the debtor, describing
such inventory by item or type.
(4) A purchase money security interest in collateral
other than inventory has priority over a conflicting security
interest in the same collateral or its proceeds if the
purchase money security interest is perfected at the time the
debtor receives possession of the collateral or within 20
days thereafter.
(5) In all cases not governed by other rules stated in
this Section (including cases of purchase money security
interests which do not qualify for the special priorities set
forth in subsections (3) and (4) of this Section), priority
between conflicting security interests in the same collateral
shall be determined according to the following rules:
(a) Conflicting security interests rank according
to priority in time of filing or perfection. Priority
dates from the time a filing is first made covering the
collateral or the time the security interest is first
perfected, whichever is earlier, provided that there is
no period thereafter when there is neither filing nor
perfection.
(b) So long as conflicting security interests are
unperfected, the first to attach has priority.
(6) For the purposes of subsection (5) a date of filing
or perfection as to collateral is also a date of filing or
perfection as to proceeds.
(7) If future advances are made while a security
interest is perfected by filing, the taking of possession or
under Section 9-115 or 9-116 on investment property, the
security interest has the same priority for the purposes of
subsection (5) with respect to the future advances as it does
with respect to the first advance. If a commitment is made
before or while the security interest is so perfected, the
security interest has the same priority with respect to
advances made pursuant thereto. In other cases a perfected
security interest has priority from the date the advance is
made.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-313) (from Ch. 26, par. 9-313)
Sec. 9-313. When possession by or delivery to secured
party perfects security interest without filing.
(a) Perfection by possession or delivery. Except as
otherwise provided in subsection (b), a secured party may
perfect a security interest in negotiable documents, goods,
instruments, money, or tangible chattel paper by taking
possession of the collateral. A secured party may perfect a
security interest in certificated securities by taking
delivery of the certificated securities under Section 8-301.
(b) Goods covered by certificate of title. With respect
to goods covered by a certificate of title issued by this
State, a secured party may perfect a security interest in the
goods by taking possession of the goods only in the
circumstances described in Section 9-316(d).
(c) Collateral in possession of person other than
debtor. With respect to collateral other than certificated
securities and goods covered by a document, a secured party
takes possession of collateral in the possession of a person
other than the debtor, the secured party, or a lessee of the
collateral from the debtor in the ordinary course of the
debtor's business, when:
(1) the person in possession authenticates a record
acknowledging that it holds possession of the collateral
for the secured party's benefit; or
(2) the person takes possession of the collateral
after having authenticated a record acknowledging that it
will hold possession of collateral for the secured
party's benefit.
(d) Time of perfection by possession; continuation of
perfection. If perfection of a security interest depends upon
possession of the collateral by a secured party, perfection
occurs no earlier than the time the secured party takes
possession and continues only while the secured party retains
possession.
(e) Time of perfection by delivery; continuation of
perfection. A security interest in a certificated security in
registered form is perfected by delivery when delivery of the
certificated security occurs under Section 8-301 and remains
perfected by delivery until the debtor obtains possession of
the security certificate.
(f) Acknowledgment not required. A person in possession
of collateral is not required to acknowledge that it holds
possession for a secured party's benefit.
(g) Effectiveness of acknowledgment; no duties or
confirmation. If a person acknowledges that it holds
possession for the secured party's benefit:
(1) the acknowledgment is effective under
subsection (c) or Section 8-301(a), even if the
acknowledgment violates the rights of a debtor; and
(2) unless the person otherwise agrees or law other
than this Article otherwise provides, the person does not
owe any duty to the secured party and is not required to
confirm the acknowledgment to another person.
(h) Secured party's delivery to person other than
debtor. A secured party having possession of collateral does
not relinquish possession by delivering the collateral to a
person other than the debtor or a lessee of the collateral
from the debtor in the ordinary course of the debtor's
business if the person was instructed before the delivery or
is instructed contemporaneously with the delivery:
(1) to hold possession of the collateral for the
secured party's benefit; or
(2) to redeliver the collateral to the secured
party.
(i) Effect of delivery under subsection (h); no duties
or confirmation. A secured party does not relinquish
possession, even if a delivery under subsection (h) violates
the rights of a debtor. A person to which collateral is
delivered under subsection (h) does not owe any duty to the
secured party and is not required to confirm the delivery to
another person unless the person otherwise agrees or law
other than this Article otherwise provides.
Priority of Security Interests in Fixtures.
(1) In this Section and in the provisions of Part 4 of
this Article referring to fixture filing, unless the context
otherwise requires
(a) Goods are "fixtures" when they become so
related to particular real estate that an interest in
them arises under real estate law
(b) A "fixture filing" is the filing in the office
where a mortgage on the real estate would be filed or
recorded of a financing statement covering goods which
are or are to become fixtures and conforming to the
requirements of subsection (5) of Section 9-402
(c) A mortgage is a "construction mortgage" to the
extent that it secures an obligation incurred for the
construction of an improvement on land including the
acquisition cost of the land, if the recorded writing so
indicates.
(2) A security interest under this Article may be
created in goods which are fixtures or may continue in goods
which become fixtures, but no security interest exists under
this Article in ordinary building materials incorporated into
an improvement on land.
(3) This Article does not prevent creation of an
encumbrance upon fixtures pursuant to real estate law.
(4) A perfected security interest in fixtures has
priority over the conflicting interest of an encumbrancer or
owner of the real estate where
(a) the security interest is a purchase money
security interest, the interest of the encumbrancer or
owner arises before the goods become fixtures, the
security interest is perfected by a fixture filing before
the goods become fixtures or within 10 days thereafter,
and the debtor has an interest of record in the real
estate or is in possession of the real estate; or
(b) the security interest is perfected by a fixture
filing before the interest of the encumbrancer or owner
is of record, the security interest has priority over any
conflicting interest of a predecessor in title of the
encumbrancer or owner, and the debtor has an interest of
record in the real estate or is in possession of the real
estate; or
(c) the fixtures are readily removable factory or
office machines or readily removable replacements of
domestic appliances which are consumer goods, and before
the goods become fixtures the security interest is
perfected by any method permitted by this Article; or
(d) the conflicting interest is a lien on the real
estate obtained by legal or equitable proceedings after
the security interest was perfected by any method
permitted by this Article.
(5) A security interest in fixtures, whether or not
perfected, has priority over the conflicting interest of an
encumbrancer or owner of the real estate where
(a) the encumbrancer or owner has consented in
writing to the security interest or has disclaimed an
interest in the goods as fixtures; or
(b) the debtor has a right to remove the goods as
against the encumbrancer or owner. If the debtor's right
terminates, the priority of the security interest
continues for a reasonable time.
(6) Notwithstanding paragraph (a) of subsection (4) but
otherwise subject to subsections (4) and (5), a security
interest in fixtures is subordinate to a construction
mortgage recorded before the goods become fixtures if the
goods become fixtures before the completion of the
construction. To the extent that it is given to refinance a
construction mortgage, a mortgage has this priority to the
same extent as the construction mortgage.
(7) In cases not within the preceding subsections, a
security interest in fixtures is subordinate to the
conflicting interest of an encumbrancer or owner of the
related real estate who is not the debtor.
(8) When the secured party has priority over all owners
and encumbrancers of the real estate, he may, on default,
subject to the provisions of Part 5, remove his collateral
from the real estate but he must reimburse any encumbrancer
or owner of the real estate who is not the debtor and who has
not otherwise agreed for the cost of repair of any physical
injury, but not for any diminution in value of the real
estate caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to
reimbursement may refuse permission to remove until the
secured party gives adequate security for the performance of
this obligation.
(Source: P. A. 78-238; revised 10-31-98.)
(810 ILCS 5/9-314) (from Ch. 26, par. 9-314)
Sec. 9-314. Perfection by control.
(a) Perfection by control. A security interest in
investment property, deposit accounts, letter-of-credit
rights, or electronic chattel paper may be perfected by
control of the collateral under Section 9-104, 9-105, 9-106,
or 9-107.
(b) Specified collateral: time of perfection by
control; continuation of perfection. A security interest in
deposit accounts, electronic chattel paper, or
letter-of-credit rights is perfected by control under Section
9-104, 9-105, or 9-107 when the secured party obtains control
and remains perfected by control only while the secured party
retains control.
(c) Investment property: time of perfection by control;
continuation of perfection. A security interest in
investment property is perfected by control under Section
9-106 from the time the secured party obtains control and
remains perfected by control until:
(1) the secured party does not have control; and
(2) one of the following occurs:
(A) if the collateral is a certificated
security, the debtor has or acquires possession of
the security certificate;
(B) if the collateral is an uncertificated
security, the issuer has registered or registers the
debtor as the registered owner; or
(C) if the collateral is a security
entitlement, the debtor is or becomes the
entitlement holder. Accessions.
(1) A security interest in goods which attaches before
they are installed in or affixed to other goods takes
priority as to the goods installed or affixed (called in this
section "accessions") over the claims of all persons to the
whole except as stated in subsection (3) and subject to
Section 9--315(1).
(2) A security interest which attaches to goods after
they become part of a whole is valid against all persons
subsequently acquiring interests in the whole except as
stated in subsection (3) but is invalid against any person
with an interest in the whole at the time the security
interest attaches to the goods who has not in writing
consented to the security interest or disclaimed an interest
in the goods as part of the whole.
(3) The security interests described in subsections (1)
and (2) do not take priority over
(a) a subsequent purchaser for value of any
interest in the whole; or
(b) a creditor with a lien on the whole
subsequently obtained by judicial proceedings; or
(c) a creditor with a prior perfected security
interest in the whole to the extent that he makes subsequent
advances if the subsequent purchase is made, the lien by
judicial proceedings obtained or the subsequent advance under
the prior perfected security interest is made or contracted
for without knowledge of the security interest and before it
is perfected. A purchaser of the whole at a foreclosure sale
other than the holder of a perfected security interest
purchasing at his own foreclosure sale is a subsequent
purchaser within this Section.
(4) When under subsections (1) or (2) and (3) a secured
party has an interest in accessions which has priority over
the claims of all persons who have interests in the whole, he
may on default subject to the provisions of Part 5 remove his
collateral from the whole but he must reimburse any
encumbrancer or owner of the whole who is not the debtor and
who has not otherwise agreed for the cost of repair of any
physical injury but not for any diminution in value of the
whole caused by the absence of the goods removed or by any
necessity for replacing them. A person entitled to
reimbursement may refuse permission to remove until the
secured party gives adequate security for the performance of
this obligation.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-315) (from Ch. 26, par. 9-315)
Sec. 9-315. Secured party's rights on disposition of
collateral and in proceeds.
(a) Disposition of collateral: continuation of security
interest or agricultural lien; proceeds. Except as otherwise
provided in this Article and in Section 2-403(2):
(1) a security interest or agricultural lien
continues in collateral notwithstanding sale, lease,
license, exchange, or other disposition thereof unless
the secured party authorized the disposition free of the
security interest or agricultural lien; and
(2) a security interest attaches to any
identifiable proceeds of collateral.
(b) When commingled proceeds identifiable. Proceeds
that are commingled with other property are identifiable
proceeds:
(1) if the proceeds are goods, to the extent
provided by Section 9-336; and
(2) if the proceeds are not goods, to the extent
that the secured party identifies the proceeds by a
method of tracing, including application of equitable
principles, that is permitted under law other than this
Article with respect to commingled property of the type
involved.
(c) Perfection of security interest in proceeds. A
security interest in proceeds is a perfected security
interest if the security interest in the original collateral
was perfected.
(d) Continuation of perfection. A perfected security
interest in proceeds becomes unperfected on the 21st day
after the security interest attaches to the proceeds unless:
(1) the following conditions are satisfied:
(A) a filed financing statement covers the
original collateral;
(B) the proceeds are collateral in which a
security interest may be perfected by filing in the
office in which the financing statement has been
filed; and
(C) the proceeds are not acquired with cash
proceeds;
(2) the proceeds are identifiable cash proceeds; or
(3) the security interest in the proceeds is
perfected other than under subsection (c) when the
security interest attaches to the proceeds or within 20
days thereafter.
(e) When perfected security interest in proceeds becomes
unperfected. If a filed financing statement covers the
original collateral, a security interest in proceeds which
remains perfected under subsection (d)(1) becomes unperfected
at the later of:
(1) when the effectiveness of the filed financing
statement lapses under Section 9-515 or is terminated
under Section 9-513; or
(2) the 21st day after the security interest
attaches to the proceeds. Priority when goods are
commingled or processed.
(1) If a security interest in goods was perfected and
subsequently the goods or a part thereof have become part of
a product or mass, the security interest continues in the
product or mass if
(a) the goods are so manufactured, processed,
assembled or commingled that their identity is lost in the
product or mass; or
(b) a financing statement covering the original
goods also covers the product into which the goods have been
manufactured, processed or assembled. In a case to which
paragraph (b) applies, no separate security interest in that
part of the original goods which has been manufactured,
processed or assembled into the product may be claimed under
Section 9--314.
(2) When under subsection (1) more than one security
interest attaches to the product or mass, they rank equally
according to the ratio that the cost of the goods to which
each interest originally attached bears to the cost of the
total product or mass.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-315.01 new)
Sec. 9-315.01. Debtor disposing of collateral and
failing to pay secured party amount due under security
agreement; penalties for violation.
(1) It is unlawful for a debtor under the terms of a
security agreement (a) who has no right of sale or other
disposition of the collateral or (b) who has a right of sale
or other disposition of the collateral and is to account to
the secured party for the proceeds of any sale or other
disposition of the collateral, to sell or otherwise dispose
of the collateral and willfully and wrongfully to fail to pay
the secured party the amount of said proceeds due under the
security agreement. Failure to pay such proceeds to the
secured party within 10 days after the sale or other
disposition of the collateral is prima facie evidence of a
willful and wanton failure to pay.
(2) An individual convicted of a violation of this
Section shall be guilty of a Class 3 felony.
(3) A corporation convicted of a violation of this
Section shall be guilty of a business offense and shall be
fined not less than $2,000 nor more than $10,000.
(4) In the event the debtor under the terms of a
security agreement is a corporation or a partnership, any
officer, director, manager, or managerial agent of the debtor
who violates this Section or causes the debtor to violate
this Section shall be guilty of a Class 3 felony.
(810 ILCS 5/9-315.02 new)
Sec. 315.02. Disposal of collateral by debtor to persons
other than those previously disclosed to secured
party-penalties for violation-defense.
(1) Where, pursuant to Section 9-205.1, a secured party
has required that before the debtor sells or otherwise
disposes of collateral in the debtor's possession he disclose
to the secured party the persons to whom he desires to sell
or otherwise dispose of such collateral, it is unlawful for
the debtor to sell or otherwise dispose of the collateral to
a person other than a person so disclosed to the secured
party.
(2) An individual convicted of a violation of this
Section shall be guilty of a Class A misdemeanor.
(3) A corporation convicted of a violation of this
Section shall be guilty of a business offense and shall be
fined not less than $2,000 nor more than $10,000.
(4) In the event the debtor under the terms of a
security agreement is a corporation or a partnership, any
officer, director, manager, or managerial agent of the debtor
who violates this Section or causes the debtor to violate
this Section shall be guilty of a Class A misdemeanor.
(5) It is an affirmative defense to a prosecution for
the violation of this Section that the debtor has paid to the
secured party the proceeds from the sale or other disposition
of the collateral within 10 days after such sale or
disposition.
(810 ILCS 5/9-316) (from Ch. 26, par. 9-316)
Sec. 9-316. Continued perfection of security interest
following change in governing law.
(a) General rule: effect on perfection of change in
governing law. A security interest perfected pursuant to the
law of the jurisdiction designated in Section 9-301(1) or
9-305(c) remains perfected until the earliest of:
(1) the time perfection would have ceased under the
law of that jurisdiction;
(2) the expiration of four months after a change of
the debtor's location to another jurisdiction; or
(3) the expiration of one year after a transfer of
collateral to a person that thereby becomes a debtor and
is located in another jurisdiction.
(b) Security interest perfected or unperfected under law
of new jurisdiction. If a security interest described in
subsection (a) becomes perfected under the law of the other
jurisdiction before the earliest time or event described in
that subsection, it remains perfected thereafter. If the
security interest does not become perfected under the law of
the other jurisdiction before the earliest time or event, it
becomes unperfected and is deemed never to have been
perfected as against a purchaser of the collateral for value.
(c) Possessory security interest in collateral moved to
new jurisdiction. A possessory security interest in
collateral, other than goods covered by a certificate of
title and as-extracted collateral consisting of goods,
remains continuously perfected if:
(1) the collateral is located in one jurisdiction
and subject to a security interest perfected under the
law of that jurisdiction;
(2) thereafter the collateral is brought into
another jurisdiction; and
(3) upon entry into the other jurisdiction, the
security interest is perfected under the law of the other
jurisdiction.
(d) Goods covered by certificate of title from this
State. Except as otherwise provided in subsection (e), a
security interest in goods covered by a certificate of title
which is perfected by any method under the law of another
jurisdiction when the goods become covered by a certificate
of title from this State remains perfected until the security
interest would have become unperfected under the law of the
other jurisdiction had the goods not become so covered.
(e) When subsection (d) security interest becomes
unperfected against purchasers. A security interest
described in subsection (d) becomes unperfected as against a
purchaser of the goods for value and is deemed never to have
been perfected as against a purchaser of the goods for value
if the applicable requirements for perfection under Section
9-311(b) or 9-313 are not satisfied before the earlier of:
(1) the time the security interest would have
become unperfected under the law of the other
jurisdiction had the goods not become covered by a
certificate of title from this State; or
(2) the expiration of four months after the goods
had become so covered.
(f) Change in jurisdiction of bank, issuer, nominated
person, securities intermediary, or commodity intermediary.
A security interest in deposit accounts, letter-of-credit
rights, or investment property which is perfected under the
law of the bank's jurisdiction, the issuer's jurisdiction, a
nominated person's jurisdiction, the securities
intermediary's jurisdiction, or the commodity intermediary's
jurisdiction, as applicable, remains perfected until the
earlier of:
(1) the time the security interest would have
become unperfected under the law of that jurisdiction; or
(2) the expiration of four months after a change of
the applicable jurisdiction to another jurisdiction.
(g) Subsection (f) security interest perfected or
unperfected under law of new jurisdiction. If a security
interest described in subsection (f) becomes perfected under
the law of the other jurisdiction before the earlier of the
time or the end of the period described in that subsection,
it remains perfected thereafter. If the security interest
does not become perfected under the law of the other
jurisdiction before the earlier of that time or the end of
that period, it becomes unperfected and is deemed never to
have been perfected as against a purchaser of the collateral
for value. Priority subject to subordination.
Nothing in this Article prevents subordination by
agreement by any person entitled to priority.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new)
SUBPART 3. PRIORITY
(810 ILCS 5/9-317) (from Ch. 26, par. 9-317)
Sec. 9-317. Interests that take priority over or take
free of security interest or agricultural lien.
(a) Conflicting security interests and rights of lien
creditors. A security interest or agricultural lien is
subordinate to the rights of:
(1) a person entitled to priority under Section
9-322; and
(2) except as otherwise provided in subsection (e)
or (f), a person that becomes a lien creditor before the
earlier of the time:
(A) the security interest or agricultural lien
is perfected; or
(B) one of the conditions specified in Section
9-203(b)(3) is met and a financing statement
covering the collateral is filed.
(b) Buyers that receive delivery. Except as otherwise
provided in subsection (e), a buyer, other than a secured
party, of tangible chattel paper, documents, goods,
instruments, or a security certificate takes free of a
security interest or agricultural lien if the buyer gives
value and receives delivery of the collateral without
knowledge of the security interest or agricultural lien and
before it is perfected.
(c) Lessees that receive delivery. Except as otherwise
provided in subsection (e), a lessee of goods takes free of a
security interest or agricultural lien if the lessee gives
value and receives delivery of the collateral without
knowledge of the security interest or agricultural lien and
before it is perfected.
(d) Licensees and buyers of certain collateral. A
licensee of a general intangible or a buyer, other than a
secured party, of accounts, electronic chattel paper, general
intangibles, or investment property other than a certificated
security takes free of a security interest if the licensee or
buyer gives value without knowledge of the security interest
and before it is perfected.
(e) Purchase-money security interest. Except as
otherwise provided in Sections 9-320 and 9-321, if a person
files a financing statement with respect to a purchase-money
security interest before or within 20 days after the debtor
receives delivery of the collateral, the security interest
takes priority over the rights of a buyer, lessee, or lien
creditor which arise between the time the security interest
attaches and the time of filing.
(f) Public deposits. An unperfected security interest
shall take priority over the rights of a lien creditor if (i)
the lien creditor is a trustee or receiver of a bank or
acting in furtherance of its supervisory authority over such
bank and (ii) a security interest is granted by the bank to
secure a deposit of public funds with the bank or a
repurchase agreement with the bank pursuant to the Government
Securities Act of 1986, as amended. Secured party not
obligated on contract of debtor.
The mere existence of a security interest or authority
given to the debtor to dispose of or use collateral does not
impose contract or tort liability upon the secured party for
the debtor's acts or omissions.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-318) (from Ch. 26, par. 9-318)
Sec. 9-318. No interest retained in right to payment
that is sold; rights and title of seller of account or
chattel paper with respect to creditors and purchasers.
(a) Seller retains no interest. A debtor that has sold
an account, chattel paper, payment intangible, or promissory
note does not retain a legal or equitable interest in the
collateral sold.
(b) Deemed rights of debtor if buyer's security interest
unperfected. For purposes of determining the rights of
creditors of, and purchasers for value of an account or
chattel paper from, a debtor that has sold an account or
chattel paper, while the buyer's security interest is
unperfected, the debtor is deemed to have rights and title to
the account or chattel paper identical to those the debtor
sold. Defenses Against Assignee; Modification of Contract
After Notification of Assignment; Term Prohibiting Assignment
Ineffective; Identification and Proof of Assignment.
(1) Unless an account debtor has made an enforceable
agreement not to assert defenses or claims arising out of a
sale as provided in Section 9-- 206 the rights of an assignee
are subject to
(a) all the terms of the contract between the
account debtor and assignor and any defense or claim arising
therefrom; and
(b) any other defense or claim of the account
debtor against the assignor which accrues before the account
debtor receives notification of the assignment.
(2) So far as the right to payment or a part thereof
under an assigned contract has not been fully earned by
performance, and notwithstanding notification of the
assignment, any modification of or substitution for the
contract made in good faith and in accordance with reasonable
commercial standards is effective against an assignee unless
the account debtor has otherwise agreed but the assignee
acquires corresponding rights under the modified or
substituted contract. The assignment may provide that such
modification or substitution is a breach by the assignor.
(3) The account debtor is authorized to pay the assignor
until the account debtor receives notification that the
amount due or to become due has been assigned and that
payment is to be made to the assignee. A notification which
does not reasonably identify the rights assigned is
ineffective. If requested by the account debtor, the assignee
must seasonably furnish reasonable proof that the assignment
has been made and unless he does so the account debtor may
pay the assignor.
(4) A term in any contract between an account debtor and
an assignor is ineffective if it prohibits assignment of an
account or prohibits creation of a security interest in a
general intangible for money due or to become due or requires
the account debtor's consent to such assignment or security
interest.
(Source: P. A. 77-2810.)
(810 ILCS 5/9-319 new)
Sec. 9-319. Rights and title of consignee with respect
to creditors and purchasers.
(a) Consignee has consignor's rights. Except as
otherwise provided in subsection (b), for purposes of
determining the rights of creditors of, and purchasers for
value of goods from, a consignee, while the goods are in the
possession of the consignee, the consignee is deemed to have
rights and title to the goods identical to those the
consignor had or had power to transfer.
(b) Applicability of other law. For purposes of
determining the rights of a creditor of a consignee, law
other than this Article determines the rights and title of a
consignee while goods are in the consignee's possession if,
under this Part, a perfected security interest held by the
consignor would have priority over the rights of the
creditor.
(810 ILCS 5/9-320 new)
Sec. 9-320. Buyer of goods and farm products.
(a) Buyer in ordinary course of business. Except as
otherwise provided in subsections (e) and (f), a buyer in the
ordinary course of business takes free of a security interest
created by the buyer's seller, even if the security interest
is perfected and the buyer knows of its existence.
(b) Buyer of consumer goods. Except as otherwise
provided in subsection (e), a buyer of goods from a person
who used or bought the goods for use primarily for personal,
family, or household purposes takes free of a security
interest, even if perfected, if the buyer buys:
(1) without knowledge of the security interest;
(2) for value;
(3) primarily for the buyer's personal, family, or
household purposes; and
(4) before the filing of a financing statement
covering the goods.
(c) Effectiveness of filing for subsection (b). To the
extent that it affects the priority of a security interest
over a buyer of goods under subsection (b), the period of
effectiveness of a filing made in the jurisdiction in which
the seller is located is governed by Section 9-316(a) and
(b).
(d) Buyer in ordinary course of business at wellhead or
minehead. A buyer in ordinary course of business buying oil,
gas, or other minerals at the wellhead or minehead or after
extraction takes free of an interest arising out of an
encumbrance.
(e) Possessory security interest not affected.
Subsections (a) and (b) do not affect a security interest in
goods in the possession of the secured party under Section
9-313.
(f) Buyer of farm products.
(1) A buyer of farm products takes subject to a
security interest created by the seller if:
(A) within one year before the sale of the
farm products, the buyer has received from the
secured party or the seller written notice of the
security interest organized according to farm
products that:
(i) is an original or reproduced copy
thereof;
(ii) contains: (a) the name and address
of the secured party; (b) the name and address
of the person indebted to the secured party;
(c) the social security number of the debtor
or, in the case of a debtor doing business
other than as an individual, the Internal
Revenue Service taxpayer identification number
of such debtor; (d) a description of the farm
products subject to the security interest
created by the debtor, including the amount of
such products where applicable, crop year,
county, and a reasonable description of the
property;
(iii) must be amended in writing, within
3 months, similarly signed and transmitted, to
reflect material changes;
(iv) will lapse on either the expiration
period of the statement or the transmission of
a notice signed by the secured party that the
statement has lapsed, whichever occurs first;
and
(v) sets forth any payment obligations
imposed on the buyer by the secured party as
conditions for waiver or release of the
security interest; and
(B) the buyer has failed to perform the
payment obligations.
(2) For the purposes of this subsection (f), a
buyer of farm products has received notice from the
secured party or seller when written notice of the
security interest is sent to the buyer by registered or
certified mail.
(810 ILCS 5/9-320.1 new)
Sec. 9-320.1. Liability of commission merchant or
selling agent engaged in sale of livestock or other farm
products to holder of security interest.
(a) A commission merchant or selling agent who sells a
farm product for others shall be subject to a security
interest created by the seller in such farm product if:
(1) within one year before the sale of the farm
products, the buyer has received from the secured party
or the seller written notice of the security interest
organized according to farm products that:
(A) is an original or reproduced copy thereof;
(B) contains: (i) the name and address of the
secured party; (ii) the name and address of the
person indebted to the secured party; (iii) the
social security number of the debtor or, in case of
a debtor doing business other than as an individual,
the Internal Revenue Service taxpayer identification
number of such debtor; (iv) a description of the
farm products subject to the security interest
created by the debtor, including the amount of such
products where applicable, crop year, county, and a
reasonable description of the property;
(C) must be amended in writing, within 3
months, similarly signed and transmitted, to reflect
material changes;
(D) will lapse on either the expiration period
of the statement or the transmission of a notice
signed by the secured party that the statement has
lapsed, whichever occurs first; and
(E) sets forth any payment obligations imposed
on the buyer by the secured party as conditions for
waiver or release of the security interest; and
(2) the commission merchant or selling agent has
failed to perform the payment obligations.
(b) For the purposes of this Section, a commission
merchant or selling agent has received notice from the
secured party or seller when written notice of the security
interest is sent to the commission merchant or selling agent
by registered or certified mail.
(810 ILCS 5/9-320.2 new)
Sec. 9-320.2. Notice to seller of farm products. A
commission merchant or selling agent who sells farm products
for others, and any person buying farm products in the
ordinary course of business from a person engaged in farming
operations, shall post at each licensed location where the
merchant, agent, or person buying farm products in the
ordinary course of business does business a notice that shall
read as follows:
"NOTICE TO SELLERS OF FARM PRODUCTS
It is a criminal offense to sell farm products subject to
a security interest without making payment to the secured
party. You should notify the purchaser if there is a
security interest in the farm products you are selling.".
The notice shall be posted in a conspicuous manner and
shall be in contrasting type, large enough to be read from a
distance of 10 feet.
(810 ILCS 5/9-321 new)
Sec. 9-321. Licensee of general intangible and lessee of
goods in ordinary course of business.
(a) "Licensee in ordinary course of business." In this
Section, "licensee in ordinary course of business" means a
person that becomes a licensee of a general intangible in
good faith, without knowledge that the license violates the
rights of another person in the general intangible, and in
the ordinary course from a person in the business of
licensing general intangibles of that kind. A person becomes
a licensee in the ordinary course if the license to the
person comports with the usual or customary practices in the
kind of business in which the licensor is engaged or with the
licensor's own usual or customary practices.
(b) Rights of licensee in ordinary course of business.
A licensee in ordinary course of business takes its rights
under a nonexclusive license free of a security interest in
the general intangible created by the licensor, even if the
security interest is perfected and the licensee knows of its
existence.
(c) Rights of lessee in ordinary course of business. A
lessee in ordinary course of business takes its leasehold
interest free of a security interest in the goods created by
the lessor, even if the security interest is perfected and
the lessee knows of its existence.
(810 ILCS 5/9-322 new)
Sec. 9-322. Priorities among conflicting security
interests in and agricultural liens on same collateral.
(a) General priority rules. Except as otherwise
provided in this Section, priority among conflicting security
interests and agricultural liens in the same collateral is
determined according to the following rules:
(1) Conflicting perfected security interests and
agricultural liens rank according to priority in time of
filing or perfection. Priority dates from the earlier of
the time a filing covering the collateral is first made
or the security interest or agricultural lien is first
perfected, if there is no period thereafter when there is
neither filing nor perfection.
(2) A perfected security interest or agricultural
lien has priority over a conflicting unperfected security
interest or agricultural lien.
(3) The first security interest or agricultural
lien to attach or become effective has priority if
conflicting security interests and agricultural liens are
unperfected.
(b) Time of perfection: proceeds and supporting
obligations. For the purposes of subsection (a)(1):
(1) the time of filing or perfection as to a
security interest in collateral is also the time of
filing or perfection as to a security interest in
proceeds; and
(2) the time of filing or perfection as to a
security interest in collateral supported by a supporting
obligation is also the time of filing or perfection as to
a security interest in the supporting obligation.
(c) Special priority rules: proceeds and supporting
obligations. Except as otherwise provided in subsection (f),
a security interest in collateral which qualifies for
priority over a conflicting security interest under Section
9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a
conflicting security interest in:
(1) any supporting obligation for the collateral;
and
(2) proceeds of the collateral if:
(A) the security interest in proceeds is
perfected;
(B) the proceeds are cash proceeds or of the
same type as the collateral; and
(C) in the case of proceeds that are proceeds
of proceeds, all intervening proceeds are cash
proceeds, proceeds of the same type as the
collateral, or an account relating to the
collateral.
(d) First-to-file priority rule for certain collateral.
Subject to subsection (e) and except as otherwise provided in
subsection (f), if a security interest in chattel paper,
deposit accounts, negotiable documents, instruments,
investment property, or letter-of-credit rights is perfected
by a method other than filing, conflicting perfected security
interests in proceeds of the collateral rank according to
priority in time of filing.
(e) Applicability of subsection (d). Subsection (d)
applies only if the proceeds of the collateral are not cash
proceeds, chattel paper, negotiable documents, instruments,
investment property, or letter-of-credit rights.
(f) Limitations on subsections (a) through (e).
Subsections (a) through (e) are subject to:
(1) subsection (g) and the other provisions of this
Part;
(2) Section 4-210 with respect to a security
interest of a collecting bank;
(3) Section 5-118 with respect to a security
interest of an issuer or nominated person; and
(4) Section 9-110 with respect to a security
interest arising under Article 2 or 2A.
(g) Priority under agricultural lien statute. A
perfected agricultural lien on collateral has priority over a
conflicting security interest in or agricultural lien on the
same collateral if the statute creating the agricultural lien
so provides.
(810 ILCS 5/9-323 new)
Sec. 9-323. Future advances.
(a) When priority based on time of advance. Except as
otherwise provided in subsection (c), for purposes of
determining the priority of a perfected security interest
under Section 9-322(a)(1), perfection of the security
interest dates from the time an advance is made to the extent
that the security interest secures an advance that:
(1) is made while the security interest is
perfected only:
(A) under Section 9-309 when it attaches; or
(B) temporarily under Section 9-312(e), (f),
or (g); and
(2) is not made pursuant to a commitment entered
into before or while the security interest is perfected
by a method other than under Section 9-309 or 9-312(e),
(f), or (g).
(b) Lien creditor. Except as otherwise provided in
subsection (c), a security interest is subordinate to the
rights of a person that becomes a lien creditor to the extent
that the security interest secures an advance made more than
45 days after the person becomes a lien creditor unless the
advance is made:
(1) without knowledge of the lien; or
(2) pursuant to a commitment entered into without
knowledge of the lien.
(c) Buyer of receivables. Subsections (a) and (b) do
not apply to a security interest held by a secured party that
is a buyer of accounts, chattel paper, payment intangibles,
or promissory notes or a consignor.
(d) Buyer of goods. Except as otherwise provided in
subsection (e), a buyer of goods other than a buyer in
ordinary course of business takes free of a security interest
to the extent that it secures advances made after the earlier
of:
(1) the time the secured party acquires knowledge
of the buyer's purchase; or
(2) 45 days after the purchase.
(e) Advances made pursuant to commitment: priority of
buyer of goods. Subsection (d) does not apply if the advance
is made pursuant to a commitment entered into without
knowledge of the buyer's purchase and before the expiration
of the 45-day period.
(f) Lessee of goods. Except as otherwise provided in
subsection (g), a lessee of goods, other than a lessee in
ordinary course of business, takes the leasehold interest
free of a security interest to the extent that it secures
advances made after the earlier of:
(1) the time the secured party acquires knowledge
of the lease; or
(2) 45 days after the lease contract becomes
enforceable.
(g) Advances made pursuant to commitment: priority of
lessee of goods. Subsection (f) does not apply if the
advance is made pursuant to a commitment entered into without
knowledge of the lease and before the expiration of the
45-day period.
(810 ILCS 5/9-324 new)
Sec. 9-324. Priority of purchase-money security
interests.
(a) General rule: purchase-money priority. Except as
otherwise provided in subsection (g), a perfected
purchase-money security interest in goods other than
inventory or livestock has priority over a conflicting
security interest in the same goods, and, except as otherwise
provided in Section 9-327, a perfected security interest in
its identifiable proceeds also has priority, if the
purchase-money security interest is perfected when the debtor
receives possession of the collateral or within 20 days
thereafter.
(b) Inventory purchase-money priority. Subject to
subsection (c) and except as otherwise provided in subsection
(g), a perfected purchase-money security interest in
inventory has priority over a conflicting security interest
in the same inventory, has priority over a conflicting
security interest in chattel paper or an instrument
constituting proceeds of the inventory and in proceeds of the
chattel paper, if so provided in Section 9-330, and, except
as otherwise provided in Section 9-327, also has priority in
identifiable cash proceeds of the inventory to the extent the
identifiable cash proceeds are received on or before the
delivery of the inventory to a buyer, if:
(1) the purchase-money security interest is
perfected when the debtor receives possession of the
inventory;
(2) the purchase-money secured party sends an
authenticated notification to the holder of the
conflicting security interest;
(3) the holder of the conflicting security interest
receives the notification within five years before the
debtor receives possession of the inventory; and
(4) the notification states that the person sending
the notification has or expects to acquire a
purchase-money security interest in inventory of the
debtor and describes the inventory.
(c) Holders of conflicting inventory security interests
to be notified. Subsections (b)(2) through (4) apply only if
the holder of the conflicting security interest had filed a
financing statement covering the same types of inventory:
(1) if the purchase-money security interest is
perfected by filing, before the date of the filing; or
(2) if the purchase-money security interest is
temporarily perfected without filing or possession under
Section 9-312(f), before the beginning of the 20-day
period thereunder.
(d) Livestock purchase-money priority. Subject to
subsection (e) and except as otherwise provided in subsection
(g), a perfected purchase-money security interest in
livestock that are farm products has priority over a
conflicting security interest in the same livestock, and,
except as otherwise provided in Section 9-327, a perfected
security interest in their identifiable proceeds and
identifiable products in their unmanufactured states also has
priority, if:
(1) the purchase-money security interest is
perfected when the debtor receives possession of the
livestock;
(2) the purchase-money secured party sends an
authenticated notification to the holder of the
conflicting security interest;
(3) the holder of the conflicting security interest
receives the notification within six months before the
debtor receives possession of the livestock; and
(4) the notification states that the person sending
the notification has or expects to acquire a
purchase-money security interest in livestock of the
debtor and describes the livestock.
(e) Holders of conflicting livestock security interests
to be notified. Subsections (d)(2) through (4) apply only if
the holder of the conflicting security interest had filed a
financing statement covering the same types of livestock:
(1) if the purchase-money security interest is
perfected by filing, before the date of the filing; or
(2) if the purchase-money security interest is
temporarily perfected without filing or possession under
Section 9-312(f), before the beginning of the 20-day
period thereunder.
(f) Software purchase-money priority. Except as
otherwise provided in subsection (g), a perfected
purchase-money security interest in software has priority
over a conflicting security interest in the same collateral,
and, except as otherwise provided in Section 9-327, a
perfected security interest in its identifiable proceeds also
has priority, to the extent that the purchase-money security
interest in the goods in which the software was acquired for
use has priority in the goods and proceeds of the goods under
this Section.
(g) Conflicting purchase-money security interests. If
more than one security interest qualifies for priority in the
same collateral under subsection (a), (b), (d), or (f):
(1) a security interest securing an obligation
incurred as all or part of the price of the collateral
has priority over a security interest securing an
obligation incurred for value given to enable the debtor
to acquire rights in or the use of collateral; and
(2) in all other cases, Section 9-322(a) applies to
the qualifying security interests.
(810 ILCS 5/9-325 new)
Sec. 9-325. Priority of security interests in
transferred collateral.
(a) Subordination of security interest in transferred
collateral. Except as otherwise provided in subsection (b), a
security interest created by a debtor is subordinate to a
security interest in the same collateral created by another
person if:
(1) the debtor acquired the collateral subject to
the security interest created by the other person;
(2) the security interest created by the other
person was perfected when the debtor acquired the
collateral; and
(3) there is no period thereafter when the security
interest is unperfected.
(b) Limitation of subsection (a) subordination.
Subsection (a) subordinates a security interest only if the
security interest:
(1) otherwise would have priority solely under
Section 9-322(a) or 9-324; or
(2) arose solely under Section 2-711(3) or
2A-508(5).
(810 ILCS 5/9-326 new)
Sec. 9-326. Priority of security interests created by
new debtor.
(a) Subordination of security interest created by new
debtor. Subject to subsection (b), a security interest
created by a new debtor which is perfected by a filed
financing statement that is effective solely under Section
9-508 in collateral in which a new debtor has or acquires
rights is subordinate to a security interest in the same
collateral which is perfected other than by a filed financing
statement that is effective solely under Section 9-508.
(b) Priority under other provisions; multiple original
debtors. The other provisions of this Part determine the
priority among conflicting security interests in the same
collateral perfected by filed financing statements that are
effective solely under Section 9-508. However, if the
security agreements to which a new debtor became bound as
debtor were not entered into by the same original debtor, the
conflicting security interests rank according to priority in
time of the new debtor's having become bound.
(810 ILCS 5/9-327 new)
Sec. 9-327. Priority of security interests in deposit
account. The following rules govern priority among
conflicting security interests in the same deposit account:
(1) A security interest held by a secured party having
control of the deposit account under Section 9-104 has
priority over a conflicting security interest held by a
secured party that does not have control.
(2) Except as otherwise provided in paragraphs (3) and
(4), security interests perfected by control under Section
9-314 rank according to priority in time of obtaining
control.
(3) Except as otherwise provided in paragraph (4), a
security interest held by the bank with which the deposit
account is maintained has priority over a conflicting
security interest held by another secured party.
(4) A security interest perfected by control under
Section 9-104(a)(3) has priority over a security interest
held by the bank with which the deposit account is
maintained.
(810 ILCS 5/9-328 new)
Sec. 9-328. Priority of security interests in investment
property. The following rules govern priority among
conflicting security interests in the same investment
property:
(1) A security interest held by a secured party having
control of investment property under Section 9-106 has
priority over a security interest held by a secured party
that does not have control of the investment property.
(2) Except as otherwise provided in paragraphs (3) and
(4), conflicting security interests held by secured parties
each of which has control under Section 9-106 rank according
to priority in time of:
(A) if the collateral is a security, obtaining
control;
(B) if the collateral is a security entitlement
carried in a securities account and:
(i) if the secured party obtained control
under Section 8-106(d)(1), the secured party's
becoming the person for which the securities account
is maintained;
(ii) if the secured party obtained control
under Section 8-106(d)(2), the securities
intermediary's agreement to comply with the secured
party's entitlement orders with respect to security
entitlements carried or to be carried in the
securities account; or
(iii) if the secured party obtained control
through another person under Section 8-106(d)(3),
the time on which priority would be based under this
paragraph if the other person were the secured
party; or
(C) if the collateral is a commodity contract
carried with a commodity intermediary, the satisfaction
of the requirement for control specified in Section
9-106(b)(2) with respect to commodity contracts carried
or to be carried with the commodity intermediary.
(3) A security interest held by a securities
intermediary in a security entitlement or a securities
account maintained with the securities intermediary has
priority over a conflicting security interest held by another
secured party.
(4) A security interest held by a commodity intermediary
in a commodity contract or a commodity account maintained
with the commodity intermediary has priority over a
conflicting security interest held by another secured party.
(5) A security interest in a certificated security in
registered form which is perfected by taking delivery under
Section 9-313(a) and not by control under Section 9-314 has
priority over a conflicting security interest perfected by a
method other than control.
(6) Conflicting security interests created by a broker,
securities intermediary, or commodity intermediary which are
perfected without control under Section 9-106 rank equally.
(7) In all other cases, priority among conflicting
security interests in investment property is governed by
Sections 9-322 and 9-323.
(810 ILCS 5/9-329 new)
Sec. 9-329. Priority of security interests in
letter-of-credit right. The following rules govern priority
among conflicting security interests in the same
letter-of-credit right:
(1) A security interest held by a secured party
having control of the letter-of-credit right under
Section 9-107 has priority to the extent of its control
over a conflicting security interest held by a secured
party that does not have control.
(2) Security interests perfected by control under
Section 9-314 rank according to priority in time of
obtaining control.
(810 ILCS 5/9-330 new)
Sec. 9-330. Priority of purchaser of chattel paper or
instrument.
(a) Purchaser's priority: security interest claimed
merely as proceeds. A purchaser of chattel paper has
priority over a security interest in the chattel paper which
is claimed merely as proceeds of inventory subject to a
security interest if:
(1) in good faith and in the ordinary course of the
purchaser's business, the purchaser gives new value and
takes possession of the chattel paper or obtains control
of the chattel paper under Section 9-105; and
(2) the chattel paper does not indicate that it has
been assigned to an identified assignee other than the
purchaser.
(b) Purchaser's priority: other security interests. A
purchaser of chattel paper has priority over a security
interest in the chattel paper which is claimed other than
merely as proceeds of inventory subject to a security
interest if the purchaser gives new value and takes
possession of the chattel paper or obtains control of the
chattel paper under Section 9-105 in good faith, in the
ordinary course of the purchaser's business, and without
knowledge that the purchase violates the rights of the
secured party.
(c) Chattel paper purchaser's priority in proceeds.
Except as otherwise provided in Section 9-327, a purchaser
having priority in chattel paper under subsection (a) or (b)
also has priority in proceeds of the chattel paper to the
extent that:
(1) Section 9-322 provides for priority in the
proceeds; or
(2) the proceeds consist of the specific goods
covered by the chattel paper or cash proceeds of the
specific goods, even if the purchaser's security interest
in the proceeds is unperfected.
(d) Instrument purchaser's priority. Except as
otherwise provided in Section 9-331(a), a purchaser of an
instrument has priority over a security interest in the
instrument perfected by a method other than possession if the
purchaser gives value and takes possession of the instrument
in good faith and without knowledge that the purchase
violates the rights of the secured party.
(e) Holder of purchase-money security interest gives new
value. For purposes of subsections (a) and (b), the holder of
a purchase-money security interest in inventory gives new
value for chattel paper constituting proceeds of the
inventory.
(f) Indication of assignment gives knowledge. For
purposes of subsections (b) and (d), if chattel paper or an
instrument indicates that it has been assigned to an
identified secured party other than the purchaser, a
purchaser of the chattel paper or instrument has knowledge
that the purchase violates the rights of the secured party.
(810 ILCS 5/9-331 new)
Sec. 9-331. Priority of rights of purchasers of
instruments, documents, and securities under other Articles;
priority of interests in financial assets and security
entitlements under Article 8.
(a) Rights under Articles 3, 7, and 8 not limited. This
Article does not limit the rights of a holder in due course
of a negotiable instrument, a holder to which a negotiable
document of title has been duly negotiated, or a protected
purchaser of a security. These holders or purchasers take
priority over an earlier security interest, even if
perfected, to the extent provided in Articles 3, 7, and 8.
(b) Protection under Article 8. This Article does not
limit the rights of or impose liability on a person to the
extent that the person is protected against the assertion of
a claim under Article 8.
(c) Filing not notice. Filing under this Article does
not constitute notice of a claim or defense to the holders,
or purchasers, or persons described in subsections (a) and
(b).
(810 ILCS 5/9-332 new)
Sec. 9-332. Transfer of money; transfer of funds from
deposit account.
(a) Transferee of money. A transferee of money takes
the money free of a security interest unless the transferee
acts in collusion with the debtor in violating the rights of
the secured party.
(b) Transferee of funds from deposit account. A
transferee of funds from a deposit account takes the funds
free of a security interest in the deposit account unless the
transferee acts in collusion with the debtor in violating the
rights of the secured party.
(810 ILCS 5/9-333 new)
Sec. 9-333. Priority of certain liens arising by
operation of law.
(a) "Possessory lien." In this Section, "possessory
lien" means an interest, other than a security interest or an
agricultural lien:
(1) which secures payment or performance of an
obligation for services or materials furnished with
respect to goods by a person in the ordinary course of
the person's business;
(2) which is created by statute or rule of law in
favor of the person; and
(3) whose effectiveness depends on the person's
possession of the goods.
(b) Priority of possessory lien. A possessory lien on
goods has priority over a security interest in the goods
unless the lien is created by a statute that expressly
provides otherwise.
(810 ILCS 5/9-334 new)
Sec. 9-334. Priority of security interests in fixtures
and crops.
(a) Security interest in fixtures under this Article. A
security interest under this Article may be created in goods
that are fixtures or may continue in goods that become
fixtures. A security interest does not exist under this
Article in ordinary building materials incorporated into an
improvement on land.
(b) Security interest in fixtures under real-property
law. This Article does not prevent creation of an
encumbrance upon fixtures under real property law.
(c) General rule: subordination of security interest in
fixtures. In cases not governed by subsections (d) through
(h), a security interest in fixtures is subordinate to a
conflicting interest of an encumbrancer or owner of the
related real property other than the debtor.
(d) Fixtures purchase-money priority. Except as
otherwise provided in subsection (h), a perfected security
interest in fixtures has priority over a conflicting interest
of an encumbrancer or owner of the real property if the
debtor has an interest of record in or is in possession of
the real property and:
(1) the security interest is a purchase-money
security interest;
(2) the interest of the encumbrancer or owner
arises before the goods become fixtures; and
(3) the security interest is perfected by a fixture
filing before the goods become fixtures or within 20 days
thereafter.
(e) Priority of security interest in fixtures over
interests in real property. A perfected security interest in
fixtures has priority over a conflicting interest of an
encumbrancer or owner of the real property if:
(1) the debtor has an interest of record in the
real property or is in possession of the real property
and the security interest:
(A) is perfected by a fixture filing before
the interest of the encumbrancer or owner is of
record; and
(B) has priority over any conflicting interest
of a predecessor in title of the encumbrancer or
owner;
(2) before the goods become fixtures, the security
interest is perfected by any method permitted by this
Article and the fixtures are readily removable:
(A) factory or office machines;
(B) equipment that is not primarily used or
leased for use in the operation of the real
property; or
(C) replacements of domestic appliances that
are consumer goods;
(3) the conflicting interest is a lien on the real
property obtained by legal or equitable proceedings after
the security interest was perfected by any method
permitted by this Article; or
(4) the security interest is:
(A) created in a manufactured home in a
manufactured-home transaction; and
(B) perfected pursuant to a statute described
in Section 9-311(a)(2).
(f) Priority based on consent, disclaimer, or right to
remove. A security interest in fixtures, whether or not
perfected, has priority over a conflicting interest of an
encumbrancer or owner of the real property if:
(1) the encumbrancer or owner has, in an
authenticated record, consented to the security interest
or disclaimed an interest in the goods as fixtures; or
(2) the debtor has a right to remove the goods as
against the encumbrancer or owner.
(g) Continuation of subsection (f)(2) priority. The
priority of the security interest under subsection (f)(2)
continues for a reasonable time if the debtor's right to
remove the goods as against the encumbrancer or owner
terminates.
(h) Priority of construction mortgage. A mortgage is a
construction mortgage to the extent that it secures an
obligation incurred for the construction of an improvement on
land, including the acquisition cost of the land, if a
recorded record of the mortgage so indicates. Except as
otherwise provided in subsections (e) and (f), a security
interest in fixtures is subordinate to a construction
mortgage if a record of the mortgage is recorded before the
goods become fixtures and the goods become fixtures before
the completion of the construction. A mortgage has this
priority to the same extent as a construction mortgage to the
extent that it is given to refinance a construction mortgage.
(i) Priority of security interest in crops.
(1) Subject to Section 9-322(g), a perfected
security interest in crops growing on real property has
priority over:
(A) a conflicting interest of an encumbrancer
or owner of the real property; and
(B) the rights of a holder of an obligation
secured by a collateral assignment of beneficial
interest in a land trust, including rights by virtue
of an equitable lien.
(2) For purposes of this subsection:
(A) "Collateral assignment of beneficial
interest" means any pledge or assignment of the
beneficial interest in a land trust to a person to
secure a debt to other obligation.
(B) "Land trust" means any trust arrangement
under which the legal and equitable title to real
estate is held by a trustee, the interest of the
beneficiary of the trust is personal property, and
the beneficiary or any person designated in writing
by the beneficiary has (i) the exclusive power to
direct or control the trustee in dealing with the
title to the trust property, (ii) the exclusive
control of the management, operation, renting, and
selling of the trust property, and (iii) the
exclusive right to the earnings, avails, and
proceeds of trust property.
(810 ILCS 5/9-335 new)
Sec. 9-335. Accessions.
(a) Creation of security interest in accession. A
security interest may be created in an accession and
continues in collateral that becomes an accession.
(b) Perfection of security interest. If a security
interest is perfected when the collateral becomes an
accession, the security interest remains perfected in the
collateral.
(c) Priority of security interest. Except as otherwise
provided in subsection (d), the other provisions of this Part
determine the priority of a security interest in an
accession.
(d) Compliance with certificate-of-title statute. A
security interest in an accession is subordinate to a
security interest in the whole which is perfected by
compliance with the requirements of a certificate-of-title
statute under Section 9-311(b).
(e) Removal of accession after default. After default,
subject to Part 6, a secured party may remove an accession
from other goods if the security interest in the accession
has priority over the claims of every person having an
interest in the whole.
(f) Reimbursement following removal. A secured party
that removes an accession from other goods under subsection
(e) shall promptly reimburse any holder of a security
interest or other lien on, or owner of, the whole or of the
other goods, other than the debtor, for the cost of repair of
any physical injury to the whole or the other goods. The
secured party need not reimburse the holder or owner for any
diminution in value of the whole or the other goods caused by
the absence of the accession removed or by any necessity for
replacing it. A person entitled to reimbursement may refuse
permission to remove until the secured party gives adequate
assurance for the performance of the obligation to reimburse.
(810 ILCS 5/9-336 new)
Sec. 9-336. Commingled goods.
(a) "Commingled goods." In this Section, "commingled
goods" means goods that are physically united with other
goods in such a manner that their identity is lost in a
product or mass.
(b) No security interest in commingled goods as such. A
security interest does not exist in commingled goods as such.
However, a security interest may attach to a product or mass
that results when goods become commingled goods.
(c) Attachment of security interest to product or mass.
If collateral becomes commingled goods, a security interest
attaches to the product or mass.
(d) Perfection of security interest. If a security
interest in collateral is perfected before the collateral
becomes commingled goods, the security interest that attaches
to the product or mass under subsection (c) is perfected.
(e) Priority of security interest. Except as otherwise
provided in subsection (f), the other provisions of this Part
determine the priority of a security interest that attaches
to the product or mass under subsection (c).
(f) Conflicting security interests in product or mass
If more than one security interest attaches to the product or
mass under subsection (c), the following rules determine
priority:
(1) A security interest that is perfected under
subsection (d) has priority over a security interest that
is unperfected at the time the collateral becomes
commingled goods.
(2) If more than one security interest is perfected
under subsection (d), the security interests rank equally
in proportion to the value of the collateral at the time
it became commingled goods.
(810 ILCS 5/9-337 new)
Sec. 9-337. Priority of security interests in goods
covered by certificate of title. If, while a security
interest in goods is perfected by any method under the law of
another jurisdiction, this State issues a certificate of
title that does not show that the goods are subject to the
security interest or contain a statement that they may be
subject to security interests not shown on the certificate:
(1) a buyer of the goods, other than a person in
the business of selling goods of that kind, takes free of
the security interest if the buyer gives value and
receives delivery of the goods after issuance of the
certificate and without knowledge of the security
interest; and
(2) the security interest is subordinate to a
conflicting security interest in the goods that attaches,
and is perfected under Section 9-311(b), after issuance
of the certificate and without the conflicting secured
party's knowledge of the security interest.
(810 ILCS 5/9-338 new)
Sec. 9-338. Priority of security interest or
agricultural lien perfected by filed financing statement
providing certain incorrect information. If a security
interest or agricultural lien is perfected by a filed
financing statement providing information described in
Section 9-516(b)(5) which is incorrect at the time the
financing statement is filed:
(1) the security interest or agricultural lien is
subordinate to a conflicting perfected security interest
in the collateral to the extent that the holder of the
conflicting security interest gives value in reasonable
reliance upon the incorrect information; and
(2) a purchaser, other than a secured party, of the
collateral takes free of the security interest or
agricultural lien to the extent that, in reasonable
reliance upon the incorrect information, the purchaser
gives value and, in the case of chattel paper, documents,
goods, instruments, or a security certificate, receives
delivery of the collateral.
(810 ILCS 5/9-339 new)
Sec. 9-339. Priority subject to subordination. This
Article does not preclude subordination by agreement by a
person entitled to priority.
(810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new)
SUBPART 4. RIGHTS OF BANK
(810 ILCS 5/9-340 new)
Sec. 9-340. Effectiveness of right of recoupment or
set-off against deposit account.
(a) Exercise of recoupment or set-off. Except as
otherwise provided in subsection (c), a bank with which a
deposit account is maintained may exercise any right of
recoupment or set-off against a secured party that holds a
security interest in the deposit account.
(b) Recoupment or set-off not affected by security
interest. Except as otherwise provided in subsection (c), the
application of this Article to a security interest in a
deposit account does not affect a right of recoupment or
set-off of the secured party as to a deposit account
maintained with the secured party.
(c) When set-off ineffective. The exercise by a bank of
a set-off against a deposit account is ineffective against a
secured party that holds a security interest in the deposit
account which is perfected by control under Section
9-104(a)(3), if the set-off is based on a claim against the
debtor.
(810 ILCS 5/9-341 new)
Sec. 9-341. Bank's rights and duties with respect to
deposit account. Except as otherwise provided in Section
9-340(c), and unless the bank otherwise agrees in an
authenticated record, a bank's rights and duties with respect
to a deposit account maintained with the bank are not
terminated, suspended, or modified by:
(1) the creation, attachment, or perfection of a
security interest in the deposit account;
(2) the bank's knowledge of the security interest;
or
(3) the bank's receipt of instructions from the
secured party.
(810 ILCS 5/9-342 new)
Sec. 9-342. Bank's right to refuse to enter into or
disclose existence of control agreement. This Article does
not require a bank to enter into an agreement of the kind
described in Section 9-104(a)(2), even if its customer so
requests or directs. A bank that has entered into such an
agreement is not required to confirm the existence of the
agreement to another person unless requested to do so by its
customer.
(810 ILCS 5/Art. 9, Part 4 heading)
PART 4. RIGHTS OF THIRD PARTIES FILING
(810 ILCS 5/9-401) (from Ch. 26, par. 9-401)
Sec. 9-401. Alienability of debtor's rights.
(a) Other law governs alienability; exceptions. Except
as otherwise provided in subsection (b) and Sections 9-406,
9-407, 9-408, and 9-409, whether a debtor's rights in
collateral may be voluntarily or involuntarily transferred is
governed by law other than this Article.
(b) Agreement does not prevent transfer. An agreement
between the debtor and secured party which prohibits a
transfer of the debtor's rights in collateral or makes the
transfer a default does not prevent the transfer from taking
effect. Place of Filing; Erroneous Filing; Removal of
Collateral.
(1) The proper place to file in order to perfect a
security interest is as follows:
(a) when the collateral is consumer goods, then in
the office of the recorder in the county of the debtor's
residence or if the debtor is not a resident of this
State then in the office of the Recorder of Deeds in the
county where the goods are kept;
(b) when the collateral is timber to be cut or is
minerals or the like (including oil and gas) or accounts
subject to subsection (5) of Section 9-103, or when the
financing statement is filed as a fixture filing (Section
9-313) and the collateral is goods which are or are to
become fixtures, then in the office where a mortgage on
the real estate would be filed or recorded;
(c) in all other cases, in the office of the
Secretary of State.
(2) A filing which is made in good faith in an improper
place or not in all of the places required by this section is
nevertheless effective with regard to any collateral as to
which the filing complied with the requirements of this
Article and is also effective with regard to collateral
covered by the financing statement against any person who has
knowledge of the contents of such financing statement.
(3) A filing which is made in the proper place in this
State continues effective even though the debtor's residence
or place of business or the location of the collateral or its
use, whichever controlled the original filing, is thereafter
changed.
(4) The rules stated in Section 9-103 determine whether
filing is necessary in this State.
(5) Notwithstanding the preceding subsections, and
subject to subsection (3) of Section 9-302, the proper place
to file in order to perfect a security interest in
collateral, including fixtures, of a transmitting utility is
the office of the Secretary of State. This filing constitutes
a fixture filing (Section 9-313) as to the collateral
described therein which is or is to become fixtures.
(6) For the purposes of this Section, the residence of
an organization is its place of business if it has one or its
chief executive office if it has more than one place of
business.
(Source: P.A. 90-300, eff. 1-1-98.)
(810 ILCS 5/9-401A)
Sec. 9-401A. (Blank). Continuation of certain financing
statements filed before January 1, 1998. The following rules
apply to a financing statement or continuation statement that
was properly filed before January 1, 1998 in the office of a
county recorder, but which, if filed on or after January 1,
1998, is required by Section 9-401 to be filed in the office
of the Secretary of State:
(1) The financing statement shall remain effective until
it lapses as provided in Section 9-403.
(2) The effectiveness of the financing statement may be
continued only by filing a continuation statement in the
office of the Secretary of State that provides the name and
address of the debtor and secured party, indicates the county
where the financing statement is filed, complies with the
requirements of Section 9-403, and either:
(A) indicates the types or describes the items of
collateral included in the original financing statement
as modified by any releases or amendments; or
(B) has attached a copy of the originally filed
financing statement together with amendments,
assignments, and releases affecting it.
A continuation statement filed as provided in this item
(2) may be further continued by a continuation statement that
complies with the requirements of Section 9-403.
(3) The financing statement may be terminated, assigned,
released, or amended only by an appropriate filing in the
office of the county recorder where it is filed, except that
if the financing statement has been continued as provided in
item (2) of this Section, it may thereafter be terminated,
assigned, released, or amended only by an appropriate filing
in the office of the Secretary of State.
(Source: P.A. 90-300, eff. 1-1-98.)
(810 ILCS 5/9-402) (from Ch. 26, par. 9-402)
Sec. 9-402. Secured party not obligated on contract of
debtor or in tort. The existence of a security interest,
agricultural lien, or authority given to a debtor to dispose
of or use collateral, without more, does not subject a
secured party to liability in contract or tort for the
debtor's acts or omissions. Formal requisites of financing
statement; amendments; mortgage as financing statement.
(1) A financing statement is sufficient if it gives the
names of the debtor and the secured party, is signed by the
debtor, gives an address of the secured party from which
information concerning the security interest may be obtained,
gives a mailing address of the debtor and contains a
statement indicating the types, or describing the items, of
collateral. A financing statement may be filed before a
security agreement is made or a security interest otherwise
attaches. When a financing statement filed prior to January
1, 1996, covers crops growing or to be grown, the statement
must also contain a legal description of the real estate
concerned. If a financing statement covers crops growing or
to be grown and includes a description of the real estate
concerned, the description is sufficient if it includes the
quarter section, section, township and range, and the name of
a record owner if other than the debtor, of the real estate
concerned. When the financing statement covers timber to be
cut or covers minerals or the like (including oil and gas) or
accounts subject to subsection (5) of Section 9-103, or when
the financing statement is filed as a fixture filing (Section
9-313) and the collateral is goods which are or are to become
fixtures, the statement must also comply with subsection (5).
A copy of the security agreement is sufficient as a financing
statement if it contains the above information and is signed
by the debtor. A carbon, photographic or other reproduction
of a security agreement or a financing statement is
sufficient as a financing statement if the security agreement
so provides or if the original has been filed in this State.
(2) A financing statement which otherwise complies with
subsection (1) is sufficient when it is signed by the secured
party instead of the debtor if it is filed to perfect a
security interest in
(a) collateral already subject to a security
interest in another jurisdiction when it is brought into
this State, or when the debtor's location is changed to
this State. Such a financing statement must state that
the collateral was brought into this State or that the
debtor's location was changed to this State under such
circumstances; or
(b) proceeds under Section 9-306 if the security
interest in the original collateral was perfected. Such a
financing statement must describe the original
collateral; or
(c) collateral as to which the filing has lapsed;
or
(d) collateral acquired after a change of name,
identity or corporate structure of the debtor (subsection
(7).
(3) A form substantially as follows is sufficient to
comply with subsection (1):
Name of debtor (or assignor) .......................
Address .......................................
Name of secured party (or assignee) ...........
Address .......................................
1. This financing statement covers the following
types (or items) of property:
(Describe) .........................................
2. (Blank).
3. (If applicable) The above goods are to become
fixtures on *
*Where appropriate substitute either "The above
timber is standing on ...." or "The above minerals or the
like (including oil and gas) or accounts will be financed
at the wellhead or minehead of the well or mine located
on ...."
(Describe Real Estate) .............................
and this financing statement is to be filed in the real
estate records. (If the debtor does not have an interest
of record) The name of a record owner is ................
4. (If products of collateral are claimed) Products
of the collateral are also covered.
Signature of Debtor (or Assignor) ..................
Signature of Secured Party (or Assignee) ...........
(use whichever is applicable)
(4) A financing statement may be amended by filing a
writing signed by both the debtor and the secured party. An
amendment does not extend the period of effectiveness of a
financing statement. If any amendment adds collateral, it is
effective as to the added collateral only from the filing
date of the amendment. In this Article, unless the context
otherwise requires, the term "financing statement" means the
original financing statement and any amendments.
(5) A financing statement covering timber to be cut or
covering minerals or the like (including oil and gas) or
accounts subject to subsection (5) of Section 9-103, or a
financing statement filed as a fixture filing (Section 9-313)
where the debtor is not a transmitting utility, must show
that it covers this type of collateral, must recite that it
is to be filed in the real estate records, and the financing
statement must contain a description of the real estate. If
the debtor does not have an interest of record in the real
estate, the financing statement must show the name of a
record owner.
(6) A mortgage is effective as a financing statement
filed as a fixture filing from the date of its recording if
(a) the goods are described in the mortgage by item
or type,
(b) the goods are or are to become fixtures related
to the real estate described in the mortgage,
(c) the mortgage complies with the requirements for
a financing statement in this Section other than a
recital that it is to be filed in the real estate
records, and
(d) the mortgage is duly recorded.
No fee with reference to the financing statement is
required other than the regular recording and satisfaction
fees with respect to the mortgage.
(7) A financing statement sufficiently shows the name of
the debtor if it gives the individual, partnership or
corporate name of the debtor, whether or not it adds other
trade names or names of partners. Where the debtor so changes
his name or in the case of an organization its name, identity
or corporate structure that a filed financing statement
becomes seriously misleading, the filing is not effective to
perfect a security interest in collateral acquired by the
debtor more than 4 months after the change, unless a new
appropriate financing statement is filed before the
expiration of that time. A filed financing statement remains
effective with respect to collateral transferred by the
debtor even though the secured party knows of or consents to
the transfer.
(8) A financing statement substantially complying with
the requirements of this Section is effective even though it
contains minor errors which are not seriously misleading.
(Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.)
(810 ILCS 5/9-403) (from Ch. 26, par. 9-403)
Sec. 9-403. Agreement not to assert defenses against
assignee.
(a) "Value." In this Section, "value" has the meaning
provided in Section 3-303(a).
(b) Agreement not to assert claim or defense. Except as
otherwise provided in this Section, an agreement between an
account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may
have against the assignor is enforceable by an assignee that
takes an assignment:
(1) for value;
(2) in good faith;
(3) without notice of a claim of a property or
possessory right to the property assigned; and
(4) without notice of a defense or claim in
recoupment of the type that may be asserted against a
person entitled to enforce a negotiable instrument under
Section 3-305(a).
(c) When subsection (b) not applicable. Subsection (b)
does not apply to defenses of a type that may be asserted
against a holder in due course of a negotiable instrument
under Section 3-305(b).
(d) Omission of required statement in consumer
transaction. In a consumer transaction, if a record
evidences the account debtor's obligation, law other than
this Article requires that the record include a statement to
the effect that the rights of an assignee are subject to
claims or defenses that the account debtor could assert
against the original obligee, and the record does not include
such a statement:
(1) the record has the same effect as if the record
included such a statement; and
(2) the account debtor may assert against an
assignee those claims and defenses that would have been
available if the record included such a statement.
(e) Rule for individual under other law. This Section
is subject to law other than this Article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family,
or household purposes.
(f) Other law not displaced. Except as otherwise
provided in subsection (d), this Section does not displace
law other than this Article which gives effect to an
agreement by an account debtor not to assert a claim or
defense against an assignee. What constitutes filing;
duration of filing; effect of lapsed filing; duties of filing
officer; fees.
(1) Presentation for filing of a financing statement and
tender of the filing fee or acceptance of the statement by
the filing officer constitutes filing under this Article.
(2) Except as provided in subsection (6) a filed
financing statement is effective for a period of 5 years from
the date of filing. The effectiveness of a filed financing
statement lapses on the expiration of the 5 year period
unless a continuation statement is filed prior to the lapse.
If a security interest perfected by filing exists at the time
insolvency proceedings are commenced by or against the
debtor, the security interest remains perfected until
termination of the insolvency proceedings and thereafter for
a period of 60 days or until expiration of the 5 year period,
whichever occurs later. Upon lapse the security interest
becomes unperfected, unless it is perfected without filing.
If the security interest becomes unperfected upon lapse, it
is deemed to have been unperfected as against a person who
became a purchaser or lien creditor before lapse.
(3) A continuation statement may be filed by the secured
party within 6 months prior to the expiration of the 5 year
period specified in subsection (2). Any such continuation
statement must be signed by the secured party, identify the
original statement by file number and state that the original
statement is still effective. A continuation statement signed
by a person other than the secured party of record must be
accompanied by a separate written statement of assignment
signed by the secured party of record and complying with
subsection (2) of Section 9-405, including payment of the
required fee. Upon timely filing of the continuation
statement, the effectiveness of the original statement is
continued for 5 years after the last date to which the filing
was effective whereupon it lapses in the same manner as
provided in subsection (2) unless another continuation
statement is filed prior to such lapse. Succeeding
continuation statements may be filed in the same manner to
continue the effectiveness of the original statement. Unless
a statute on disposition of public records provides
otherwise, the filing officer may remove a lapsed statement
from the files and destroy it immediately if he has retained
a microfilm or other photographic record, or in other cases
after one year after the lapse. The filing officer shall so
arrange matters by physical annexation of financing
statements to continuation statements or other related
filings, or by other means, that if he physically destroys
the financing statements of a period more than 5 years past,
those which have been continued by a continuation statement
or which are still effective under subsection (6) shall be
retained.
(4) Except as provided in subsection (7) a filing
officer shall mark each statement with a file number and with
the date and hour of filing and shall hold the statement or a
microfilm or other photographic copy thereof for public
inspection. In addition the filing officer shall index the
statement according to the name of the debtor and shall note
in the index the file number and the address of the debtor
given in the statement.
(5) The uniform fee for filing and indexing and for
stamping a copy furnished by the secured party to show the
date and place of filing for an original financing statement,
amended statement, or for a continuation statement shall be
$20.
(6) If the debtor is a transmitting utility (subsection
(5) of Section 9-401 and a filed financing statement so
states, it is effective until a termination statement is
filed. A real estate mortgage which is effective as a fixture
filing under subsection (6) of Section 9-402 remains
effective as a fixture filing until the mortgage is released
or satisfied of record or its effectiveness otherwise
terminates as to the real estate.
(7) When a financing statement covers timber to be cut
or covers minerals or the like (including oil and gas) or
accounts subject to subsection (5) of Section 9-103, or is
filed as a fixture filing, the filing officer shall index it
under the names of the debtor and any owner of record shown
on the financing statement in the same fashion as if they
were the mortgagors in a mortgage of the real estate
described, and, to the extent that the law of this State
provides for indexing of mortgages under the name of the
mortgagee, under the name of the secured party as if he were
the mortgagee thereunder, or where indexing is by description
in the same fashion as if the financing statement were a
mortgage of the real estate described.
(8) For financing statements filed on or after January
1, 1998 as to a debtor who is a resident of the State of
Illinois, if the collateral is equipment used in farming
operations, farm products, or accounts or general intangibles
arising from the sale of farm products by a farmer, the
secured party shall, within 30 days after filing with the
office of the Secretary of State, remit to the office of the
recorder in the county of the debtor's residence a fee of $10
together with a copy of the financing statement filed in the
office of the Secretary of State. This fee is in addition to
payment of the fee provided in subsection (5) of this Section
and is imposed to defray the cost of converting the county
recorder's document storage system to computers or
micrographics. The copy of the financing statement provided
to the office of the recorder shall be for informational
purposes only and shall not be for filing with the office of
the recorder nor shall the provision of the informational
copy be subject to imposition of any filing fee under Section
3-5018 of the Counties Code or otherwise. The provisions of
this subsection (8) other than this sentence, are inoperative
after the earlier of (i) July 1, 1999 or (ii) the effective
date of a change to the Illinois Uniform Commercial Code
which adopts a recommendation by the National Conference of
Commissioners on Uniform State Laws to amend Section 9-401 of
this Code to make the office of the Secretary of State the
proper place to file a financing statement described in this
subsection (8).
(9) The failure to send an informational copy of a
financing statement to the appropriate office of the recorder
or to pay the fee as set forth in subsection (8) shall not in
any manner affect the existence, validity, perfection,
priority, or enforceability of the security interest of the
secured party.
(Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98;
revised 10-31-98.)
(810 ILCS 5/9-404) (from Ch. 26, par. 9-404)
Sec. 9-404. Rights acquired by assignee; claims and
defenses against assignee.
(a) Assignee's rights subject to terms, claims, and
defenses; exceptions. Unless an account debtor has made an
enforceable agreement not to assert defenses or claims, and
subject to subsections (b) through (e), the rights of an
assignee are subject to:
(1) all terms of the agreement between the account
debtor and assignor and any defense or claim in
recoupment arising from the transaction that gave rise to
the contract; and
(2) any other defense or claim of the account
debtor against the assignor which accrues before the
account debtor receives a notification of the assignment
authenticated by the assignor or the assignee.
(b) Account debtor's claim reduces amount owed to
assignee. Subject to subsection (c) and except as otherwise
provided in subsection (d), the claim of an account debtor
against an assignor may be asserted against an assignee under
subsection (a) only to reduce the amount the account debtor
owes.
(c) Rule for individual under other law. This Section
is subject to law other than this Article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family,
or household purposes.
(d) Omission of required statement in consumer
transaction. In a consumer transaction, if a record
evidences the account debtor's obligation, law other than
this Article requires that the record include a statement to
the effect that the account debtor's recovery against an
assignee with respect to claims and defenses against the
assignor may not exceed amounts paid by the account debtor
under the record, and the record does not include such a
statement, the extent to which a claim of an account debtor
against the assignor may be asserted against an assignee is
determined as if the record included such a statement.
(e) Inapplicability to health-care-insurance receivable.
This Section does not apply to an assignment of a
health-care-insurance receivable. Termination Statement;
Duties of Filing Officer.
(1) If a financing statement covering consumer goods is
filed on or after the effective date of this amendatory Act
of 1972, then within one month or within 10 days following
written demand by the debtor after there is no outstanding
secured obligation and no commitment to make advances, incur
obligations or otherwise give value, the secured party must
file with each filing officer with whom the financing
statement was filed, a termination statement to the effect
that he no longer claims a security interest under the
financing statement, which shall be identified by file
number. In other cases whenever there is no outstanding
secured obligation and no commitment to make advances, incur
obligations or otherwise give value, the secured party must
on written demand by the debtor send the debtor, for each
filing officer with whom the financing statement was filed, a
termination statement to the effect that he no longer claims
a security interest under the financing statement, which
shall be identified by file number. A termination statement
signed by a person other than the secured party of record
must be accompanied by a separate written statement of
assignment signed by the secured party of record and
complying with subsection (2) of Section 9-405, including
payment of the required fee. If the affected secured party
fails to file such a termination statement as required by
this subsection, or to send such a termination statement
within 10 days after proper demand therefor, he shall be
liable to the debtor for $100 and in addition for any loss
caused to the debtor by such failure.
(2) On presentation to the filing officer of such a
termination statement he must note it in the index. If he has
received the termination statement in duplicate, he shall
return one copy of the termination statement to the secured
party stamped to show the time of receipt thereof. If the
filing officer has a microfilm or other photographic record
of the financing statement, and of any related continuation
statement, statement of assignment and statement of release,
he may remove the originals from the files at any time after
receipt of the termination statement, or if he has no such
record, he may remove them from the files at any time after
one year after receipt of the termination statement.
(Source: P.A. 89-503, eff. 1-1-97.)
(810 ILCS 5/9-405) (from Ch. 26, par. 9-405)
Sec. 9-405. Modification of assigned contract.
(a) Effect of modification on assignee. A modification
of or substitution for an assigned contract is effective
against an assignee if made in good faith. The assignee
acquires corresponding rights under the modified or
substituted contract. The assignment may provide that the
modification or substitution is a breach of contract by the
assignor. This subsection is subject to subsections (b)
through (d).
(b) Applicability of subsection (a). Subsection (a)
applies to the extent that:
(1) the right to payment or a part thereof under an
assigned contract has not been fully earned by
performance; or
(2) the right to payment or a part thereof has been
fully earned by performance and the account debtor has
not received notification of the assignment under Section
9-406(a).
(c) Rule for individual under other law. This Section
is subject to law other than this Article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family,
or household purposes.
(d) Inapplicability to health-care-insurance receivable.
This Section does not apply to an assignment of a
health-care-insurance receivable. Assignment of Security
Interest; Duties of Filing Officer; Fees.
(1) A financing statement may disclose an assignment of
a security interest in the collateral described in the
financing statement by indication in the financing statement
of the name and address of the assignee or by an assignment
itself or a copy thereof on the face or back of the
statement. On presentation to the filing officer of such a
financing statement the filing officer shall mark the same as
provided in Section 9-403 (4). The uniform fee for filing,
indexing and furnishing filing data for a financing statement
so indicating an assignment shall be $20.
(2) A secured party may assign of record all or a part
of his rights under a financing statement by the filing in
the place where the original financing statement was filed of
a separate written statement of assignment signed by the
secured party of record and setting forth the name of the
secured party of record and the debtor, the file number and
the date of filing of the financing statement and the name
and address of the assignee and containing a description of
the collateral assigned. A copy of the assignment is
sufficient as a separate statement if it complies with the
preceding sentence. On presentation to the filing officer of
such a separate statement, the filing officer shall mark such
separate statement with the date and hour of the filing. He
shall note the assignment on the index of the financing
statement, or in the case of a fixture filing, or a filing
covering timber to be cut, or covering minerals or the like
(including oil and gas) or accounts subject to subsection (5)
of Section 9-103, he shall index the assignment under the
name of the assignor as grantor and, to the extent that the
law of this State provides for indexing the assignment of a
mortgage under the name of the assignee, he shall index the
assignment of the financing statement under the name of the
assignee. The uniform fee for filing, indexing and furnishing
filing data about such a separate statement of assignment
shall be $20. Notwithstanding the provisions of this
subsection, an assignment of record of a security interest in
a fixture contained in a mortgage effective as a fixture
filing (subsection (6) of Section 9-402 may be made only by
an assignment of the mortgage in the manner provided by the
law of this State other than this Act.
(3) After the disclosure or filing of an assignment
under this Section, the assignee is the secured party of
record.
(Source: P.A. 89-503, eff. 1-1-97.)
(810 ILCS 5/9-406) (from Ch. 26, par. 9-406)
Sec. 9-406. Discharge of account debtor; notification of
assignment; identification and proof of assignment;
restrictions on assignment of accounts, chattel paper,
payment intangibles, and promissory notes ineffective.
(a) Discharge of account debtor; effect of notification.
Subject to subsections (b) through (i), an account debtor on
an account, chattel paper, or a payment intangible may
discharge its obligation by paying the assignor until, but
not after, the account debtor receives a notification,
authenticated by the assignor or the assignee, that the
amount due or to become due has been assigned and that
payment is to be made to the assignee. After receipt of the
notification, the account debtor may discharge its obligation
by paying the assignee and may not discharge the obligation
by paying the assignor.
(b) When notification ineffective. Subject to
subsection (h), notification is ineffective under subsection
(a):
(1) if it does not reasonably identify the rights
assigned;
(2) to the extent that an agreement between an
account debtor and a seller of a payment intangible
limits the account debtor's duty to pay a person other
than the seller and the limitation is effective under law
other than this Article; or
(3) at the option of an account debtor, if the
notification notifies the account debtor to make less
than the full amount of any installment or other periodic
payment to the assignee, even if:
(A) only a portion of the account, chattel
paper, or payment intangible has been assigned to
that assignee;
(B) a portion has been assigned to another
assignee; or
(C) the account debtor knows that the
assignment to that assignee is limited.
(c) Proof of assignment. Subject to subsection (h), if
requested by the account debtor, an assignee shall seasonably
furnish reasonable proof that the assignment has been made.
Unless the assignee complies, the account debtor may
discharge its obligation by paying the assignor, even if the
account debtor has received a notification under subsection
(a).
(d) Term restricting assignment generally ineffective.
Except as otherwise provided in subsection (e) and Sections
2A-303 and 9-407, and subject to subsection (h), a term in an
agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it:
(1) prohibits, restricts, or requires the consent
of the account debtor or person obligated on the
promissory note to the assignment or transfer of, or the
creation, attachment, perfection, or enforcement of a
security interest in, the account, chattel paper, payment
intangible, or promissory note; or
(2) provides that the assignment or transfer or the
creation, attachment, perfection, or enforcement of the
security interest may give rise to a default, breach,
right of recoupment, claim, defense, termination, right
of termination, or remedy under the account, chattel
paper, payment intangible, or promissory note.
(e) Inapplicability of subsection (d) to certain sales.
Subsection (d) does not apply to the sale of a payment
intangible or promissory note.
(f) Legal restrictions on assignment generally
ineffective. Except as otherwise provided in Sections 2A-303
and 9-407 and subject to subsections (h) and (i), a rule of
law, statute, or regulation that prohibits, restricts, or
requires the consent of a government, governmental body or
official, or account debtor to the assignment or transfer of,
or creation of a security interest in, an account or chattel
paper is ineffective to the extent that the rule of law,
statute, or regulation:
(1) prohibits, restricts, or requires the consent
of the government, governmental body or official, or
account debtor to the assignment or transfer of, or the
creation, attachment, perfection, or enforcement of a
security interest in the account or chattel paper; or
(2) provides that the assignment or transfer or the
creation, attachment, perfection, or enforcement of the
security interest may give rise to a default, breach,
right of recoupment, claim, defense, termination, right
of termination, or remedy under the account or chattel
paper.
(g) Subsection (b)(3) not waivable. Subject to
subsection (h), an account debtor may not waive or vary its
option under subsection (b)(3).
(h) Rule for individual under other law. This Section
is subject to law other than this Article which establishes a
different rule for an account debtor who is an individual and
who incurred the obligation primarily for personal, family,
or household purposes.
(i) Inapplicability to health-care-insurance receivable.
This Section does not apply to an assignment of a
health-care-insurance receivable.
Release of Collateral; Duties of Filing Officer; Fees. A
secured party of record may by his signed statement release
all or a part of any collateral described in a filed
financing statement. The statement of release is sufficient
if it contains a description of the collateral being
released, the name and address of the debtor, the name and
address of the secured party, and the file number of the
financing statement. A statement of release signed by a
person other than the secured party of record must be
accompanied by a separate written statement of assignment
signed by the secured party of record and complying with
subsection (2) of Section 9-405, including payment of the
required fee. Upon presentation of such a statement of
release to the filing officer he shall mark the statement
with the hour and date of filing and shall note the same upon
the margin of the index of the filing of the financing
statement. The uniform fee for filing and noting such a
statement of release shall be $20.
(Source: P.A. 89-503, eff. 1-1-97.)
(810 ILCS 5/9-407) (from Ch. 26, par. 9-407)
Sec. 9-407. Restrictions on creation or enforcement of
security interest in leasehold interest or in lessor's
residual interest.
(a) Term restricting assignment generally ineffective.
Except as otherwise provided in subsection (b), a term in a
lease agreement is ineffective to the extent that it:
(1) prohibits, restricts, or requires the consent
of a party to the lease to the assignment or transfer or
the creation, attachment, perfection, or enforcement of a
security interest in an interest of a party under the
lease contract or in the lessor's residual interest in
the goods; or
(2) provides that the assignment or transfer or the
creation, attachment, perfection, or enforcement of the
security interest may give rise to a default, breach,
right of recoupment, claim, defense, termination, right
of termination, or remedy under the lease.
(b) Effectiveness of certain terms. Except as otherwise
provided in Section 2A-303(7), a term described in subsection
(a)(2) is effective to the extent that there is:
(1) a transfer by the lessee of the lessee's right
of possession or use of the goods in violation of the
term; or
(2) a delegation of a material performance of
either party to the lease contract in violation of the
term.
(c) Security interest not material impairment. The
creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease
contract or the lessor's residual interest in the goods is
not a transfer that materially impairs the lessee's prospect
of obtaining return performance or materially changes the
duty of or materially increases the burden or risk imposed on
the lessee within the purview of Section 2A-303(4) unless,
and then only to the extent that, enforcement actually
results in a delegation of material performance of the
lessor. Information from Filing Officer; Fees.
(1) If the person filing any financing statement,
termination statement, statement of assignment, or statement
of release, furnishes the filing officer a copy thereof, the
filing officer shall upon request note upon the copy the file
number and date and hour of the filing of the original and
deliver or send the copy to such person.
(2) Upon request of any person, the filing officer shall
issue his certificate showing whether there is on file on the
date and hour stated therein, any presently effective
financing statement naming a particular debtor and any
statement of assignment thereof and if there is, giving the
date and hour of filing of each such statement and the names
and addresses of each secured party therein. The uniform fee
for such a certificate shall be $10 per name searched. Upon
request the filing officer shall furnish a copy of any filed
financing statement or statement of assignment for a uniform
fee of $1.00 per page.
(Source: P.A. 86-343.)
(810 ILCS 5/9-408) (from Ch. 26, par. 9-408)
Sec. 9-408. Restrictions on assignment of promissory
notes, health-care-insurance receivables, and certain general
intangibles ineffective.
(a) Term restricting assignment generally ineffective.
Except as otherwise provided in subsection (b), a term in a
promissory note or in an agreement between an account debtor
and a debtor which relates to a health-care-insurance
receivable or a general intangible, including a contract,
permit, license, or franchise, and which term prohibits,
restricts, or requires the consent of the person obligated on
the promissory note or the account debtor to, the assignment
or transfer of, or creation, attachment, or perfection of a
security interest in, the promissory note,
health-care-insurance receivable, or general intangible, is
ineffective to the extent that the term:
(1) would impair the creation, attachment, or
perfection of a security interest; or
(2) provides that the assignment or transfer or the
creation, attachment, or perfection of the security
interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of
termination, or remedy under the promissory note,
health-care-insurance receivable, or general intangible.
(b) Applicability of subsection (a) to sales of certain
rights to payment. Subsection (a) applies to a security
interest in a payment intangible or promissory note only if
the security interest arises out of a sale of the payment
intangible or promissory note.
(c) Legal restrictions on assignment generally
ineffective. A rule of law, statute, or regulation that
prohibits, restricts, or requires the consent of a
government, governmental body or official, person obligated
on a promissory note, or account debtor to the assignment or
transfer of, or creation of a security interest in, a
promissory note, health-care-insurance receivable, or general
intangible, including a contract, permit, license, or
franchise between an account debtor and a debtor, is
ineffective to the extent that the rule of law, statute, or
regulation:
(1) would impair the creation, attachment, or
perfection of a security interest; or
(2) provides that the assignment or transfer or the
creation, attachment, or perfection of the security
interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of
termination, or remedy under the promissory note,
health-care-insurance receivable, or general intangible.
(d) Limitation on ineffectiveness under subsections (a)
and (c). To the extent that a term in a promissory note or in
an agreement between an account debtor and a debtor which
relates to a health-care-insurance receivable or general
intangible or a rule of law, statute, or regulation described
in subsection (c) would be effective under law other than
this Article but is ineffective under subsection (a) or (c),
the creation, attachment, or perfection of a security
interest in the promissory note, health-care-insurance
receivable, or general intangible:
(1) is not enforceable against the person obligated
on the promissory note or the account debtor;
(2) does not impose a duty or obligation on the
person obligated on the promissory note or the account
debtor;
(3) does not require the person obligated on the
promissory note or the account debtor to recognize the
security interest, pay or render performance to the
secured party, or accept payment or performance from the
secured party;
(4) does not entitle the secured party to use or
assign the debtor's rights under the promissory note,
health-care-insurance receivable, or general intangible,
including any related information or materials furnished
to the debtor in the transaction giving rise to the
promissory note, health-care-insurance receivable, or
general intangible;
(5) does not entitle the secured party to use,
assign, possess, or have access to any trade secrets or
confidential information of the person obligated on the
promissory note or the account debtor; and
(6) does not entitle the secured party to enforce
the security interest in the promissory note,
health-care-insurance receivable, or general intangible.
Financing Statements Covering Consigned or Leased Goods.
A consignor or lessor of goods may file a financing
statement using the terms "consignor," "consignee," "lessor,"
"lessee" or the like instead of the terms specified in
Section 9-402. The provisions of this part shall apply as
appropriate to such a financing statement but its filing
shall not of itself be a factor in determining whether or not
the consignment or lease is intended as security (Section
1-201 (37). However, if it is determined for other reasons
that the consignment or lease is so intended, a security
interest of the consignor or lessor which attaches to the
consigned or leased goods is perfected by such filing.
(Source: P. A. 78-238.)
(810 ILCS 5/9-409 new)
Sec. 9-409. Restrictions on assignment of
letter-of-credit rights ineffective.
(a) Term or law restricting assignment generally
ineffective. A term in a letter of credit or a rule of law,
statute, regulation, custom, or practice applicable to the
letter of credit which prohibits, restricts, or requires the
consent of an applicant, issuer, or nominated person to a
beneficiary's assignment of or creation of a security
interest in a letter-of-credit right is ineffective to the
extent that the term or rule of law, statute, regulation,
custom, or practice:
(1) would impair the creation, attachment, or
perfection of a security interest in the letter-of-credit
right; or
(2) provides that the assignment or the creation,
attachment, or perfection of the security interest may
give rise to a default, breach, right of recoupment,
claim, defense, termination, right of termination, or
remedy under the letter-of-credit right.
(b) Limitation on ineffectiveness under subsection (a).
To the extent that a term in a letter of credit is
ineffective under subsection (a) but would be effective under
law other than this Article or a custom or practice
applicable to the letter of credit, to the transfer of a
right to draw or otherwise demand performance under the
letter of credit, or to the assignment of a right to proceeds
of the letter of credit, the creation, attachment, or
perfection of a security interest in the letter-of-credit
right:
(1) is not enforceable against the applicant,
issuer, nominated person, or transferee beneficiary;
(2) imposes no duties or obligations on the
applicant, issuer, nominated person, or transferee
beneficiary; and
(3) does not require the applicant, issuer,
nominated person, or transferee beneficiary to recognize
the security interest, pay or render performance to the
secured party, or accept payment or other performance
from the secured party.
(810 ILCS 5/9-410)
Sec. 9-410. (Blank). Disposition of fees. Of the total
money collected for each filing with the Secretary of State
of an original financing statement, amended statement,
continuation, assignment, or for a release of collateral, $12
of the filing fee shall be paid into the Secretary of State
Special Services Fund. The remaining $8 shall be deposited
into the General Revenue Fund in the State Treasury.
(Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.)
(810 ILCS 5/Art. 9, Part 5 heading)
PART 5. FILING DEFAULT
(810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new)
SUBPART 1. FILING OFFICE; CONTENTS AND
EFFECTIVENESS OF FINANCING STATEMENT
(810 ILCS 5/9-501) (from Ch. 26, par. 9-501)
Sec. 9-501. Filing office.
(a) Filing offices. Except as otherwise provided in
subsection (b), if the local law of this State governs
perfection of a security interest or agricultural lien, the
office in which to file a financing statement to perfect the
security interest or agricultural lien is:
(1) the office designated for the filing or
recording of a record of a mortgage on the related real
property, if:
(A) the collateral is as-extracted collateral
or timber to be cut; or
(B) the financing statement is filed as a
fixture filing and the collateral is goods that are
or are to become fixtures; or
(2) the office of the Secretary of State in all
other cases, including a case in which the collateral is
goods that are or are to become fixtures and the
financing statement is not filed as a fixture filing.
(b) Filing office for transmitting utilities. The
office in which to file a financing statement to perfect a
security interest in collateral, including fixtures, of a
transmitting utility is the office of the Secretary of State.
The financing statement also constitutes a fixture filing as
to the collateral indicated in the financing statement which
is or is to become fixtures. Default; procedure when security
agreement covers both real and personal property.
(1) When a debtor is in default under a security
agreement, a secured party has the rights and remedies
provided in this Part and except as limited by subsection (3)
those provided in the security agreement. He may reduce his
claim to judgment, foreclose or otherwise enforce the
security interest by any available judicial procedure. If the
collateral is documents the secured party may proceed either
as to the documents or as to the goods covered thereby. A
secured party in possession has the rights, remedies and
duties provided in Section 9-207. The rights and remedies
referred to in this subsection are cumulative.
(2) After default, the debtor has the rights and
remedies provided in this Part, those provided in the
security agreement and those provided in Section 9-207.
(3) To the extent that they give rights to the debtor
and impose duties on the secured party, the rules stated in
the subsections referred to below may not be waived or varied
except as provided with respect to compulsory disposition of
collateral (subsection (3) of Section 9-504 and Section 9-505
and with respect to redemption of collateral (Section 9-506)
but the parties may by agreement determine the standards by
which the fulfillment of these rights and duties is to be
measured if such standards are not manifestly unreasonable:
(a) subsection (2) of Section 9-502 and subsection
(2) of Section 9-504 insofar as they require accounting
for surplus proceeds of collateral;
(b) subsection (3) of Section 9-504 and subsection
(1) of Section 9-505 which deal with disposition of
collateral;
(c) subsection (2) of Section 9-505 which deals
with acceptance of collateral as discharge of obligation;
(d) Section 9-506 which deals with redemption of
collateral; and
(e) subsection (1) of Section 9-507 which deals
with the secured party's liability for failure to comply
with this Part.
(4) If the security agreement covers both real and
personal property, the secured party may proceed under this
Part as to the personal property or he may proceed as to both
the real and the personal property in accordance with his
rights and remedies in respect to the real property in which
case the provisions of this Part do not apply.
(5) When a secured party has reduced his claim to
judgment the lien of any levy which may be made upon his
collateral by virtue of such judgment shall relate back to
the date of the perfection of the security interest in such
collateral. A judicial sale, pursuant to such judgment, is a
foreclosure of the security interest by judicial procedure
within the meaning of this Section, and the secured party may
purchase at the sale and thereafter hold the collateral free
of any other requirements of this Article.
(Source: P.A. 84-546; revised 10-31-98.)
(810 ILCS 5/9-502) (from Ch. 26, par. 9-502)
Sec. 9-502. Contents of financing statement; record of
mortgage as financing statement; time of filing financing
statement.
(a) Sufficiency of financing statement. Subject to
subsection (b), a financing statement is sufficient only if
it:
(1) provides the name of the debtor;
(2) provides the name of the secured party or a
representative of the secured party; and
(3) indicates the collateral covered by the
financing statement.
(b) Real-property-related financing statements. Except
as otherwise provided in Section 9-501(b), to be sufficient,
a financing statement that covers as-extracted collateral or
timber to be cut, or which is filed as a fixture filing and
covers goods that are or are to become fixtures, must satisfy
subsection (a) and also:
(1) indicate that it covers this type of
collateral;
(2) indicate that it is to be filed in the real
property records;
(3) provide a description of the real property to
which the collateral is related sufficient to give
constructive notice of a mortgage under the law of this
State if the description were contained in a record of
the mortgage of the real property; and
(4) if the debtor does not have an interest of
record in the real property, provide the name of a record
owner.
(c) Record of mortgage as financing statement. A record
of a mortgage is effective, from the date of recording, as a
financing statement filed as a fixture filing or as a
financing statement covering as-extracted collateral or
timber to be cut only if:
(1) the record indicates the goods or accounts that
it covers;
(2) the goods are or are to become fixtures related
to the real property described in the record or the
collateral is related to the real property described in
the record and is as-extracted collateral or timber to be
cut;
(3) the record satisfies the requirements for a
financing statement in this Section other than an
indication that it is to be filed in the real property
records; and
(4) the record is recorded.
(d) Filing before security agreement or attachment. A
financing statement may be filed before a security agreement
is made or a security interest otherwise attaches. Collection
Rights of Secured Party.
(1) When so agreed and in any event on default the
secured party is entitled to notify an account debtor or the
obligor on an instrument to make payment to him whether or
not the assignor was theretofore making collections on the
collateral, and also to take control of any proceeds to which
he is entitled under Section 9-306.
(2) A secured party who by agreement is entitled to
charge back uncollected collateral or otherwise to full or
limited recourse against the debtor and who undertakes to
collect from the account debtors or obligors must proceed in
a commercially reasonable manner and may deduct his
reasonable expenses of realization from the collections. If
the security agreement secures an indebtedness, the secured
party must account to the debtor for any surplus, and unless
otherwise agreed, the debtor is liable for any deficiency.
But, if the underlying transaction was a sale of accounts or
chattel paper, the debtor is entitled to any surplus or is
liable for any deficiency only if the security agreement so
provides.
(Source: P.A. 77-2810.)
(810 ILCS 5/9-503) (from Ch. 26, par. 9-503)
Sec. 9-503. Name of debtor and secured party.
(a) Sufficiency of debtor's name. A financing statement
sufficiently provides the name of the debtor:
(1) if the debtor is a registered organization,
only if the financing statement provides the name of the
debtor indicated on the public record of the debtor's
jurisdiction of organization which shows the debtor to
have been organized;
(2) if the debtor is a decedent's estate, only if
the financing statement provides the name of the decedent
and indicates that the debtor is an estate;
(3) if the debtor is a trust or a trustee acting
with respect to property held in trust, only if the
financing statement:
(A) provides the name specified for the trust
in its organic documents or, if no name is
specified, provides the name of the settlor and
additional information sufficient to distinguish the
debtor from other trusts having one or more of the
same settlors; and
(B) indicates, in the debtor's name or
otherwise, that the debtor is a trust or is a
trustee acting with respect to property held in
trust; and
(4) in other cases:
(A) if the debtor has a name, only if it
provides the individual or organizational name of
the debtor; and
(B) if the debtor does not have a name, only
if it provides the names of the partners, members,
associates, or other persons comprising the debtor.
(b) Additional debtor-related information. A financing
statement that provides the name of the debtor in accordance
with subsection (a) is not rendered ineffective by the
absence of:
(1) a trade name or other name of the debtor; or
(2) unless required under subsection (a)(4)(B),
names of partners, members, associates, or other persons
comprising the debtor.
(c) Debtor's trade name insufficient. A financing
statement that provides only the debtor's trade name does not
sufficiently provide the name of the debtor.
(d) Representative capacity. Failure to indicate the
representative capacity of a secured party or representative
of a secured party does not affect the sufficiency of a
financing statement.
(e) Multiple debtors and secured parties. A financing
statement may provide the name of more than one debtor and
the name of more than one secured party. Secured party's
right to take possession after default.
Unless otherwise agreed a secured party has on default
the right to take possession of the collateral. In taking
possession a secured party may proceed without judicial
process if this can be done without breach of the peace or
may proceed by action.
If the security agreement so provides the secured party
may require the debtor to assemble the collateral and make it
available to the secured party at a place to be designated by
the secured party which is reasonably convenient to both
parties. Without removal a secured party may render equipment
unusable, and may dispose of collateral on the debtor's
premises under Section 9--504.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-504) (from Ch. 26, par. 9-504)
Sec. 9-504. Indication of collateral. A financing
statement sufficiently indicates the collateral that it
covers if the financing statement provides:
(1) a description of the collateral pursuant to
Section 9-108; or
(2) an indication that the financing statement
covers all assets or all personal property.
Secured Party's Right to Dispose of Collateral After
Default; Effect of Disposition.
(1) A secured party after default may sell, lease or
otherwise dispose of any or all of the collateral in its then
condition or following any commercially reasonable
preparation or processing. Any sale of goods is subject to
the Article on Sales (Article 2). The proceeds of disposition
shall be applied in the order following to
(a) the reasonable expenses of retaking, holding,
preparing for sale or lease, selling, leasing and the like
and, to the extent provided for in the agreement and not
prohibited by law, the reasonable attorneys' fees and legal
expenses incurred by the secured party;
(b) the satisfaction of indebtedness secured by the
security interest under which the disposition is made;
(c) the satisfaction of indebtedness secured by any
subordinate security interest in the collateral if written
notification of demand therefor is received before
distribution of the proceeds is completed. If requested by
the secured party, the holder of a subordinate security
interest must seasonably furnish reasonable proof of his
interest, and unless he does so, the secured party need not
comply with his demand.
(2) If the security interest secures an indebtedness,
the secured party must account to the debtor for any surplus,
and, unless otherwise agreed, the debtor is liable for any
deficiency. But if the underlying transaction was a sale of
accounts or chattel paper, the debtor is entitled to any
surplus or is liable for any deficiency only if the security
agreement so provides.
(3) Disposition of the collateral may be by public or
private proceedings and may be made by way of one or more
contracts. Sale or other disposition may be as a unit or in
parcels and at any time and place and on any terms but every
aspect of the disposition including the method, manner, time,
place and terms must be commercially reasonable. Unless
collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized
market, reasonable notification of the time and place of any
public sale or reasonable notification of the time after
which any private sale or other intended disposition is to be
made shall be sent by the secured party to the debtor, if he
has not signed after default a statement renouncing or
modifying his right to notification of sale. In the case of
consumer goods no other notification need be sent. In other
cases notification shall be sent to any other secured party
from whom the secured party has received (before sending his
notification to the debtor or before the debtor's
renunciation of his rights) written notice of a claim of an
interest in the collateral. The secured party may buy at any
public sale and if the collateral is of a type customarily
sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations he
may buy at private sale.
(4) When collateral is disposed of by a secured party
after default, the disposition transfers to a purchaser for
value all of the debtor's rights therein, discharges the
security interest under which it is made and any security
interest or lien subordinate thereto. The purchaser takes
free of all such rights and interests even though the secured
party fails to comply with the requirements of this Part or
of any judicial proceedings
(a) in the case of a public sale, if the purchaser
has no knowledge of any defects in the sale and if he does
not buy in collusion with the secured party, other bidders or
the person conducting the sale; or
(b) in any other case, if the purchaser acts in
good faith.
(5) A person who is liable to a secured party under a
guaranty, indorsement, repurchase agreement or the like and
who receives a transfer of collateral from the secured party
or is subrogated to his rights has thereafter the rights and
duties of the secured party. Such a transfer of collateral is
not a sale or disposition of the collateral under this
Article.
(Source: P. A. 78-238.)
(810 ILCS 5/9-505) (from Ch. 26, par. 9-505)
Sec. 9-505. Filing and compliance with other statutes and
treaties for consignments, leases, other bailments, and other
transactions.
(a) Use of terms other than "debtor" and "secured
party." A consignor, lessor, or other bailor of goods, a
licensor, or a buyer of a payment intangible or promissory
note may file a financing statement, or may comply with a
statute or treaty described in Section 9-311(a), using the
terms "consignor", "consignee", "lessor", "lessee", "bailor",
"bailee", "licensor", "licensee", "owner", "registered
owner", "buyer", "seller", or words of similar import,
instead of the terms "secured party" and "debtor".
(b) Effect of financing statement under subsection (a).
This part applies to the filing of a financing statement
under subsection (a) and, as appropriate, to compliance that
is equivalent to filing a financing statement under Section
9-311(b), but the filing or compliance is not of itself a
factor in determining whether the collateral secures an
obligation. If it is determined for another reason that the
collateral secures an obligation, a security interest held by
the consignor, lessor, bailor, licensor, owner, or buyer
which attaches to the collateral is perfected by the filing
or compliance. Compulsory Disposition of Collateral;
Acceptance of the Collateral as Discharge of Obligation.
(1) If the debtor has paid 60% of the cash price in the
case of a purchase money security interest in consumer goods
or 60% of the loan in the case of another security interest
in consumer goods, and has not signed after default a
statement renouncing or modifying his rights under this Part
a secured party who has taken possession of collateral must
dispose of it under Section 9--504 and if he fails to do so
within 90 days after he takes possession the debtor at his
option may recover in conversion or under Section 9--507(1)
on secured party's liability.
(2) In any other case involving consumer goods or any
other collateral a secured party in possession may, after
default, propose to retain the collateral in satisfaction of
the obligation. Written notice of such proposal shall be sent
to the debtor if he has not signed after default a statement
renouncing or modifying his rights under this subsection. In
the case of consumer goods no other notice need be given. In
other cases notice shall be sent to any other secured party
from whom the secured party has received (before sending his
notice to the debtor or before the debtor's renunciation of
his rights) written notice of a claim of an interest in the
collateral. If the secured party receives objection in
writing from a person entitled to receive notification within
twenty-one days after the notice was sent, the secured party
must dispose of the collateral under Section 9-504. In the
absence of such written objection the secured party may
retain the collateral in satisfaction of the debtor's
obligation.
(Source: P.A. 77-2810.)
(810 ILCS 5/9-506) (from Ch. 26, par. 9-506)
Sec. 9-506. Effect of errors or omissions.
(a) Minor errors and omissions. A financing statement
substantially satisfying the requirements of this Part is
effective, even if it has minor errors or omissions, unless
the errors or omissions make the financing statement
seriously misleading.
(b) Financing statement seriously misleading. Except as
otherwise provided in subsection (c), a financing statement
that fails sufficiently to provide the name of the debtor in
accordance with Section 9-503(a) is seriously misleading.
(c) Financing statement not seriously misleading. If a
search of the records of the filing office under the debtor's
correct name, using the filing office's standard search
logic, if any, would disclose a financing statement that
fails sufficiently to provide the name of the debtor in
accordance with Section 9-503(a), the name provided does not
make the financing statement seriously misleading.
(d) "Debtor's correct name." For purposes of Section
9-508(b), the "debtor's correct name" in subsection (c) means
the correct name of the new debtor. Debtor's right to redeem
collateral.
At any time before the secured party has disposed of
collateral or entered into a contract for its disposition
under Section 9--504 or before the obligation has been
discharged under Section 9--505(2) the debtor or any other
secured party may unless otherwise agreed in writing after
default redeem the collateral by tendering fulfillment of all
obligations secured by the collateral as well as the expenses
reasonably incurred by the secured party in retaking, holding
and preparing the collateral for disposition, in arranging
for the sale, and to the extent provided in the agreement and
not prohibited by law, his reasonable attorneys' fees and
legal expenses.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-507) (from Ch. 26, par. 9-507)
Sec. 9-507. Effect of certain events on effectiveness of
financing statement.
(a) Disposition. A filed financing statement remains
effective with respect to collateral that is sold, exchanged,
leased, licensed, or otherwise disposed of and in which a
security interest or agricultural lien continues, even if the
secured party knows of or consents to the disposition.
(b) Information becoming seriously misleading. Except
as otherwise provided in subsection (c) and Section 9-508, a
financing statement is not rendered ineffective if, after the
financing statement is filed, the information provided in the
financing statement becomes seriously misleading under
Section 9-506.
(c) Change in debtor's name. If a debtor so changes its
name that a filed financing statement becomes seriously
misleading under Section 9-506:
(1) the financing statement is effective to perfect
a security interest in collateral acquired by the debtor
before, or within four months after, the change; and
(2) the financing statement is not effective to
perfect a security interest in collateral acquired by the
debtor more than four months after the change, unless an
amendment to the financing statement which renders the
financing statement not seriously misleading is filed
within four months after the change. Secured party's
liability for failure to comply with this part.
(1) If it is established that the secured party is not
proceeding in accordance with the provisions of this Part
disposition may be ordered or restrained on appropriate terms
and conditions. If the disposition has occurred the debtor or
any person entitled to notification or whose security
interest has been made known to the secured party prior to
the disposition has a right to recover from the secured party
any loss caused by a failure to comply with the provisions of
this Part. If the collateral is consumer goods, the debtor in
an individual action has a right to recover in any event an
amount not less than the credit service charge plus 10% of
the principal amount of the debt or the time price
differential plus 10% of the cash price.
(2) The fact that a better price could have been
obtained by a sale at a different time or in a different
method from that selected by the secured party is not of
itself sufficient to establish that the sale was not made in
a commercially reasonable manner. If the secured party either
sells the collateral in the usual manner in any recognized
market therefor or if he sells at the price current in such
market at the time of his sale or if he has otherwise sold in
conformity with reasonable commercial practices among dealers
in the type of property sold he has sold in a commercially
reasonable manner. The principles stated in the two preceding
sentences with respect to sales also apply as may be
appropriate to other types of disposition. A disposition
which has been approved in any judicial proceeding or by any
bona fide creditors' committee or representative of creditors
shall conclusively be deemed to be commercially reasonable,
but this sentence does not indicate that any such approval
must be obtained in any case nor does it indicate that any
disposition not so approved is not commercially reasonable.
(Source: P.A. 90-214, eff. 7-25-97.)
(810 ILCS 5/9-508 new)
Sec. 9-508. Effectiveness of financing statement if new
debtor becomes bound by security agreement.
(a) Financing statement naming original debtor. Except
as otherwise provided in this Section, a filed financing
statement naming an original debtor is effective to perfect a
security interest in collateral in which a new debtor has or
acquires rights to the extent that the financing statement
would have been effective had the original debtor acquired
rights in the collateral.
(b) Financing statement becoming seriously misleading.
If the difference between the name of the original debtor and
that of the new debtor causes a filed financing statement
that is effective under subsection (a) to be seriously
misleading under Section 9-506:
(1) the financing statement is effective to perfect
a security interest in collateral acquired by the new
debtor before, and within four months after, the new
debtor becomes bound under Section 9-203(d); and
(2) the financing statement is not effective to
perfect a security interest in collateral acquired by the
new debtor more than four months after the new debtor
becomes bound under Section 9-203(d) unless an initial
financing statement providing the name of the new debtor
is filed before the expiration of that time.
(c) When Section not applicable. This Section does not
apply to collateral as to which a filed financing statement
remains effective against the new debtor under Section
9-507(a).
(810 ILCS 5/9-509 new)
Sec. 9-509. Persons entitled to file a record.
(a) Person entitled to file record. A person may file
an initial financing statement, amendment that adds
collateral covered by a financing statement, or amendment
that adds a debtor to a financing statement only if:
(1) the debtor authorizes the filing in an
authenticated record or pursuant to subsection (b) or
(c); or
(2) the person holds an agricultural lien that has
become effective at the time of filing and the financing
statement covers only collateral in which the person
holds an agricultural lien.
(b) Security agreement as authorization. By
authenticating or becoming bound as debtor by a security
agreement, a debtor or new debtor authorizes the filing of an
initial financing statement, and an amendment, covering:
(1) the collateral described in the security
agreement; and
(2) property that becomes collateral under Section
9-315(a)(2), whether or not the security agreement
expressly covers proceeds.
(c) Acquisition of collateral as authorization. By
acquiring collateral in which a security interest or
agricultural lien continues under Section 9-315(a)(1), a
debtor authorizes the filing of an initial financing
statement, and an amendment, covering the collateral and
property that becomes collateral under Section 9-315(a)(2).
(d) Person entitled to file certain amendments. A
person may file an amendment other than an amendment that
adds collateral covered by a financing statement or an
amendment that adds a debtor to a financing statement only
if:
(1) the secured party of record authorizes the
filing; or
(2) the amendment is a termination statement for a
financing statement as to which the secured party of
record has failed to file or send a termination statement
as required by Section 9-513(a) or (c), the debtor
authorizes the filing, and the termination statement
indicates that the debtor authorized it to be filed.
(e) Multiple secured parties of record. If there is
more than one secured party of record for a financing
statement, each secured party of record may authorize the
filing of an amendment under subsection (d).
(810 ILCS 5/9-510 new)
Sec. 9-510. Effectiveness of filed record.
(a) Filed record effective if authorized. A filed
record is effective only to the extent that it was filed by a
person that may file it under Section 9-509.
(b) Authorization by one secured party of record. A
record authorized by one secured party of record does not
affect the financing statement with respect to another
secured party of record.
(c) Continuation statement not timely filed. A
continuation statement that is not filed within the six-month
period prescribed by Section 9-515(d) is ineffective.
(810 ILCS 5/9-511 new)
Sec. 9-511. Secured party of record.
(a) Secured party of record. A secured party of record
with respect to a financing statement is a person whose name
is provided as the name of the secured party or a
representative of the secured party in an initial financing
statement that has been filed. If an initial financing
statement is filed under Section 9-514(a), the assignee named
in the initial financing statement is the secured party of
record with respect to the financing statement.
(b) Amendment naming secured party of record. If an
amendment of a financing statement which provides the name of
a person as a secured party or a representative of a secured
party is filed, the person named in the amendment is a
secured party of record. If an amendment is filed under
Section 9-514(b), the assignee named in the amendment is a
secured party of record.
(c) Amendment deleting secured party of record. A
person remains a secured party of record until the filing of
an amendment of the financing statement which deletes the
person.
(810 ILCS 5/9-512 new)
Sec. 9-512. Amendment of financing statement.
(a) Amendment of information in financing statement.
Subject to Section 9-509, a person may add or delete
collateral covered by, continue or terminate the
effectiveness of, or, subject to subsection (e), otherwise
amend the information provided in, a financing statement by
filing an amendment that:
(1) identifies, by its file number, the initial
financing statement to which the amendment relates; and
(2) if the amendment relates to an initial
financing statement filed or recorded in a filing office
described in Section 9-501(a)(1), provides the date and
time that the initial financing statement was filed and
the information specified in Section 9-502(b).
(b) Period of effectiveness not affected. Except as
otherwise provided in Section 9-515, the filing of an
amendment does not extend the period of effectiveness of the
financing statement.
(c) Effectiveness of amendment adding collateral. A
financing statement that is amended by an amendment that adds
collateral is effective as to the added collateral only from
the date of the filing of the amendment.
(d) Effectiveness of amendment adding debtor. A
financing statement that is amended by an amendment that adds
a debtor is effective as to the added debtor only from the
date of the filing of the amendment.
(e) Certain amendments ineffective. An amendment is
ineffective to the extent it:
(1) purports to delete all debtors and fails to
provide the name of a debtor to be covered by the
financing statement; or
(2) purports to delete all secured parties of
record and fails to provide the name of a new secured
party of record.
(810 ILCS 5/9-513 new)
Sec. 9-513. Termination statement.
(a) Consumer goods. A secured party shall cause the
secured party of record for a financing statement to file a
termination statement for the financing statement if the
financing statement covers consumer goods and:
(1) there is no obligation secured by the
collateral covered by the financing statement and no
commitment to make an advance, incur an obligation, or
otherwise give value; or
(2) the debtor did not authorize the filing of the
initial financing statement.
(b) Time for compliance with subsection (a). To comply
with subsection (a), a secured party shall cause the secured
party of record to file the termination statement:
(1) within one month after there is no obligation
secured by the collateral covered by the financing
statement and no commitment to make an advance, incur an
obligation, or otherwise give value; or
(2) if earlier, within 20 days after the secured
party receives an authenticated demand from a debtor.
(c) Other collateral. In cases not governed by
subsection (a), within 20 days after a secured party receives
an authenticated demand from a debtor, the secured party
shall cause the secured party of record for a financing
statement to send to the debtor a termination statement for
the financing statement or file the termination statement in
the filing office if:
(1) except in the case of a financing statement
covering accounts or chattel paper that has been sold or
goods that are the subject of a consignment, there is no
obligation secured by the collateral covered by the
financing statement and no commitment to make an advance,
incur an obligation, or otherwise give value;
(2) the financing statement covers accounts or
chattel paper that has been sold but as to which the
account debtor or other person obligated has discharged
its obligation;
(3) the financing statement covers goods that were
the subject of a consignment to the debtor but are not in
the debtor's possession; or
(4) the debtor did not authorize the filing of the
initial financing statement.
(d) Effect of filing termination statement. Except as
otherwise provided in Section 9-510, upon the filing of a
termination statement with the filing office, the financing
statement to which the termination statement relates ceases
to be effective. Except as otherwise provided in Section
9-510, for purposes of Sections 9-519(g), 9-522(a), and
9-523(c) the filing with the filing office of a termination
statement relating to a financing statement that indicates
that the debtor is a transmitting utility also causes the
effectiveness of the financing statement to lapse.
(810 ILCS 5/9-514 new)
Sec. 9-514. Assignment of powers of secured party of
record.
(a) Assignment reflected on initial financing statement.
Except as otherwise provided in subsection (c), an initial
financing statement may reflect an assignment of all of the
secured party's power to authorize an amendment to the
financing statement by providing the name and mailing address
of the assignee as the name and address of the secured party.
(b) Assignment of filed financing statement. Except as
otherwise provided in subsection (c), a secured party of
record may assign of record all or part of its power to
authorize an amendment to a financing statement by filing in
the filing office an amendment of the financing statement
which:
(1) identifies, by its file number, the initial
financing statement to which it relates;
(2) provides the name of the assignor; and
(3) provides the name and mailing address of the
assignee.
(c) Assignment of record of mortgage. An assignment of
record of a security interest in a fixture covered by a
record of a mortgage which is effective as a financing
statement filed as a fixture filing under Section 9-502(c)
may be made only by an assignment of record of the mortgage
in the manner provided by law of this State other than the
Uniform Commercial Code.
(810 ILCS 5/9-515 new)
Sec. 9-515. Duration and effectiveness of financing
statement; effect of lapsed financing statement.
(a) Five-year effectiveness. Except as otherwise
provided in subsections (b), (e), (f), and (g), a filed
financing statement is effective for a period of five years
after the date of filing.
(b) Public-finance or manufactured-home transaction.
Except as otherwise provided in subsections (e), (f), and
(g), an initial financing statement filed in connection with
a public-finance transaction or manufactured-home transaction
is effective for a period of 30 years after the date of
filing if it indicates that it is filed in connection with a
public-finance transaction or manufactured-home transaction.
(c) Lapse and continuation of financing statement. The
effectiveness of a filed financing statement lapses on the
expiration of the period of its effectiveness unless before
the lapse a continuation statement is filed pursuant to
subsection (d). Upon lapse, a financing statement ceases to
be effective and any security interest or agricultural lien
that was perfected by the financing statement becomes
unperfected, unless the security interest is perfected
otherwise. If the security interest or agricultural lien
becomes unperfected upon lapse, it is deemed never to have
been perfected as against a purchaser of the collateral for
value.
(d) When continuation statement may be filed. A
continuation statement may be filed only within six months
before the expiration of the five-year period specified in
subsection (a) or the 30-year period specified in subsection
(b), whichever is applicable.
(e) Effect of filing continuation statement. Except as
otherwise provided in Section 9-510, upon timely filing of a
continuation statement, the effectiveness of the initial
financing statement continues for a period of five years
commencing on the day on which the financing statement would
have become ineffective in the absence of the filing. Upon
the expiration of the five-year period, the financing
statement lapses in the same manner as provided in subsection
(c), unless, before the lapse, another continuation statement
is filed pursuant to subsection (d). Succeeding continuation
statements may be filed in the same manner to continue the
effectiveness of the initial financing statement.
(f) Transmitting utility financing statement. If a
debtor is a transmitting utility and a filed financing
statement so indicates, the financing statement is effective
until a termination statement is filed.
(g) Record of mortgage as financing statement. A record
of a mortgage that is effective as a financing statement
filed as a fixture filing under Section 9-502(c) remains
effective as a financing statement filed as a fixture filing
until the mortgage is released or satisfied of record or its
effectiveness otherwise terminates as to the real property.
(810 ILCS 5/9-516 new)
Sec. 9-516. What constitutes filing; effectiveness of
filing.
(a) What constitutes filing. Except as otherwise
provided in subsection (b), communication of a record to a
filing office and tender of the filing fee or acceptance of
the record by the filing office constitutes filing.
(b) Refusal to accept record; filing does not occur.
Filing does not occur with respect to a record that a filing
office refuses to accept because:
(1) the record is not communicated by a method or
medium of communication authorized by the filing office;
(2) an amount equal to or greater than the
applicable filing fee is not tendered;
(3) the filing office is unable to index the record
because:
(A) in the case of an initial financing
statement, the record does not provide a name for
the debtor;
(B) in the case of an amendment or correction
statement, the record:
(i) does not identify the initial
financing statement as required by Section
9-512 or 9-518, as applicable; or
(ii) identifies an initial financing
statement whose effectiveness has lapsed under
Section 9-515;
(C) in the case of an initial financing
statement that provides the name of a debtor
identified as an individual or an amendment that
provides a name of a debtor identified as an
individual which was not previously provided in the
financing statement to which the record relates, the
record does not identify the debtor's last name; or
(D) in the case of a record filed or recorded
in the filing office described in Section
9-501(a)(1), the record does not provide a
sufficient description of the real property to which
it relates;
(4) in the case of an initial financing statement
or an amendment that adds a secured party of record, the
record does not provide a name and mailing address for
the secured party of record;
(5) in the case of an initial financing statement
or an amendment that provides a name of a debtor which
was not previously provided in the financing statement to
which the amendment relates, the record does not:
(A) provide a mailing address for the debtor;
(B) indicate whether the debtor is an
individual or an organization; or
(C) if the financing statement indicates that
the debtor is an organization, provide:
(i) a type of organization for the
debtor;
(ii) a jurisdiction of organization for
the debtor; or
(iii) an organizational identification
number for the debtor or indicate that the
debtor has none;
(6) in the case of an assignment reflected in an
initial financing statement under Section 9-514(a) or an
amendment filed under Section 9-514(b), the record does
not provide a name and mailing address for the assignee;
or
(7) in the case of a continuation statement, the
record is not filed within the six-month period
prescribed by Section 9-515(d).
(c) Rules applicable to subsection (b). For purposes of
subsection (b):
(1) a record does not provide information if the
filing office is unable to read or decipher the
information; and
(2) a record that does not indicate that it is an
amendment or identify an initial financing statement to
which it relates, as required by Section 9-512, 9-514, or
9-518, is an initial financing statement.
(d) Refusal to accept record; record effective as filed
record. A record that is communicated to the filing office
with tender of the filing fee, but which the filing office
refuses to accept for a reason other than one set forth in
subsection (b), is effective as a filed record except as
against a purchaser of the collateral which gives value in
reasonable reliance upon the absence of the record from the
files.
(810 ILCS 5/9-517 new)
Sec. 9-517. Effect of indexing errors. The failure of
the filing office to index a record correctly does not affect
the effectiveness of the filed record.
(810 ILCS 5/9-518 new)
Sec. 9-518. Claim concerning inaccurate or wrongfully
filed record.
(a) Correction statement. A person may file in the
filing office a correction statement with respect to a record
indexed there under the person's name if the person believes
that the record is inaccurate or was wrongfully filed.
(b) Sufficiency of correction statement. A correction
statement must:
(1) identify the record to which it relates by:
(A) the file number assigned to the initial
financing statement to which the record relates; and
(B) if the correction statement relates to a
record filed or recorded in a filing office
described in Section 9-501(a)(1), the date and time
that the initial financing statement was filed and
the information specified in Section 9-502(b);
(2) indicate that it is a correction statement; and
(3) provide the basis for the person's belief that
the record is inaccurate and indicate the manner in which
the person believes the record should be amended to cure
any inaccuracy or provide the basis for the person's
belief that the record was wrongfully filed.
(c) Record not affected by correction statement. The
filing of a correction statement does not affect the
effectiveness of an initial financing statement or other
filed record.
(810 ILCS 5/Art. 9, Part 5, Subpart 2 heading new)
SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
(810 ILCS 5/9-519 new)
Sec. 9-519. Numbering, maintaining, and indexing
records; communicating information provided in records.
(a) Filing office duties. For each record filed in a
filing office, the filing office shall:
(1) assign a unique number to the filed record;
(2) create a record that bears the number assigned
to the filed record and the date and time of filing;
(3) maintain the filed record for public
inspection; and
(4) index the filed record in accordance with
subsections (c), (d), and (e).
(b) File number. A file number assigned after January
1, 2002, must include a digit that:
(1) is mathematically derived from or related to
the other digits of the file number; and
(2) aids the filing office in determining whether a
number communicated as the file number includes a
single-digit or transpositional error.
(c) Indexing: general. Except as otherwise provided in
subsections (d) and (e), the filing office shall:
(1) index an initial financing statement according
to the name of the debtor and index all filed records
relating to the initial financing statement in a manner
that associates with one another an initial financing
statement and all filed records relating to the initial
financing statement; and
(2) index a record that provides a name of a debtor
which was not previously provided in the financing
statement to which the record relates also according to
the name that was not previously provided.
(d) Indexing: real-property-related financing
statement. If a financing statement is filed as a fixture
filing or covers as-extracted collateral or timber to be cut,
it must be filed for record and the filing office shall index
it:
(1) under the names of the debtor and of each owner
of record shown on the financing statement as if they
were the mortgagors under a mortgage of the real property
described; and
(2) to the extent that the law of this State
provides for indexing of records of mortgages under the
name of the mortgagee, under the name of the secured
party as if the secured party were the mortgagee
thereunder, or, if indexing is by description, as if the
financing statement were a record of a mortgage of the
real property described.
(e) Indexing: real-property-related assignment. If a
financing statement is filed as a fixture filing or covers
as-extracted collateral or timber to be cut, the filing
office shall index an assignment filed under Section 9-514(a)
or an amendment filed under Section 9-514(b):
(1) under the name of the assignor as grantor; and
(2) to the extent that the law of this State
provides for indexing a record of the assignment of a
mortgage under the name of the assignee, under the name
of the assignee.
(f) Retrieval and association capability. The filing
office shall maintain a capability:
(1) to retrieve a record by the name of the debtor
and by the file number assigned to the initial financing
statement to which the record relates; and
(2) to associate and retrieve with one another an
initial financing statement and each filed record
relating to the initial financing statement.
(g) Removal of debtor's name. The filing office may not
remove a debtor's name from the index until one year after
the effectiveness of a financing statement naming the debtor
lapses under Section 9-515 with respect to all secured
parties of record.
(h) Timeliness of filing office performance. The filing
office shall perform the acts required by subsections (a)
through (e) at the time and in the manner prescribed by
filing-office rule, but not later than two business days
after the filing office receives the record in question.
(i) Inapplicability to real-property-related filing
office. Subsections (b) and (h) do not apply to a filing
office described in Section 9-501(a)(1).
(810 ILCS 5/9-520 new)
Sec. 9-520. Acceptance and refusal to accept record.
(a) Mandatory refusal to accept record. A filing office
shall refuse to accept a record for filing for a reason set
forth in Section 9-516(b) and may refuse to accept a record
for filing only for a reason set forth in Section 9-516(b).
(b) Communication concerning refusal. If a filing
office refuses to accept a record for filing, it shall
communicate to the person that presented the record the fact
of and reason for the refusal and the date and time the
record would have been filed had the filing office accepted
it. The communication must be made at the time and in the
manner prescribed by filing-office rule, but in the case of a
filing office described in Section 9-501(a)(2), in no event
more than two business days after the filing office receives
the record.
(c) When filed financing statement effective. A filed
financing statement satisfying Section 9-502(a) and (b) is
effective, even if the filing office is required to refuse to
accept it for filing under subsection (a). However, Section
9-338 applies to a filed financing statement providing
information described in Section 9-516(b)(5) which is
incorrect at the time the financing statement is filed.
(d) Separate application to multiple debtors. If a
record communicated to a filing office provides information
that relates to more than one debtor, this Part applies as to
each debtor separately.
(810 ILCS 5/9-521 new)
Sec. 9-521. Uniform form of written financing statement
and amendment.
(a) Initial financing statement form. A filing office
that accepts written records may not refuse to accept a
written initial financing statement in the form and format
set forth in the final official text of the 1999 revisions to
Article 9 of the Uniform Commercial Code promulgated by the
American Law Institute and the National Conference of
Commissioners on Uniform State Laws, except for a reason set
forth in Section 9-516(b).
(b) Amendment form. A filing office that accepts
written records may not refuse to accept a written record in
the form and format set forth in the final official text of
the 1999 revisions to Article 9 of the Uniform Commercial
Code promulgated by the American Law Institute and the
National Conference of Commissioners on Uniform State Laws,
except for a reason set forth in Section 9-516(b).
(810 ILCS 5/9-522 new)
Sec. 9-522. Maintenance and destruction of records.
(a) Post-lapse maintenance and retrieval of information.
The filing office shall maintain a record of the information
provided in a filed financing statement for at least one year
after the effectiveness of the financing statement has lapsed
under Section 9-515 with respect to all secured parties of
record. The record must be retrievable by using the name of
the debtor and:
(1) if the record was filed in the filing office
described in Section 9-501(a)(1), by using the file
number assigned to the initial financing statement to
which the record relates and the date and time that the
record was filed or recorded; or
(2) if the record was filed in the filing office
described in Section 9-501(a)(2), by using the file
number assigned to the initial financing statement to
which the record relates.
(b) Destruction of written records. Except to the
extent that a statute governing disposition of public records
provides otherwise, the filing office immediately may destroy
any written record evidencing a financing statement. However,
if the filing office destroys a written record, it shall
maintain another record of the financing statement which
complies with subsection (a).
(810 ILCS 5/9-523 new)
Sec. 9-523. Information from filing office; sale or
license of records.
(a) Acknowledgment of filing written record. If a
person that files a written record requests an acknowledgment
of the filing, the filing office shall send to the person an
image of the record showing the number assigned to the record
pursuant to Section 9-519(a)(1) and the date and time of the
filing of the record. However, if the person furnishes a
copy of the record to the filing office, the filing office
may instead:
(1) note upon the copy the number assigned to the
record pursuant to Section 9-519(a)(1) and the date and
time of the filing of the record; and
(2) send the copy to the person.
(b) Acknowledgment of filing other record. If a person
files a record other than a written record, the filing office
shall communicate to the person an acknowledgment that
provides:
(1) the information in the record;
(2) the number assigned to the record pursuant to
Section 9-519(a)(1); and
(3) the date and time of the filing of the record.
(c) Communication of requested information. The filing
office shall communicate or otherwise make available in a
record the following information to any person that requests
it:
(1) whether there is on file on a date and time
specified by the filing office, but not a date earlier
than three business days before the filing office
receives the request, any financing statement that:
(A) designates a particular debtor or, if the
request so states, designates a particular debtor at
the address specified in the request;
(B) has not lapsed under Section 9-515 with
respect to all secured parties of record; and
(C) if the request so states, has lapsed under
Section 9-515 and a record of which is maintained by
the filing office under Section 9-522(a);
(2) the date and time of filing of each financing
statement; and
(3) the information provided in each financing
statement.
(d) Medium for communicating information. In complying
with its duty under subsection (c), the filing office may
communicate information in any medium. However, if
requested, the filing office shall communicate information by
issuing a record that can be admitted into evidence in the
courts of this State without extrinsic evidence of its
authenticity.
(e) Timeliness of filing office performance. The filing
office shall perform the acts required by subsections (a)
through (d) at the time and in the manner prescribed by
filing-office rule, but in the case of a filing office
described in Section 9-501(a)(2), not later than two business
days after the filing office receives the request.
(f) Public availability of records. At least weekly,
the Secretary of State shall offer to sell or license to the
public on a nonexclusive basis, in bulk, copies of all
records filed in it under this Part, in every medium from
time to time available to the filing office.
(810 ILCS 5/9-524 new)
Sec. 9-524. Delay by filing office. Delay by the filing
office beyond a time limit prescribed by this Part is excused
if:
(1) the delay is caused by interruption of
communication or computer facilities, war, emergency
conditions, failure of equipment, or other circumstances
beyond control of the filing office; and
(2) the filing office exercises reasonable
diligence under the circumstances.
(810 ILCS 5/9-525 new)
Sec. 9-525. Fees.
(a) Initial financing statement or other record: general
rule. Except as otherwise provided in subsection (e), the fee
for filing and indexing a record under this Part, other than
an initial financing statement of the kind described in
subsection (b), is:
(1) $20 if the record is communicated in writing
and consists of one or two pages;
(2) $20 if the record is communicated in writing
and consists of more than two pages; and
(3) $20 if the record is communicated by another
medium authorized by filing-office rule.
(b) Initial financing statement: public-finance and
manufactured-housing transactions. Except as otherwise
provided in subsection (e), the fee for filing and indexing
an initial financing statement of the following kind is:
(1) $20 if the financing statement indicates that
it is filed in connection with a public-finance
transaction;
(2) $20 if the financing statement indicates that
it is filed in connection with a manufactured-home
transaction.
(c) Number of names. The number of names required to be
indexed does not affect the amount of the fee in subsections
(a) and (b).
(d) Response to information request. The fee for
responding to a request for information from the filing
office, including for issuing a certificate showing
communicating whether there is on file any financing
statement naming a particular debtor, is:
(1) $10 if the request is communicated in writing;
and
(2) $10 if the request is communicated by another
medium authorized by filing-office rule.
(e) Record of mortgage. This Section does not require a
fee with respect to a record of a mortgage which is effective
as a financing statement filed as a fixture filing or as a
financing statement covering as-extracted collateral or
timber to be cut under Section 9-502(c). However, the
recording and satisfaction fees that otherwise would be
applicable to the record of the mortgage apply.
(810 ILCS 5/9-526 new)
Sec. 9-526. Filing-office rules.
(a) Adoption of filing-office rules. The Secretary of
State shall adopt and publish rules to implement this
Article. The filing-office rules must be:
(1) consistent with this Article; and
(2) adopted and published in accordance with the
Illinois Administrative Procedure Act.
(b) Harmonization of rules. To keep the filing-office
rules and practices of the filing office in harmony with the
rules and practices of filing offices in other jurisdictions
that enact substantially this Part, and to keep the
technology used by the filing office compatible with the
technology used by filing offices in other jurisdictions that
enact substantially this Part, the Secretary of State, so far
as is consistent with the purposes, policies, and provisions
of this Article, in adopting, amending, and repealing
filing-office rules, shall:
(1) consult with filing offices in other
jurisdictions that enact substantially this Part; and
(2) consult the most recent version of the Model
Rules promulgated by the International Association of
Corporate Administrators or any successor organization;
and
(3) take into consideration the rules and practices
of, and the technology used by, filing offices in other
jurisdictions that enact substantially this Part.
(810 ILCS 5/9-527 new)
Sec. 9-527. Duty to report. The Secretary of State
shall report annually to the Governor and Legislature on the
operation of the filing office. The report must contain a
statement of the extent to which:
(1) the filing-office rules are not in harmony with
the rules of filing offices in other jurisdictions that
enact substantially this Part and the reasons for these
variations; and
(2) the filing-office rules are not in harmony with
the most recent version of the Model Rules promulgated by
the International Association of Corporate
Administrators, or any successor organization, and the
reasons for these variations.
(810 ILCS 5/Art. 9, Part 6 heading new)
PART 6. DEFAULT
(810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new)
SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
(810 ILCS 5/9-601 new)
Sec. 9-601. Rights after default; judicial enforcement;
consignor or buyer of accounts, chattel paper, payment
intangibles, or promissory notes.
(a) Rights of secured party after default. After
default, a secured party has the rights provided in this Part
and, except as otherwise provided in Section 9-602, those
provided by agreement of the parties. A secured party:
(1) may reduce a claim to judgment, foreclose, or
otherwise enforce the claim, security interest, or
agricultural lien by any available judicial procedure;
and
(2) if the collateral is documents, may proceed
either as to the documents or as to the goods they cover.
(b) Rights and duties of secured party in possession or
control. A secured party in possession of collateral or
control of collateral under Section 9-104, 9-105, 9-106, or
9-107 has the rights and duties provided in Section 9-207.
(c) Rights cumulative; simultaneous exercise. The
rights under subsections (a) and (b) are cumulative and may
be exercised simultaneously.
(d) Rights of debtor and obligor. Except as otherwise
provided in subsection (g) and Section 9-605, after default,
a debtor and an obligor have the rights provided in this Part
and by agreement of the parties.
(e) Lien of levy after judgment. If a secured party has
reduced its claim to judgment, the lien of any levy that may
be made upon the collateral by virtue of a judgment relates
back to the earliest of:
(1) the date of perfection of the security interest
or agricultural lien in the collateral;
(2) the date of filing a financing statement
covering the collateral; or
(3) any date specified in a statute under which the
agricultural lien was created.
(f) Execution sale. A sale pursuant to a judgment is a
foreclosure of the security interest or agricultural lien by
judicial procedure within the meaning of this Section. A
secured party may purchase at the sale and thereafter hold
the collateral free of any other requirements of this
Article.
(g) Consignor or buyer of certain rights to payment.
Except as otherwise provided in Section 9-607(c), this Part
imposes no duties upon a secured party that is a consignor or
is a buyer of accounts, chattel paper, payment intangibles,
or promissory notes.
(810 ILCS 5/9-602 new)
Sec. 9-602. Waiver and variance of rights and duties.
Except as otherwise provided in Section 9-624, to the extent
that they give rights to a debtor or obligor and impose
duties on a secured party, the debtor or obligor may not
waive or vary the rules stated in the following listed
Sections:
(1) Section 9-207(b)(4)(C), which deals with use
and operation of the collateral by the secured party;
(2) Section 9-210, which deals with requests for an
accounting and requests concerning a list of collateral
and statement of account;
(3) Section 9-607(c), which deals with collection
and enforcement of collateral;
(4) Sections 9-608(a) and 9-615(c) to the extent
that they deal with application or payment of noncash
proceeds of collection, enforcement, or disposition;
(5) Sections 9-608(a) and 9-615(d) to the extent
that they require accounting for or payment of surplus
proceeds of collateral;
(6) Section 9-609 to the extent that it imposes
upon a secured party that takes possession of collateral
without judicial process the duty to do so without breach
of the peace;
(7) Sections 9-610(b), 9-611, 9-613, and 9-614,
which deal with disposition of collateral;
(8) Section 9-615(f), which deals with calculation
of a deficiency or surplus when a disposition is made to
the secured party, a person related to the secured party,
or a secondary obligor;
(9) Section 9-616, which deals with explanation of
the calculation of a surplus or deficiency;
(10) Sections 9-620, 9-621, and 9-622, which deal
with acceptance of collateral in satisfaction of
obligation;
(11) Section 9-623, which deals with redemption of
collateral;
(12) Section 9-624, which deals with permissible
waivers; and
(13) Sections 9-625 and 9-626, which deal with the
secured party's liability for failure to comply with this
Article.
(810 ILCS 5/9-603 new)
Sec. 9-603. Agreement on standards concerning rights and
duties.
(a) Agreed standards. The parties may determine by
agreement the standards measuring the fulfillment of the
rights of a debtor or obligor and the duties of a secured
party under a rule stated in Section 9-602 if the standards
are not manifestly unreasonable.
(b) Agreed standards inapplicable to breach of peace.
Subsection (a) does not apply to the duty under Section 9-609
to refrain from breaching the peace.
(810 ILCS 5/9-604 new)
Sec. 9-604. Procedure if security agreement covers real
property or fixtures.
(a) Enforcement: personal and real property. If a
security agreement covers both personal and real property, a
secured party may proceed:
(1) under this Part as to the personal property
without prejudicing any rights with respect to the real
property; or
(2) as to both the personal property and the real
property in accordance with the rights with respect to
the real property, in which case the other provisions of
this Part do not apply.
(b) Enforcement: fixtures. Subject to subsection (c),
if a security agreement covers goods that are or become
fixtures, a secured party may proceed:
(1) under this Part; or
(2) in accordance with the rights with respect to
real property, in which case the other provisions of this
Part do not apply.
(c) Removal of fixtures. Subject to the other
provisions of this Part, if a secured party holding a
security interest in fixtures has priority over all owners
and encumbrancers of the real property, the secured party,
after default, may remove the collateral from the real
property.
(d) Injury caused by removal. A secured party that
removes collateral shall promptly reimburse any encumbrancer
or owner of the real property, other than the debtor, for the
cost of repair of any physical injury caused by the removal.
The secured party need not reimburse the encumbrancer or
owner for any diminution in value of the real property caused
by the absence of the goods removed or by any necessity of
replacing them. A person entitled to reimbursement may
refuse permission to remove until the secured party gives
adequate assurance for the performance of the obligation to
reimburse.
(810 ILCS 5/9-605 new)
Sec. 9-605. Unknown debtor or secondary obligor. A
secured party does not owe a duty based on its status as
secured party:
(1) to a person that is a debtor or obligor, unless
the secured party knows:
(A) that the person is a debtor or obligor;
(B) the identity of the person; and
(C) how to communicate with the person; or
(2) to a secured party or lienholder that has filed
a financing statement against a person, unless the
secured party knows:
(A) that the person is a debtor; and
(B) the identity of the person.
(810 ILCS 5/9-606 new)
Sec. 9-606. Time of default for agricultural lien. For
purposes of this Part, a default occurs in connection with an
agricultural lien at the time the secured party becomes
entitled to enforce the lien in accordance with the statute
under which it was created.
(810 ILCS 5/9-607 new)
Sec. 9-607. Collection and enforcement by secured party.
(a) Collection and enforcement generally. If so agreed,
and in any event after default, a secured party:
(1) may notify an account debtor or other person
obligated on collateral to make payment or otherwise
render performance to or for the benefit of the secured
party;
(2) may take any proceeds to which the secured
party is entitled under Section 9-315;
(3) may enforce the obligations of an account
debtor or other person obligated on collateral and
exercise the rights of the debtor with respect to the
obligation of the account debtor or other person
obligated on collateral to make payment or otherwise
render performance to the debtor, and with respect to any
property that secures the obligations of the account
debtor or other person obligated on the collateral;
(4) if it holds a security interest in a deposit
account perfected by control under Section 9-104(a)(1),
may apply the balance of the deposit account to the
obligation secured by the deposit account; and
(5) if it holds a security interest in a deposit
account perfected by control under Section 9-104(a)(2) or
(3), may instruct the bank to pay the balance of the
deposit account to or for the benefit of the secured
party.
(b) Nonjudicial enforcement of mortgage. If necessary
to enable a secured party to exercise under subsection (a)(3)
the right of a debtor to enforce a mortgage nonjudicially,
the secured party may record in the office in which a record
of the mortgage is recorded:
(1) a copy of the security agreement that creates
or provides for a security interest in the obligation
secured by the mortgage; and
(2) the secured party's sworn affidavit in
recordable form stating that:
(A) a default has occurred; and
(B) the secured party is entitled to enforce
the mortgage nonjudicially.
(c) Commercially reasonable collection and enforcement.
A secured party shall proceed in a commercially reasonable
manner if the secured party:
(1) undertakes to collect from or enforce an
obligation of an account debtor or other person obligated
on collateral; and
(2) is entitled to charge back uncollected
collateral or otherwise to full or limited recourse
against the debtor or a secondary obligor.
(d) Expenses of collection and enforcement. A secured
party may deduct from the collections made pursuant to
subsection (c) reasonable expenses of collection and
enforcement, including reasonable attorney's fees and legal
expenses incurred by the secured party.
(e) Duties to secured party not affected. This Section
does not determine whether an account debtor, bank, or other
person obligated on collateral owes a duty to a secured
party.
(810 ILCS 5/9-608 new)
Sec. 9-608. Application of proceeds of collection or
enforcement; liability for deficiency and right to surplus.
(a) Application of proceeds, surplus, and deficiency if
obligation secured. If a security interest or agricultural
lien secures payment or performance of an obligation, the
following rules apply:
(1) A secured party shall apply or pay over for
application the cash proceeds of collection or
enforcement under Section 9-607 in the following order
to:
(A) the reasonable expenses of collection and
enforcement and, to the extent provided for by
agreement and not prohibited by law, reasonable
attorney's fees and legal expenses incurred by the
secured party;
(B) the satisfaction of obligations secured by
the security interest or agricultural lien under
which the collection or enforcement is made; and
(C) the satisfaction of obligations secured by
any subordinate security interest in or other lien
on the collateral subject to the security interest
or agricultural lien under which the collection or
enforcement is made if the secured party receives an
authenticated demand for proceeds before
distribution of the proceeds is completed.
(2) If requested by a secured party, a holder of a
subordinate security interest or other lien shall furnish
reasonable proof of the interest or lien within a
reasonable time. Unless the holder complies, the secured
party need not comply with the holder's demand under
paragraph (1)(C).
(3) A secured party need not apply or pay over for
application noncash proceeds of collection and
enforcement under Section 9-607 unless the failure to do
so would be commercially unreasonable. A secured party
that applies or pays over for application noncash
proceeds shall do so in a commercially reasonable manner.
(4) A secured party shall account to and pay a
debtor for any surplus, and the obligor is liable for any
deficiency.
(b) No surplus or deficiency in sales of certain rights
to payment. If the underlying transaction is a sale of
accounts, chattel paper, payment intangibles, or promissory
notes, the debtor is not entitled to any surplus, and the
obligor is not liable for any deficiency.
(810 ILCS 5/9-609 new)
Sec. 9-609. Secured party's right to take possession
after default.
(a) Possession; rendering equipment unusable;
disposition on debtor's premises. After default, a secured
party:
(1) may take possession of the collateral; and
(2) without removal, may render equipment unusable
and dispose of collateral on a debtor's premises under
Section 9-610.
(b) Judicial and nonjudicial process. A secured party
may proceed under subsection (a):
(1) pursuant to judicial process; or
(2) without judicial process, if it proceeds
without breach of the peace.
(c) Assembly of collateral. If so agreed, and in any
event after default, a secured party may require the debtor
to assemble the collateral and make it available to the
secured party at a place to be designated by the secured
party which is reasonably convenient to both parties.
(810 ILCS 5/9-610 new)
Sec. 9-610. Disposition of collateral after default.
(a) Disposition after default. After default, a secured
party may sell, lease, license, or otherwise dispose of any
or all of the collateral in its present condition or
following any commercially reasonable preparation or
processing.
(b) Commercially reasonable disposition. Every aspect
of a disposition of collateral, including the method, manner,
time, place, and other terms, must be commercially
reasonable. If commercially reasonable, a secured party may
dispose of collateral by public or private proceedings, by
one or more contracts, as a unit or in parcels, and at any
time and place and on any terms.
(c) Purchase by secured party. A secured party may
purchase collateral:
(1) at a public disposition; or
(2) at a private disposition only if the collateral
is of a kind that is customarily sold on a recognized
market or the subject of widely distributed standard
price quotations.
(d) Warranties on disposition. A contract for sale,
lease, license, or other disposition includes the warranties
relating to title, possession, quiet enjoyment, and the like
which by operation of law accompany a voluntary disposition
of property of the kind subject to the contract.
(e) Disclaimer of warranties. A secured party may
disclaim or modify warranties under subsection (d):
(1) in a manner that would be effective to disclaim
or modify the warranties in a voluntary disposition of
property of the kind subject to the contract of
disposition; or
(2) by communicating to the purchaser a record
evidencing the contract for disposition and including an
express disclaimer or modification of the warranties.
(f) Record sufficient to disclaim warranties. A record
is sufficient to disclaim warranties under subsection (e) if
it indicates "There is no warranty relating to title,
possession, quiet enjoyment, or the like in this disposition"
or uses words of similar import.
(810 ILCS 5/9-611 new)
Sec. 9-611. Notification before disposition of
collateral.
(a) "Notification date." In this Section, "notification
date" means the earlier of the date on which:
(1) a secured party sends to the debtor and any
secondary obligor an authenticated notification of
disposition; or
(2) the debtor and any secondary obligor waive the
right to notification.
(b) Notification of disposition required. Except as
otherwise provided in subsection (d), a secured party that
disposes of collateral under Section 9-610 shall send to the
persons specified in subsection (c) a reasonable
authenticated notification of disposition.
(c) Persons to be notified. To comply with subsection
(b), the secured party shall send an authenticated
notification of disposition to:
(1) the debtor;
(2) any secondary obligor; and
(3) if the collateral is other than consumer goods:
(A) any other person from which the secured
party has received, before the notification date, an
authenticated notification of a claim of an interest
in the collateral;
(B) any other secured party or lienholder
that, 10 days before the notification date, held a
security interest in or other lien on the collateral
perfected by the filing of a financing statement
that:
(i) identified the collateral;
(ii) was indexed under the debtor's name
as of that date; and
(iii) was filed in the office in which to
file a financing statement against the debtor
covering the collateral as of that date; and
(C) any other secured party that, 10 days
before the notification date, held a security
interest in the collateral perfected by compliance
with a statute, regulation, or treaty described in
Section 9-311(a).
(d) Subsection (b) inapplicable: perishable collateral;
recognized market. Subsection (b) does not apply if the
collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized
market.
(e) Compliance with subsection (c)(3)(B). A secured
party complies with the requirement for notification
prescribed by subsection (c)(3)(B) if:
(1) not later than 20 days or earlier than 30 days
before the notification date, the secured party requests,
in a commercially reasonable manner, information
concerning financing statements indexed under the
debtor's name in the office indicated in subsection
(c)(3)(B); and
(2) before the notification date, the secured
party:
(A) did not receive a response to the request
for information; or
(B) received a response to the request for
information and sent an authenticated notification
of disposition to each secured party or other
lienholder named in that response whose financing
statement covered the collateral.
(810 ILCS 5/9-612 new)
Sec. 9-612. Timeliness of notification before
disposition of collateral.
(a) Reasonable time is question of fact. Except as
otherwise provided in subsection (b), whether a notification
is sent within a reasonable time is a question of fact. The
limitation of the rule in subsection (b) to transactions
other than consumer-goods transactions is intended to leave
to the court the determination of the proper rules in
consumer-goods transactions. The court may not infer from
that limitation the nature of the proper rule in
consumer-goods transactions and may continue to apply
established approaches.
(b) 10-day period sufficient in non-consumer
transaction. In a transaction other than a consumer
transaction, a notification of disposition sent after default
and 10 days or more before the earliest time of disposition
set forth in the notification is sent within a reasonable
time before the disposition.
(810 ILCS 5/9-613 new)
Sec. 9-613. Contents and form of notification before
disposition of collateral: general. Except in a
consumer-goods transaction, the following rules apply:
(1) The contents of a notification of disposition
are sufficient if the notification:
(A) describes the debtor and the secured
party;
(B) describes the collateral that is the
subject of the intended disposition;
(C) states the method of intended disposition;
(D) states that the debtor is entitled to an
accounting of the unpaid indebtedness and states the
charge, if any, for an accounting; and
(E) states the time and place of a public
disposition or the time after which any other
disposition is to be made.
(2) Whether the contents of a notification that
lacks any of the information specified in paragraph (1)
are nevertheless sufficient is a question of fact.
(3) The contents of a notification providing
substantially the information specified in paragraph (1)
are sufficient, even if the notification is accompanied
by or combined other notification or includes:
(A) information not specified by that
paragraph; or
(B) minor errors that are not seriously
misleading.
(4) A particular phrasing of the notification is
not required.
(5) The following form of notification and the form
appearing in Section 9-614(4), when completed, each
provides sufficient information:
NOTIFICATION OF DISPOSITION OF COLLATERAL
To: ..................................... (Name of
debtor, obligor, or other person to which the
notification is sent)
From: ................................... (Name,
address, and telephone number of secured party)
Name of Debtor(s): ..................... (Include
only if debtor(s) are not an addressee)
For a public disposition:
We will sell or lease or license, as applicable, the
............................ (describe collateral) to the
highest qualified bidder in public as follows:
Day and Date: ...................................
Time: ...........................................
Place: ..........................................
For a private disposition:
We will sell (or lease or license, as applicable)
the ........................... (describe collateral)
privately sometime after ................ (day and date).
You are entitled to an accounting of the unpaid
indebtedness secured by the property that we intend to
sell or lease or license, as applicable for a charge of
$................. You may request an accounting by
calling us at .................. (telephone number).
(810 ILCS 5/9-614 new)
Sec. 9-614. Contents and form of notification before
disposition of collateral: consumer-goods transaction. In a
consumer-goods transaction, the following rules apply:
(1) A notification of disposition must provide the
following information:
(A) the information specified in Section
9-613(1);
(B) a description of any liability for a
deficiency of the person to which the notification
is sent;
(C) a telephone number from which the amount
that must be paid to the secured party to redeem the
collateral under Section 9-623 is available; and
(D) a telephone number or mailing address from
which additional information concerning the
disposition and the obligation secured is available.
(2) A particular phrasing of the notification is
not required.
(3) The contents of a notification providing
substantially the information specified in paragraph (1)
are sufficient, even if the notification:
(A) is accompanied by or combined with other
notifications;
(B) includes information not specified by that
paragraph; or
(C) includes minor errors that are not
seriously misleading.
(4) The following form of notification, when
completed, provides sufficient information:
............. (Name and address of secured party)
............. (Date)
NOTICE OF OUR PLAN TO SELL PROPERTY
......................................................
(Name and address of any obligor who is also a debtor)
Subject: ..................................
(Identification of Transaction)
We have your ..................... (describe
collateral), because you broke promises in our agreement.
For a public disposition:
We will sell ....................... (describe
collateral) at public sale. A sale could include a lease
or license. The sale will be held as follows:
Date: ................................
Time: ................................
Place: ................................
You may attend the sale and bring bidders if you
want.
For a private disposition:
We will sell ........................... (describe
collateral) at private sale sometime after
.................... (date). A sale could include a
lease or license.
The money that we get from the sale (after paying
our costs) will reduce the amount you owe. If we get
less money than you owe, you ............ (will or will
not, as applicable) still owe us the difference. If we
get more money than you owe, you will get the extra
money, unless we must pay it to someone else.
You can get the property back at any time before we
sell it by paying us the full amount you owe (not just
the past due payments), including our expenses. To learn
the exact amount you must pay, call us at
................ (telephone number).
If you want us to explain to you in writing how we
have figured the amount that you owe us, you may call us
at .................. (telephone number) or write us at
.................................... (secured party's
address) and request a written explanation. We will
charge you $ ........... for the explanation if we sent
you another written explanation of the amount you owe us
within the last six months.
If you need more information about the sale call us
at .................. (telephone number) or write us at
......................... (secured party's address).
We are sending this notice to the following other
people who have an interest ......................
(describe collateral) or who owe money under your
agreement:
.................................................
(Names of all other debtors and obligors, if any)
(5) A notification in the form of paragraph (4) is
sufficient, even if it includes errors in information not
required by paragraph (1).
(6) If a notification under this Section is not in
the form of paragraph (4), law other than this Article
determines the effect of including information not
required by paragraph (1).
(810 ILCS 5/9-615 new)
Sec. 9-615. Application of proceeds of disposition;
liability for deficiency and right to surplus.
(a) Application of proceeds. A secured party shall
apply or pay over for application the cash proceeds of
disposition in the following order to:
(1) the reasonable expenses of retaking, holding,
preparing for disposition, processing, and disposing,
and, to the extent provided for by agreement and not
prohibited by law, reasonable attorney's fees and legal
expenses incurred by the secured party;
(2) the satisfaction of obligations secured by the
security interest or agricultural lien under which the
disposition is made;
(3) the satisfaction of obligations secured by any
subordinate security interest in or other subordinate
lien on the collateral if:
(A) the secured party receives from the holder
of the subordinate security interest or other lien
an authenticated demand for proceeds before
distribution of the proceeds is completed; and
(B) in a case in which a consignor has an
interest in the collateral, the subordinate security
interest or other lien is senior to the interest of
the consignor; and
(4) a secured party that is a consignor of the
collateral if the secured party receives from the
consignor an authenticated demand for proceeds before
distribution of the proceeds is completed.
(b) Proof of subordinate interest. If requested by a
secured party, a holder of a subordinate security interest or
other lien shall furnish reasonable proof of the interest or
lien within a reasonable time. Unless the holder does so,
the secured party need not comply with the holder's demand
under subsection (a)(3).
(c) Application of noncash proceeds. A secured party
need not apply or pay over for application noncash proceeds
of disposition under this Section unless the failure to do so
would be commercially unreasonable. A secured party that
applies or pays over for application noncash proceeds shall
do so in a commercially reasonable manner.
(d) Surplus or deficiency if obligation secured. If the
security interest under which a disposition is made secures
payment or performance of an obligation, after making the
payments and applications required by subsection (a) and
permitted by subsection (c):
(1) unless subsection (a)(4) requires the secured
party to apply or pay over cash proceeds to a consignor,
the secured party shall account to and pay a debtor for
any surplus; and
(2) the obligor is liable for any deficiency.
(e) No surplus or deficiency in sales of certain rights
to payment. If the underlying transaction is a sale of
accounts, chattel paper, payment intangibles, or promissory
notes:
(1) the debtor is not entitled to any surplus; and
(2) the obligor is not liable for any deficiency.
(f) Calculation of surplus or deficiency in disposition
to person related to secured party. The surplus or
deficiency following a disposition is calculated based on the
amount of proceeds that would have been realized in a
disposition complying with this Part and described in
subsection (f)(2) of this Section to a transferee other than
the secured party, a person related to the secured party, or
a secondary obligor if:
(1) the transferee in the disposition is the
secured party, a person related to the secured party, or
a secondary obligor; and
(2) the amount of proceeds of the disposition is
significantly below the range of proceeds that would have
been received from a complying disposition by a forced
sale without reserve to a willing buyer other than the
secured party, a person related to the secured party, or
a secondary obligor.
(g) Cash proceeds received by junior secured party. A
secured party that receives cash proceeds of a disposition in
good faith and without knowledge that the receipt violates
the rights of the holder of a security interest or other lien
that is not subordinate to the security interest or
agricultural lien under which the disposition is made:
(1) takes the cash proceeds free of the security
interest or other lien;
(2) is not obligated to apply the proceeds of the
disposition to the satisfaction of obligations secured by
the security interest or other lien; and
(3) is not obligated to account to or pay the
holder of the security interest or other lien for any
surplus.
(810 ILCS 5/9-616 new)
Sec. 9-616. Explanation of calculation of surplus or
deficiency.
(a) Definitions. In this Section:
(1) "Explanation" means a writing that:
(A) states whether a surplus or deficiency is
owed and the amount of the surplus, if applicable;
(B) states, if applicable, that future debits,
credits, charges, including additional credit
service charges or interest, rebates, and expenses
may affect the amount of the surplus or deficiency;
(C) provides a telephone number or mailing
address from which the debtor or consumer obligor
may obtain additional information concerning the
transaction and from which such person may request
the amount of the deficiency and further information
regarding how the secured party calculated the
surplus or deficiency; and
(D) at the sender's option, the information
set forth in subsection (c).
(2) "Request" means a record:
(A) authenticated by a debtor or consumer
obligor;
(B) requesting that the recipient provide
information of how it calculated the surplus or
deficiency; and
(C) sent after disposition of the collateral
under Section 9-610.
(b) Explanation of calculation. In a consumer-goods
transaction in which the debtor is entitled to a surplus or a
consumer obligor is liable for a deficiency under Section
9-615, the secured party shall:
(1) send an explanation to the debtor or consumer
obligor, as applicable, after the disposition and:
(A) before or when the secured party accounts
to the debtor and pays any surplus or first makes
written demand on the consumer obligor after the
disposition for payment of the deficiency, other
than in instances in which such demand is made by a
third-party debt collector covered by the Fair Debt
Collection Practices Act; and
(B) within 14 days after receipt of a request
made by the debtor or consumer obligor within one
year after the secured party has given an
explanation under this Section or notice to such
debtor or consumer obligor under Section 9-614 of
this Article; or
(2) in the case of a consumer obligor who is liable
for a deficiency, within 14 days after receipt of a
request, send to the consumer obligor a record waiving
the secured party's right to a deficiency.
(c) Required information for response to request. To
comply with a request, the secured party must provide a
response in writing which includes the following information:
(1) the aggregate amount of obligations secured by
the security interest under which the disposition was
made, and, if the amount reflects a rebate of unearned
interest or credit service charge, an indication of that
fact, calculated as of a specified date:
(A) if the secured party takes or receives
possession of the collateral after default, not more
than 35 days before the secured party takes or
receives possession; or
(B) if the secured party takes or receives
possession of the collateral before default or does
not take possession of the collateral, not more than
35 days before the disposition;
(2) the amount of proceeds of the disposition;
(3) the aggregate amount of the obligations after
deducting the amount of proceeds;
(4) the amount, in the aggregate or by type, and
types of expenses, including expenses of retaking,
holding, preparing for disposition, processing, and
disposing of the collateral, and attorney's fees secured
by the collateral which are known to the secured party
and relate to the current disposition;
(5) the amount, in the aggregate or by type, and
types of credits, including rebates of interest or credit
service charges, to which the obligor is known to be
entitled and which are not reflected in the amount in
paragraph (1); and
(6) the amount of the surplus or deficiency.
(d) Substantial compliance. A particular phrasing of
the explanation or response to a request is not required. An
explanation or a response to a request complying
substantially with the requirements of this Section is
sufficient even if it is:
(1) accompanied by or combined with other
notifications;
(2) includes information not specified by this
Section;
(3) includes minor errors that are not seriously
misleading; or
(4) includes errors in information not required by
this Section.
(e) Charges for responses. A debtor or consumer obligor
is entitled without charge to one response to a request under
this Section during any six-month period in which the secured
party did not send to the debtor or consumer obligor an
explanation pursuant to subsection (b)(1). The secured party
may require payment of a charge not exceeding $25 for each
additional response.
(810 ILCS 5/9-617 new)
Sec. 9-617. Rights of transferee of collateral.
(a) Effects of disposition. A secured party's
disposition of collateral after default:
(1) transfers to a transferee for value all of the
debtor's rights in the collateral;
(2) discharges the security interest under which
the disposition is made; and
(3) discharges any subordinate security interest or
other subordinate lien.
(b) Rights of good-faith transferee. A transferee that
acts in good faith takes free of the rights and interests
described in subsection (a), even if the secured party fails
to comply with this Article or the requirements of any
judicial proceeding.
(c) Rights of other transferee. If a transferee does
not take free of the rights and interests described in
subsection (a), the transferee takes the collateral subject
to:
(1) the debtor's rights in the collateral;
(2) the security interest or agricultural lien
under which the disposition is made; and
(3) any other security interest or other lien.
(810 ILCS 5/9-618 new)
Sec. 9-618. Rights and duties of certain secondary
obligors.
(a) Rights and duties of secondary obligor. A secondary
obligor acquires the rights and becomes obligated to perform
the duties of the secured party after the secondary obligor:
(1) receives an assignment of a secured obligation
from the secured party;
(2) receives a transfer of collateral from the
secured party and agrees to accept the rights and assume
the duties of the secured party; or
(3) is subrogated to the rights of a secured party
with respect to collateral.
(b) Effect of assignment, transfer, or subrogation. An
assignment, transfer, or subrogation described in subsection
(a):
(1) is not a disposition of collateral under
Section 9-610; and
(2) relieves the secured party of further duties
under this Article.
(810 ILCS 5/9-619 new)
Sec. 9-619. Transfer of record or legal title.
(a) "Transfer statement." In this Section, "transfer
statement" means a record authenticated by a secured party
stating:
(1) that the debtor has defaulted in connection
with an obligation secured by specified collateral;
(2) that the secured party has exercised its
post-default remedies with respect to the collateral;
(3) that, by reason of the exercise, a transferee
has acquired the rights of the debtor in the collateral;
and
(4) the name and mailing address of the secured
party, debtor, and transferee.
(b) Effect of transfer statement. A transfer statement
entitles the transferee to the transfer of record of all
rights of the debtor in the collateral specified in the
statement in any official filing, recording, registration, or
certificate-of-title system covering the collateral. If a
transfer statement is presented with the applicable fee and
request form to the official or office responsible for
maintaining the system, the official or office shall:
(1) accept the transfer statement;
(2) promptly amend its records to reflect the
transfer; and
(3) if applicable, issue a new appropriate
certificate of title in the name of the transferee.
(c) Transfer not a disposition; no relief of secured
party's duties. A transfer of the record or legal title to
collateral to a secured party under subsection (b) or
otherwise is not of itself a disposition of collateral under
this Article and does not of itself relieve the secured party
of its duties under this Article.
(810 ILCS 5/9-620 new)
Sec. 9-620. Acceptance of collateral in full or partial
satisfaction of obligation; compulsory disposition of
collateral.
(a) Conditions to acceptance in satisfaction. Except as
otherwise provided in subsection (g), a secured party may
accept collateral in full or partial satisfaction of the
obligation it secures only if:
(1) the debtor consents to the acceptance under
subsection (c);
(2) the secured party does not receive, within the
time set forth in subsection (d), a notification of
objection to the proposal authenticated by:
(A) a person to which the secured party was
required to send a proposal under Section 9-621; or
(B) any other person, other than the debtor,
holding an interest in the collateral subordinate to
the security interest that is the subject of the
proposal;
(3) if the collateral is consumer goods, the
collateral is not in the possession of the debtor when
the debtor consents to the acceptance; and
(4) subsection (e) does not require the secured
party to dispose of the collateral or the debtor waives
the requirement pursuant to Section 9-624.
(b) Purported acceptance ineffective. A purported or
apparent acceptance of collateral under this Section is
ineffective unless:
(1) the secured party consents to the acceptance in
an authenticated record or sends a proposal to the
debtor; and
(2) the conditions of subsection (a) are met.
(c) Debtor's consent. For purposes of this Section:
(1) a debtor consents to an acceptance of
collateral in partial satisfaction of the obligation it
secures only if the debtor agrees to the terms of the
acceptance in a record authenticated after default; and
(2) a debtor consents to an acceptance of
collateral in full satisfaction of the obligation it
secures only if the debtor agrees to the terms of the
acceptance in a record authenticated after default or the
secured party:
(A) sends to the debtor after default a
proposal that is unconditional or subject only to a
condition that collateral not in the possession of
the secured party be preserved or maintained;
(B) in the proposal, proposes to accept
collateral in full satisfaction of the obligation it
secures; and
(C) does not receive a notification of
objection authenticated by the debtor within 20 days
after the proposal is sent.
(d) Effectiveness of notification. To be effective
under subsection (a)(2), a notification of objection must be
received by the secured party:
(1) in the case of a person to which the proposal
was sent pursuant to Section 9-621, within 20 days after
notification was sent to that person; and
(2) in other cases:
(A) within 20 days after the last notification
was sent pursuant to Section 9-621; or
(B) if a notification was not sent, before the
debtor consents to the acceptance under subsection
(c).
(e) Mandatory disposition of consumer goods. A secured
party that has taken possession of collateral shall dispose
of the collateral pursuant to Section 9-610 within the time
specified in subsection (f) if:
(1) 60 percent of the cash price has been paid in
the case of a purchase-money security interest in
consumer goods; or
(2) 60 percent of the principal amount of the
obligation secured has been paid in the case of a
non-purchase-money security interest in consumer goods.
(f) Compliance with mandatory disposition requirement.
To comply with subsection (e), the secured party shall
dispose of the collateral:
(1) within 90 days after taking possession; or
(2) within any longer period to which the debtor
and all secondary obligors have agreed in an agreement to
that effect entered into and authenticated after default.
(g) No partial satisfaction in consumer transaction. In
a consumer transaction, a secured party may not accept
collateral in partial satisfaction of the obligation it
secures.
(810 ILCS 5/9-621 new)
Sec. 9-621. Notification of proposal to accept
collateral.
(a) Persons to which proposal to be sent. A secured
party that desires to accept collateral in full or partial
satisfaction of the obligation it secures shall send its
proposal to:
(1) any person from which the secured party has
received, before the debtor consented to the acceptance,
an authenticated notification of a claim of an interest
in the collateral;
(2) any other secured party or lienholder that, 10
days before the debtor consented to the acceptance, held
a security interest in or other lien on the collateral
perfected by the filing of a financing statement that:
(A) identified the collateral;
(B) was indexed under the debtor's name as of
that date; and
(C) was filed in the office or offices in
which to file a financing statement against the
debtor covering the collateral as of that date; and
(3) any other secured party that, 10 days before
the debtor consented to the acceptance, held a security
interest in the collateral perfected by compliance with a
statute, regulation, or treaty described in Section
9-311(a).
(b) Proposal to be sent to secondary obligor in partial
satisfaction. A secured party that desires to accept
collateral in partial satisfaction of the obligation it
secures shall send its proposal to any secondary obligor in
addition to the persons described in subsection (a).
(810 ILCS 5/9-622 new)
Sec. 9-622. Effect of acceptance of collateral.
(a) Effect of acceptance. A secured party's acceptance
of collateral in full or partial satisfaction of the
obligation it secures:
(1) discharges the obligation to the extent
consented to by the debtor;
(2) transfers to the secured party all of a
debtor's rights in the collateral;
(3) discharges the security interest or
agricultural lien that is the subject of the debtor's
consent and any subordinate security interest or other
subordinate lien; and
(4) terminates any other subordinate interest.
(b) Discharge of subordinate interest notwithstanding
noncompliance. A subordinate interest is discharged or
terminated under subsection (a), even if the secured party
fails to comply with this Article.
(810 ILCS 5/9-623 new)
Sec. 9-623. Right to redeem collateral.
(a) Persons that may redeem. A debtor, any secondary
obligor, or any other secured party or lienholder may redeem
collateral.
(b) Requirements for redemption. To redeem collateral,
a person shall tender:
(1) fulfillment of all obligations secured by the
collateral; and
(2) the reasonable expenses and attorney's fees
described in Section 9-615(a)(1).
(c) When redemption may occur. A redemption may occur
at any time before a secured party:
(1) has collected collateral under Section 9-607;
(2) has disposed of collateral or entered into a
contract for its disposition under Section 9-610; or
(3) has accepted collateral in full or partial
satisfaction of the obligation it secures under Section
9-622.
(810 ILCS 5/9-624 new)
Sec. 9-624. Waiver.
(a) Waiver of disposition notification. A debtor or
secondary obligor may waive the right to notification of
disposition of collateral under Section 9-611 only by an
agreement to that effect entered into and authenticated after
default.
(b) Waiver of mandatory disposition. A debtor may waive
the right to require disposition of collateral under Section
9-620(e) only by an agreement to that effect entered into and
authenticated after default.
(c) Waiver of redemption right. A debtor or secondary
obligor may waive the right to redeem collateral under
Section 9-623 only by an agreement to that effect entered
into and authenticated after default.
(810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new)
SUBPART 2. NONCOMPLIANCE WITH ARTICLE
(810 ILCS 5/9-625 new)
Sec. 9-625. Remedies for secured party's failure to
comply with Article.
(a) Judicial orders concerning noncompliance. If it is
established that a secured party is not proceeding in
accordance with this Article, a court may order or restrain
collection, enforcement, or disposition of collateral on
appropriate terms and conditions.
(b) Damages for noncompliance. Subject to subsections
(c), (d), and (f), a person is liable for damages in the
amount of any loss caused by a failure to comply with this
Article. Loss caused by a failure to comply with a request
under Section 9-210 may include loss resulting from the
debtor's inability to obtain, or increased costs of,
alternative financing.
(c) Persons entitled to recover damages; statutory
damages in consumer-goods transaction. Except as otherwise
provided in Section 9-628:
(1) a person that, at the time of the failure, was
a debtor, was an obligor, or held a security interest in
or other lien on the collateral may recover in an
individual action damages under subsection (b) for its
loss; and
(2) if the collateral is consumer goods, a person
that was a debtor or a secondary obligor at the time a
secured party failed to comply with this Part may recover
in an individual action for that failure in any event an
amount not less than the credit service charge plus 10
percent of the principal amount of the obligation or the
time-price differential plus 10 percent of the cash
price.
(d) Recovery when deficiency eliminated or reduced. A
debtor whose deficiency is eliminated under Section 9-626 may
recover damages for the loss of any surplus. However, a
debtor or secondary obligor whose deficiency is eliminated or
reduced under Section 9-626 may not otherwise recover under
subsection (b) for noncompliance with the provisions of this
Part relating to collection, enforcement, disposition, or
acceptance.
(e) Statutory damages: noncompliance with specified
provisions. In addition to any damages recoverable under
subsection (b), the debtor, consumer obligor, or person named
as a debtor in a filed record, as applicable, may recover in
an individual action $500 for each instance that a person:
(1) fails to comply with Section 9-208;
(2) fails to comply with Section 9-209;
(3) files a record that the person is not entitled
to file under Section 9-509(a); or
(4) fails to cause the secured party of record to
file or send a termination statement as required by
Section 9-513(a) or (c).
(f) Statutory damages: noncompliance with Section
9-210. A debtor or consumer obligor may recover damages
under subsection (b) and, in addition, may in an individual
action recover $500 in each case from a person that, without
reasonable cause, fails to comply with a request under
Section 9-210. A recipient of a request under Section 9-210
which never claimed an interest in the collateral or
obligations that are the subject of a request under that
Section has a reasonable excuse for failure to comply with
the request within the meaning of this subsection.
(g) Limitation of security interest: noncompliance with
Section 9-210. If a secured party fails to comply with a
request regarding a list of collateral or a statement of
account under Section 9-210, the secured party may claim a
security interest only as shown in the statement included in
the request as against a person that is reasonably misled by
the failure.
(810 ILCS 5/9-626 new)
Sec. 9-626. Action in which deficiency or surplus is in
issue; applicable rules if amount of deficiency or surplus is
in issue. In an action in which the amount of a deficiency
or surplus is in issue, the following rules apply:
(1) A secured party need not prove compliance with
the provisions of this Part relating to collection,
enforcement, disposition, or acceptance unless the debtor
or a secondary obligor places the secured party's
compliance in issue.
(2) If the secured party's compliance is placed in
issue, the secured party has the burden of establishing
that the collection, enforcement, disposition, or
acceptance was conducted in accordance with this Part.
(3) Except as otherwise provided in Section 9-628,
if a secured party fails to prove that the collection,
enforcement, disposition, or acceptance was conducted in
accordance with the provisions of this Part relating to
collection, enforcement, disposition, or acceptance, the
liability of a debtor or a secondary obligor for a
deficiency is limited to an amount by which the sum of
the secured obligation, expenses, and attorney's fees
exceeds the greater of:
(A) the proceeds of the collection,
enforcement, disposition, or acceptance; or
(B) the amount of proceeds that would have
been realized had the noncomplying secured party
proceeded in accordance with the provisions of this
Part relating to collection, enforcement,
disposition, or acceptance.
(4) For purposes of paragraph (3)(B), the amount of
proceeds that would have been realized is equal to the
sum of the secured obligation, expenses, and attorney's
fees unless the secured party proves that the amount is
less than that sum.
(5) If a deficiency or surplus is calculated under
Section 9-615(f), the debtor or obligor has the burden of
establishing that the amount of proceeds of the
disposition is significantly below the range of prices
that a complying disposition to a person other than the
secured party, a person related to the secured party, or
a secondary obligor would have brought.
(810 ILCS 5/9-627 new)
Sec. 9-627. Determination of whether conduct was
commercially reasonable.
(a) Greater amount obtainable under other circumstances;
no preclusion of commercial reasonableness. The fact that a
greater amount could have been obtained by a collection,
enforcement, disposition, or acceptance at a different time
or in a different method from that selected by the secured
party is not of itself sufficient to preclude the secured
party from establishing that the collection, enforcement,
disposition, or acceptance was made in a commercially
reasonable manner.
(b) Dispositions that are commercially reasonable. A
disposition of collateral is made in a commercially
reasonable manner if the disposition is made:
(1) in the usual manner on any recognized market;
(2) at the price current in any recognized market
at the time of the disposition; or
(3) otherwise in conformity with reasonable
commercial practices among dealers in the type of
property that was the subject of the disposition.
(c) Approval by court or on behalf of creditors. A
collection, enforcement, disposition, or acceptance is
commercially reasonable if it has been approved:
(1) in a judicial proceeding;
(2) by a bona fide creditors' committee;
(3) by a representative of creditors; or
(4) by an assignee for the benefit of creditors.
(d) Approval under subsection (c) not necessary; absence
of approval has no effect. Approval under subsection (c)
need not be obtained, and lack of approval does not mean that
the collection, enforcement, disposition, or acceptance is
not commercially reasonable.
(810 ILCS 5/9-628 new)
Sec. 9-628. Nonliability and limitation on liability of
secured party; liability of secondary obligor.
(a) Limitation of liability to debtor or obligor.
Unless a secured party knows that a person is a debtor or
obligor, knows the identity of the person, and knows how to
communicate with the person:
(1) the secured party is not liable to the person,
or to a secured party or lienholder that has filed a
financing statement against the person, for failure to
comply with this Article; and
(2) the secured party's failure to comply with this
Article does not affect the liability of the person for a
deficiency.
(b) Limitation of liability to debtor, obligor, another
secured party, or lienholder. A secured party is not liable
because of its status as secured party:
(1) to a person that is a debtor or obligor, unless
the secured party knows:
(A) that the person is a debtor or obligor;
(B) the identity of the person; and
(C) how to communicate with the person; or
(2) to a secured party or lienholder that has filed
a financing statement against a person, unless the
secured party knows:
(A) that the person is a debtor; and
(B) the identity of the person.
(c) Limitation of liability if reasonable belief that
transaction not a consumer-goods transaction or consumer
transaction. A secured party is not liable to any person,
and a person's liability for a deficiency is not affected,
because of any act or omission arising out of the secured
party's reasonable belief that a transaction is not a
consumer-goods transaction or a consumer transaction or that
goods are not consumer goods, if the secured party's belief
is based on its reasonable reliance on:
(1) a debtor's representation concerning the
purpose for which collateral was to be used, acquired, or
held; or
(2) an obligor's representation concerning the
purpose for which a secured obligation was incurred.
(d) Limitation of liability for statutory damages. A
secured party is not liable to any person under Section
9-625(c)(2) for its failure to comply with Section 9-616.
(e) Limitation of multiple liability for statutory
damages. A secured party is not liable under Section
9-625(c)(2) more than once with respect to any one secured
obligation.
(810 ILCS 5/Art. 9, Part 7 heading new)
PART 7. TRANSITION
(810 ILCS 5/9-701 new)
Sec. 9-701. Effective date. (See Section 99 of the
Public Act adding this Section to this Act.)
(810 ILCS 5/9-702 new)
Sec. 9-702. Savings clause.
(a) Pre-effective-date transactions or liens. Except as
otherwise provided in this Part, this Act applies to a
transaction or lien within its scope, even if the transaction
or lien was entered into or created before the effective date
of this amendatory Act of the 91st General Assembly.
(b) Continuing validity. Except as otherwise provided
in subsection (c) and Sections 9-703 through 9-709:
(1) transactions and liens that were not governed
by Article 9 as it existed before the effective date of
this amendatory Act of the 91st General Assembly, were
validly entered into or created before the effective date
of this amendatory Act of the 91st General Assembly, and
would be subject to this Act if they had been entered
into or created after the effective date of this
amendatory Act of the 91st General Assembly, and the
rights, duties, and interests flowing from those
transactions and liens remain valid after the effective
date of this amendatory Act of the 91st General Assembly;
and
(2) the transactions and liens may be terminated,
completed, consummated, and enforced as required or
permitted by this Act or by the law that otherwise would
apply if this Act had not taken effect.
(c) Pre-effective-date proceedings. This amendatory Act
of the 91st General Assembly does not affect an action, case,
or proceeding commenced before the effective date of this
amendatory Act of the 91st General Assembly.
(810 ILCS 5/9-703 new)
Sec. 9-703. Security interest perfected before effective
date.
(a) Continuing priority over lien creditor: perfection
requirements satisfied. A security interest that is
enforceable immediately before the effective date of this
amendatory Act of the 91st General Assembly and would have
priority over the rights of a person that becomes a lien
creditor at that time is a perfected security interest under
this Act if, on the effective date of this amendatory Act of
the 91st General Assembly, the applicable requirements for
enforceability and perfection under this Act are satisfied
without further action.
(b) Continuing priority over lien creditor: perfection
requirements not satisfied. Except as otherwise provided in
Section 9-705, if, immediately before the effective date of
this amendatory Act of the 91st General Assembly, a security
interest is enforceable and would have priority over the
rights of a person that becomes a lien creditor at that time,
but the applicable requirements for enforceability or
perfection under this Act are not satisfied on the effective
date of this amendatory Act of the 91st General Assembly, the
security interest:
(1) is a perfected security interest for one year
after the effective date of this amendatory Act of the
91st General Assembly;
(2) remains enforceable thereafter only if the
security interest becomes enforceable under Section 9-203
before the year expires; and
(3) remains perfected thereafter only if the
applicable requirements for perfection under this Act are
satisfied before the year expires.
(810 ILCS 5/9-704 new)
Sec. 9-704. Security interest unperfected before
effective date. A security interest that is enforceable
immediately before the effective date of this amendatory Act
of the 91st General Assembly but which would be subordinate
to the rights of a person that becomes a lien creditor at
that time:
(1) remains an enforceable security interest for
one year after the effective date of this amendatory Act
of the 91st General Assembly;
(2) remains enforceable thereafter if the security
interest becomes enforceable under Section 9-203 on the
effective date of this amendatory Act of the 91st General
Assembly or within one year thereafter; and
(3) becomes perfected:
(A) without further action, on the effective date
of this amendatory Act of the 91st General Assembly if
the applicable requirements for perfection under this Act
are satisfied before or at that time; or
(B) when the applicable requirements for perfection
are satisfied if the requirements are satisfied after
that time.
(810 ILCS 5/9-705 new)
Sec. 9-705. Effectiveness of action taken before
effective date.
(a) Pre-effective-date action; one-year perfection
period unless reperfected. If action, other than the filing
of a financing statement, is taken before the effective date
of this amendatory Act of the 91st General Assembly and the
action would have resulted in priority of a security interest
over the rights of a person that becomes a lien creditor had
the security interest become enforceable before the effective
date of this amendatory Act of the 91st General Assembly, the
action is effective to perfect a security interest that
attaches under this Act within one year after the effective
date of this amendatory Act of the 91st General Assembly. An
attached security interest becomes unperfected one year after
the effective date of this amendatory Act of the 91st General
Assembly unless the security interest becomes a perfected
security interest under this Act before the expiration of
that period.
(b) Pre-effective-date filing. The filing of a
financing statement before the effective date of this
amendatory Act of the 91st General Assembly is effective to
perfect a security interest to the extent the filing would
satisfy the applicable requirements for perfection under this
Act.
(c) Pre-effective-date filing in jurisdiction formerly
governing perfection. This Act does not render ineffective
an effective financing statement that, before the effective
date of this amendatory Act of the 91st General Assembly, is
filed and satisfies the applicable requirements for
perfection under the law of the jurisdiction governing
perfection as provided in Section 9-103 of the Uniform
Commercial Code as it existed before the effective date of
this amendatory Act of the 91st General Assembly. However,
except as otherwise provided in subsections (d) and (e) and
Section 9-706, the financing statement ceases to be effective
at the earlier of:
(1) the time the financing statement would have
ceased to be effective under the law of the jurisdiction
in which it is filed; or
(2) June 30, 2006.
(d) Continuation statement. The filing of a
continuation statement after the effective date of this
amendatory Act of the 91st General Assembly does not continue
the effectiveness of the financing statement filed before the
effective date of this amendatory Act of the 91st General
Assembly. However, upon the timely filing of a continuation
statement after the effective date of this amendatory Act of
the 91st General Assembly and in accordance with the law of
the jurisdiction governing perfection as provided in Part 3,
the effectiveness of a financing statement filed in the same
office in that jurisdiction before the effective date of this
amendatory Act of the 91st General Assembly continues for the
period provided by the law of that jurisdiction.
(e) Application of subsection (c)(2) to transmitting
utility financing statement. Subsection (c)(2) applies to a
financing statement that, before the effective date of this
amendatory Act of the 91st General Assembly, is filed against
a transmitting utility and satisfies the applicable
requirements for perfection under the law of the jurisdiction
governing perfection as provided in Section 9-103, as that
Section existed before the effective date of this amendatory
Act of the 91st General Assembly, only to the extent that
Part 3 provides that the law of a jurisdiction other than
jurisdiction in which the financing statement is filed
governs perfection of a security interest in collateral
covered by the financing statement.
(f) Application of Part 5. A financing statement that
includes a financing statement filed before the effective
date of this amendatory Act of the 91st General Assembly and
a continuation statement filed after the effective date of
this amendatory Act of the 91st General Assembly is effective
only to the extent that it satisfies the requirements of Part
5 for an initial financing statement.
(810 ILCS 5/9-706 new)
Sec. 9-706. When initial financing statement suffices to
continue effectiveness of financing statement.
(a) Initial financing statement in lieu of continuation
statement. The filing of an initial financing statement in
the office specified in Section 9-501 continues the
effectiveness of a financing statement filed before the
effective date of this amendatory Act of the 91st General
Assembly if:
(1) the filing of an initial financing statement in
that office would be effective to perfect a security
interest under this Act;
(2) the pre-effective-date financing statement was
filed in an office in another State or another office in
this State; and
(3) the initial financing statement satisfies
subsection (c).
(b) Period of continued effectiveness. The filing of an
initial financing statement under subsection (a) continues
the effectiveness of the pre-effective-date financing
statement:
(1) if the initial financing statement is filed
before the effective date of this amendatory Act of the
91st General Assembly, for the period provided in Section
9-403 of the Uniform Commercial Code as it existed before
the effective date of this amendatory Act of the 91st
General Assembly with respect to a financing statement;
and
(2) if the initial financing statement is filed
after the effective date of this amendatory Act of the
91st General Assembly, for the period provided in Section
9-515 with respect to an initial financing statement.
(c) Requirements for initial financing statement under
subsection (a). To be effective for purposes of subsection
(a), an initial financing statement must:
(1) satisfy the requirements of Part 5 for an
initial financing statement;
(2) identify the pre-effective-date financing
statement by indicating the office in which the financing
statement was filed and providing the dates of filing and
file numbers, if any, of the financing statement and of
the most recent continuation statement filed with respect
to the financing statement; and
(3) indicate that the pre-effective-date financing
statement remains effective.
(810 ILCS 5/9-707 new)
Sec. 9-707. Amendment of pre-effective-date financing
statement.
(a) "Pre-effective-date financing statement". In this
Section, "pre-effective-date financing statement" means a
financing statement filed before the effective date of this
amendatory Act of the 91st General Assembly.
(b) Applicable law. After the effective date of this
amendatory Act of the 91st General Assembly, a person may add
or delete collateral covered by, continue or terminate the
effectiveness of, or otherwise amend the information provided
in, a pre-effective-date financing statement only in
accordance with the law of the jurisdiction governing
perfection as provided in Part 3. However, the effectiveness
of a pre-effective-date financing statement also may be
terminated in accordance with the law of the jurisdiction in
which the financing statement is filed.
(c) Method of amending: general rule. Except as
otherwise provided in subsection (d), if the law of this
State governs perfection of a security interest, the
information in a pre-effective-date financing statement may
be amended after the effective date of this amendatory Act of
the 91st General Assembly only if:
(1) the pre-effective-date financing statement and
an amendment are filed in the office specified in Section
9-501;
(2) an amendment is filed in the office specified
in Section 9-501 concurrently with, or after the filing
in that office of, an initial financing statement that
satisfies Section 9-706(c); or
(3) an initial financing statement that provides
the information as amended and satisfies Section 9-706(c)
is filed in the office specified in Section 9-501.
(d) Method of amending: continuation. If the law of
this State governs perfection of a security interest, the
effectiveness of a pre-effective-date financing statement may
be continued only under Section 9-705(d) and (f) or Section
9-706.
(e) Method of amending: additional termination rule.
Whether or not the law of this State governs perfection of a
security interest, the effectiveness of a pre-effective-date
financing statement filed in this State may be terminated
after the effective date of this amendatory Act of the 91st
General Assembly by filing a termination statement in the
office in which the pre-effective-date financing statement is
filed, unless an initial financing statement that satisfies
Section 9-706(c) has been filed in the office specified by
the law of the jurisdiction governing perfection as provided
in Part 3 as the office in which to file a financing
statement.
(810 ILCS 5/9-708 new)
Sec. 9-708. Persons entitled to file initial financing
statement or continuation statement. A person may file an
initial financing statement or a continuation statement under
this Part if:
(1) the secured party of record authorizes the
filing; and
(2) the filing is necessary under this Part:
(A) to continue the effectiveness of a
financing statement filed before the effective date
of this amendatory Act of the 91st General Assembly;
or
(B) to perfect or continue the perfection of a
security interest.
(810 ILCS 5/9-709 new)
Sec. 9-709. Priority.
(a) Law governing priority. This Act determines the
priority of conflicting claims to collateral. However, if
the relative priorities of the claims were established before
the effective date of this amendatory Act of the 91st General
Assembly, Article 9 as it existed before the effective date
of this amendatory Act of the 91st General Assembly
determines priority.
(b) Priority if security interest becomes enforceable
under Section 9-203. For purposes of Section 9-322(a), the
priority of a security interest that becomes enforceable
under Section 9-203 of this Act dates from the effective date
of this amendatory Act of the 91st General Assembly if the
security interest is perfected under this Act by the filing
of a financing statement before the effective date of this
amendatory Act of the 91st General Assembly which would not
have been effective to perfect the security interest under
Article 9 as it existed before the effective date of this
amendatory Act of the 91st General Assembly. This subsection
does not apply to conflicting security interests each of
which is perfected by the filing of such a financing
statement.
(810 ILCS 5/9-710 new)
Sec. 9-710. Local-filing office responsibilities for
filings under the Uniform Commercial Code prior to this
amendatory Act of the 91st General Assembly.
(a) In this Section:
(1) "Local-filing office" means a filing office,
other than the office of the Secretary of State, that is
designated as the proper place to file a financing
statement under Section 9-401(1) of the Uniform
Commercial Code as in effect immediately before the
effective date of this amendatory Act of the 91st General
Assembly. The term applies only with respect to a record
that covers a type of collateral as to which the filing
office is designated in that Section as the proper place
to file.
(2) "Former-Article-9 records" means:
(A) financing statements and other records
that have been filed in a local-filing office before
July 1, 2001, and that are, or upon processing and
indexing will be, reflected in the index maintained,
as of June 30, 2001, by the local-filing office for
financing statements and other records filed in the
local filing office before July 1, 2001.
(B) the index as of June 30, 2001.
(b) Except for a record terminating a former-Article-9
record, a local-filing office must not accept for filing a
record presented after June 30, 2001, whether or not the
record relates to a financing statement filed in the
local-filing office before July 1, 2001. If the record
terminating such former-Article-9 record statement is in the
standard form prescribed by the Secretary of State, the
uniform fee for filing and indexing the termination statement
in the office of a county recorder shall be $5 and otherwise
shall be $10, plus in each case an additional fee of $5 for
each name more than one at each address listed against which
the record is required to be indexed.
(c) Until July 1, 2001, each local-filing office must
maintain all former-Article-9 records in accordance with the
Uniform Commercial Code as in effect immediately before the
effective date of this amendatory Act of the 91st General
Assembly. A former-Article-9 record that is not reflected on
the index maintained on June 30, 2001, by the local-filing
office must be processed and indexed, and reflected on the
index as of June 30, 2001, as soon as practicable but in any
event no later than July 30, 2001.
(d) Until at least June 30, 2008, each local-filing
office must respond to requests for information with respect
to former-Article-9 records relating to a debtor and issue
certificates, in accordance with the Uniform Commercial Code
as in effect immediately before this amendatory Act of the
91st General Assembly. The fees charged for responding to
requests for information relating to the debtor issuing the
certificates with respect to former-Article-9 records must be
the fees in effect under the Uniform Commercial Code as in
effect immediately before the effective date of this
amendatory Act of the 91st General Assembly on June 30, 2001,
unless a different fee is later set by the local filing
office. However, the different fee must not exceed $10 for
responding to a request for information relating to a debtor
or $10 for issuing a certificate.
(e) After June 30, 2008, each local-filing office may
remove and destroy, in accordance with any then applicable
record retention law of this State, all former-Article-9
records, including the related index.
(f) This Section does not apply, with respect to
financing statements and other records, to a filing office in
which mortgages or records of mortgages on real property are
required to be filed or recorded if:
(1) the collateral is timber to be cut or
as-extracted collateral, or
(2) the record is or relates to a financing
statement filed as a fixture filing and the collateral is
goods that are or are to become fixtures.
PART 99. (BLANK) MISCELLANEOUS ILLINOIS PROVISIONS
(810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901)
Sec. 9-9901. (Blank). Liability of Secretary of State.
Neither the Secretary of State nor any of the Secretary of
State's employees or agents shall be subject to personal
liability by reason of any error or omission in the
performance of any duty under this Article except in case of
wilful negligence.
(Source: P.A. 87-1047.)
(810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902)
Sec. 9-9902. (Blank). Security interests in crops.
(a) Legislative findings; purpose. The General Assembly
finds:
(1) it has been the accepted practice between
farmers and agricultural lenders for lenders to extend
credit with repayment secured by a security interest in
crops perfected in accordance with the provisions of this
Article;
(2) in making these loans, it has been the accepted
practice of agricultural lenders to rely upon a search of
financing statements properly filed in accordance with
the provisions of this Article to determine the presence
of claims in favor of other lenders;
(3) recently, this long standing practice and the
expectations of agricultural lenders have been negated by
court decisions that hold that a mortgagee of real estate
who takes possession, during foreclosure proceedings, of
mortgaged real estate with unsevered crops has priority
over a perfected security interest in crops;
(4) as a result of these court decisions, the
documentation and expenses in connection with prudent
agricultural lending practices will significantly
increase, creating an undue burden on agricultural
lenders;
(5) the application of these court decisions to the
holders of obligations secured by the collateral
assignment of beneficial interests in land trusts will
result in the creation of claims against crops that
agricultural lenders will be unable to discover by public
record search;
(6) these court decisions defeat the legitimate
expectations of agricultural lenders, unnecessarily
increase the cost of agricultural credit and impede the
free flow and availability of agricultural credit,
constituting an undue burden on the Illinois farm
economy;
(7) the application of these court decisions to the
holders of obligations secured by the collateral
assignment of beneficial interests in land trusts will
similarly defeat the expectations of agricultural
lenders, unnecessarily increase the cost of agricultural
credit and impede the free flow and availability of
agricultural credit, constituting an undue burden on the
Illinois farm economy;
(8) real estate lenders, frequently dealing with
farmers prior to the involvement of other agricultural
lenders, in the ordinary course of lending can perfect a
security interest in crops in accordance with the
provisions of this Article to the extent these lenders
are relying on that collateral;
(9) it is the purpose of this Section to restore an
efficient system of searching for the claims of lenders
and the protection afforded agricultural lenders by a
perfected security interest in crops under this Article,
and thereby to foster and encourage the availability of
agricultural credit.
(b) Definitions. In this Section the following meanings
apply:
(1) "Collateral assignment of beneficial interest"
means any pledge or assignment of the beneficial interest
in a land trust to a person to secure a debt or other
obligation.
(2) "Land trust" means any trust arrangement under
which the legal and equitable title to real estate is
held by a trustee, the interest of the beneficiary of the
trust is personal property and the beneficiary or any
person designated in writing by the beneficiary has (i)
the exclusive power to direct or control the trustee in
dealing with the title to the trust property, (ii) the
exclusive control of the management, operation, renting,
and selling of the trust property, and (iii) the
exclusive right to the earnings, avails, and proceeds of
the trust property.
(c) Rights to crops. With respect to any crops growing
or to be grown on real estate held in a land trust, the
rights of a holder of an obligation secured by a collateral
assignment of beneficial interest in the land trust,
including rights by virtue of an equitable lien, shall be
subject to a security interest properly perfected under this
Article.
(d) Application of Section. This Section applies to the
holder of an obligation secured by a collateral assignment of
beneficial interest in a land trust who becomes entitled to
crops by obtaining possession on or after December 22, 1988.
(Source: P.A. 87-1047.)
Section 10. The Uniform Commercial Code is amended by
changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502,
2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103,
8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section
5-118 as follows:
(810 ILCS 5/1-105) (from Ch. 26, par. 1-105)
Sec. 1-105. Territorial application of the Act; parties'
power to choose applicable law.
(1) Except as provided in this Section, when a
transaction bears a reasonable relation to this State and
also to another state or nation the parties may agree that
the law either of this State or of the other state or nation
shall govern their rights and duties. Failing an agreement,
this Act applies to transactions bearing an appropriate
relation to this State.
(2) Where one of the following provisions of this Act
specifies the applicable law, that provision governs and a
contrary agreement is effective only to the extent permitted
by the law (including the conflict of laws rules) so
specified:
Rights of creditors against sold goods. Section 2-402.
Applicability of the Article on Leases. Sections 2A-105
and 2A-106.
Applicability of the Article on Bank Deposits and
Collections. Section 4-102.
Governing law in the Article on Funds Transfers. Section
4A-507.
Letters of Credit. Section 5-116.
Applicability of the Article on Investment Securities.
Section 8-110.
Law governing perfection, the effect of perfection or
nonperfection, and the priority of security
interests and agricultural liens. Sections 9-301
through 9-307.
Perfection provisions of the Article on Secured
Transactions. Section 9-103.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
(810 ILCS 5/1-201) (from Ch. 26, par. 1-201)
Sec. 1-201. General Definitions. Subject to additional
definitions contained in the subsequent Articles of this Act
which are applicable to specific Articles or Parts thereof,
and unless the context otherwise requires, in this Act:
(1) "Action" in the sense of a judicial proceeding
includes recoupment, counterclaim, set-off, suit in equity
and any other proceedings in which rights are determined.
(2) "Aggrieved party" means a party entitled to resort
to a remedy.
(3) "Agreement" means the bargain of the parties in fact
as found in their language or by implication from other
circumstances including course of dealing or usage of trade
or course of performance as provided in this Act (Sections
1-205, and 2-208, and 2A-207). Whether an agreement has legal
consequences is determined by the provisions of this Act, if
applicable; otherwise by the law of contracts (Section
1-103). (Compare "Contract".)
(4) "Bank" means any person engaged in the business of
banking.
(5) "Bearer" means the person in possession of an
instrument, document of title, or certificated security
payable to bearer or indorsed in blank.
(6) "Bill of lading" means a document evidencing the
receipt of goods for shipment issued by a person engaged in
the business of transporting or forwarding goods, and
includes an airbill. "Airbill" means a document serving for
air transportation as a bill of lading does for marine or
rail transportation, and includes an air consignment note or
air waybill.
(7) "Branch" includes a separately incorporated foreign
branch of a bank.
(8) "Burden of establishing" a fact means the burden of
persuading the triers of fact that the existence of the fact
is more probable than its non-existence.
(9) "Buyer in ordinary course of business" means a
person that buys goods who in good faith, and without
knowledge that the sale violates to him is in violation of
the ownership rights or security interest of another person a
third party in the goods, and buys in the ordinary course
from a person, other than a pawnbroker, in the business of
selling goods of that kind but does not include a pawnbroker.
A person buys goods in the ordinary course if the sale to the
person comports with the usual or customary practices in the
kind of business in which the seller is engaged or with the
seller's own usual or customary practices. A person that
sells oil, gas, or other minerals at the wellhead or minehead
is a person All persons who sell minerals or the like
(including oil and gas) at wellhead or minehead shall be
deemed to be persons in the business of selling goods of that
kind. A buyer in ordinary course of business "Buying" may
buy be for cash, or by exchange of other property, or on
secured or unsecured credit, and may acquire includes
receiving goods or documents of title under a pre-existing
contract for sale. Only a buyer that takes possession of the
goods or has a right to recover the goods from the seller
under Article 2 may be a buyer in ordinary course of
business. A person that acquires goods in a transfer in bulk
or as security for or in total or partial satisfaction of a
money debt is not a buyer in ordinary course of business. but
does not include a transfer in bulk or as security for or in
total or partial satisfaction of a money debt.
(10) "Conspicuous": A term or clause is conspicuous when
it is so written that a reasonable person against whom it is
to operate ought to have noticed it. A printed heading in
capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous.
Language in the body of a form is "conspicuous" if it is in
larger or other contrasting type or color. But in a telegram
any stated term is "conspicuous". Whether a term or clause is
"conspicuous" or not is for decision by the court.
(11) "Contract" means the total legal obligation which
results from the parties' agreement as affected by this Act
and any other applicable rules of law. (Compare "Agreement".)
(12) "Creditor" includes a general creditor, a secured
creditor, a lien creditor and any representative of
creditors, including an assignee for the benefit of
creditors, a trustee in bankruptcy, a receiver in equity and
an executor or administrator of an insolvent debtor's or
assignor's estate.
(13) "Defendant" includes a person in the position of
defendant in a cross-action or counterclaim.
(14) "Delivery" with respect to instruments, documents
of title, chattel paper or certificated securities means
voluntary transfer of possession.
(15) "Document of title" includes bill of lading, dock
warrant, dock receipt, warehouse receipt or order for the
delivery of goods, and also any other document which in the
regular course of business or financing is treated as
adequately evidencing that the person in possession of it is
entitled to receive, hold and dispose of the document and the
goods it covers. To be a document of title a document must
purport to be issued by or addressed to a bailee and purport
to cover goods in the bailee's possession which are either
identified or are fungible portions of an identified mass.
(16) "Fault" means wrongful act, omission or breach.
(17) "Fungible" with respect to goods or securities
means goods or securities of which any unit is, by nature or
usage of trade, the equivalent of any other like unit. Goods
which are not fungible shall be deemed fungible for the
purposes of this Act to the extent that under a particular
agreement or document unlike units are treated as
equivalents.
(18) "Genuine" means free of forgery or counterfeiting.
(19) "Good faith" means honesty in fact in the conduct
or transaction concerned.
(20) "Holder" with respect to a negotiable instrument
means the person in possession if the instrument is payable
to bearer or, in the case of an instrument payable to an
identified person, if the identified person is in possession.
"Holder" with respect to a document of title means the person
in possession if the goods are deliverable to bearer or to
the order of the person in possession.
(21) To "honor" is to pay or accept and pay, or where a
credit so engages to purchase or discount a draft complying
with the terms of the credit.
(22) "Insolvency proceedings" includes any assignment
for the benefit of creditors or other proceedings intended to
liquidate or rehabilitate the estate of the person involved.
(23) A person is "insolvent" who either has ceased to
pay his debts in the ordinary course of business or cannot
pay his debts as they become due or is insolvent within the
meaning of the federal bankruptcy law.
(24) "Money" means a medium of exchange authorized or
adopted by a domestic or foreign government and includes a
monetary unit of account established by an intergovernmental
organization or by agreement between 2 or more nations.
(25) A person has "notice" of a fact when
(a) he has actual knowledge of it; or
(b) he has received a notice or notification of it;
or
(c) from all the facts and circumstances known to
him at the time in question he has reason to know that it
exists. A person "knows" or has "knowledge" of a fact
when he has actual knowledge of it. "Discover" or "learn"
or a word or phrase of similar import refers to knowledge
rather than to reason to know. The time and circumstances
under which a notice or notification may cease to be
effective are not determined by this Act.
(26) A person "notifies" or "gives" a notice or
notification to another by taking such steps as may be
reasonably required to inform the other in ordinary course
whether or not such other actually comes to know of it. A
person "receives" a notice or notification when
(a) it comes to his attention; or
(b) it is duly delivered at the place of business
through which the contract was made or at any other place
held out by him as the place for receipt of such
communications.
(27) Notice, knowledge or a notice or notification
received by an organization is effective for a particular
transaction from the time when it is brought to the attention
of the individual conducting that transaction, and in any
event from the time when it would have been brought to his
attention if the organization had exercised due diligence. An
organization exercises due diligence if it maintains
reasonable routines for communicating significant information
to the person conducting the transaction and there is
reasonable compliance with the routines. Due diligence does
not require an individual acting for the organization to
communicate information unless such communication is part of
his regular duties or unless he has reason to know of the
transaction and that the transaction would be materially
affected by the information.
(28) "Organization" includes a corporation, government
or governmental subdivision or agency, business trust,
estate, trust, partnership or association, two or more
persons having a joint or common interest, or any other legal
or commercial entity.
(29) "Party", as distinct from "third party", means a
person who has engaged in a transaction or made an agreement
within this Act.
(30) "Person" includes an individual or an organization
(see Section 1-102).
(31) "Presumption" or "presumed" means that the trier of
fact must find the existence of the fact presumed unless and
until evidence is introduced which would support a finding of
its non-existence.
(32) "Purchase" includes taking by sale, discount,
negotiation, mortgage, pledge, lien, security interest, issue
or reissue, gift or any other voluntary transaction creating
an interest in property.
(33) "Purchaser" means a person who takes by purchase.
(34) "Remedy" means any remedial right to which an
aggrieved party is entitled with or without resort to a
tribunal.
(35) "Representative" includes an agent, an officer of a
corporation or association, and a trustee, executor or
administrator of an estate, or any other person empowered to
act for another.
(36) "Rights" includes remedies.
(37) "Security interest" means an interest in personal
property or fixtures which secures payment or performance of
an obligation. The retention or reservation of title by a
seller of goods notwithstanding shipment or delivery to the
buyer (Section 2-401) is limited in effect to a reservation
of a "security interest". The term also includes any interest
of a consignor and a buyer of accounts, or chattel paper, a
payment intangible, or a promissory note in a transaction
that which is subject to Article 9. The special property
interest of a buyer of goods on identification of those goods
to a contract for sale under Section 2-401 is not a "security
interest", but a buyer may also acquire a "security
interest", by complying with Article 9. Except as otherwise
provided in Section 2-505, the right of a seller or lessor of
goods under Article 2 or 2A to retain or acquire possession
of the goods is not a "security interest", but a seller or
lessor may also acquire a "security interest" by complying
with Article 9. The retention or reservation of title by a
seller of goods notwithstanding shipment or delivery to the
buyer (Section 2-401) is limited in effect to a reservation
of a "security interest". Unless a consignment is intended as
security, reservation of title thereunder is not a "security
interest" but a consignment is in any event subject to the
provisions on consignment sales (Section 2-326).
Whether a transaction creates a lease or security
interest is determined by the facts of each case; however, a
transaction creates a security interest if the consideration
the lessee is to pay the lessor for the right to possession
and use of the goods is an obligation for the term of the
lease not subject to termination by the lessee; and
(a) the original term of the lease is equal to or
greater than the remaining economic life of the goods;
(b) the lessee is bound to renew the lease for the
remaining economic life of the goods or is bound to
become the owner of the goods;
(c) the lessee has an option to renew the lease for
the remaining economic life of the goods for no
additional consideration or nominal additional
consideration upon compliance with the lease agreement;
or
(d) the lessee has an option to become the owner of
the goods for no additional consideration or nominal
additional consideration upon compliance with the lease
agreement.
A transaction does not create a security interest merely
because it provides that:
(a) the present value of the consideration the
lessee is obligated to pay the lessor for the right to
possession and use of the goods is substantially equal to
or is greater than the fair market value of the goods at
the time the lease is entered into;
(b) the lessee assumes risk of loss of the goods,
or agrees to pay taxes, insurance, filing, recording, or
registration fees, or service or maintenance costs with
respect to the goods;
(c) the lessee has an option to renew the lease or
to become the owner of the goods;
(d) the lessee has an option to renew the lease for
a fixed rent that is equal to or greater than the
reasonably predictable fair market rent for the use of
the goods for the term of the renewal at the time the
option is to be performed; or
(e) the lessee has an option to become the owner of
the goods for a fixed price that is equal to or greater
than the reasonably predictable fair market value of the
goods at the time the option is to be performed.
For purposes of this subsection (37):
(x) Additional consideration is not nominal if (i)
when the option to renew the lease is granted to the
lessee the rent is stated to be the fair market rent for
the use of the goods for the term of the renewal
determined at the time the option is to be performed, or
(ii) when the option to become the owner of the goods is
granted to the lessee the price is stated to be the fair
market value of the goods determined at the time the
option is to be performed. Additional consideration is
nominal if it is less than the lessee's reasonably
predictable cost of performing under the lease agreement
if the option is not exercised;
(y) "Reasonably predictable" and "remaining
economic life of the goods" are to be determined with
reference to the facts and circumstances at the time the
transaction is entered into; and
(z) "Present value" means the amount as of a date
certain of one or more sums payable in the future,
discounted to the date certain. The discount is
determined by the interest rate specified by the parties
if the rate is not manifestly unreasonable at the time
the transaction is entered into; otherwise, the discount
is determined by a commercially reasonable rate that
takes into account the facts and circumstances as of each
case at the time the transaction was entered into.
(38) "Send" in connection with any writing or notice
means to deposit in the mail or deliver for transmission by
any other usual means of communication with postage or cost
of transmission provided for and properly addressed and in
the case of an instrument to an address specified thereon or
otherwise agreed, or if there be none to any address
reasonable under the circumstances. The receipt of any
writing or notice within the time at which it would have
arrived if properly sent has the effect of a proper sending.
(39) "Signed" includes any symbol executed or adopted by
a party with present intention to authenticate a writing.
(40) "Surety" includes guarantor.
(41) "Telegram" includes a message transmitted by radio,
teletype, cable, any mechanical method of transmission, or
the like.
(42) "Term" means that portion of an agreement which
relates to a particular matter.
(43) "Unauthorized" signature means one made without
actual, implied, or apparent authority and includes a
forgery.
(44) "Value". Except as otherwise provided with respect
to negotiable instruments and bank collections (Sections
3-303, 4-210, 4-208 and 4-211 4-209), a person gives "value"
for rights if he acquires them:
(a) in return for a binding commitment to extend
credit or for the extension of immediately available
credit whether or not drawn upon and whether or not a
charge-back is provided for in the event of difficulties
in collection; or
(b) as security for or in total or partial
satisfaction of a pre-existing claim; or
(c) by accepting delivery pursuant to a
pre-existing contract for purchase; or
(d) generally, in return for any consideration
sufficient to support a simple contract.
(45) "Warehouse receipt" means a receipt issued by a
person engaged in the business of storing goods for hire.
(46) "Written" or "writing" includes printing,
typewriting or any other intentional reduction to tangible
form.
(Source: P.A. 87-493; 87-582; 87-895; 87-1135.)
(810 ILCS 5/2-103) (from Ch. 26, par. 2-103)
Sec. 2-103. Definitions and index of definitions.
(1) In this Article unless the context otherwise
requires
(a) "Buyer" means a person who buys or contracts to
buy goods.
(b) "Good faith" in the case of a merchant means
honesty in fact and the observance of reasonable commercial
standards of fair dealing in the trade.
(c) "Receipt" of goods means taking physical
possession of them.
(d) "Seller" means a person who sells or contracts
to sell goods.
(2) Other definitions applying to this Article or to
specified Parts thereof, and the sections in which they
appear are:
"Acceptance". Section 2--606.
"Banker's credit". Section 2--325.
"Between merchants". Section 2--104.
"Cancellation". Section 2--106(4).
"Commercial unit". Section 2--105.
"Confirmed credit". Section 2--325.
"Conforming to contract". Section 2--106.
"Contract for sale". Section 2--106.
"Cover". Section 2--712.
"Entrusting". Section 2--403.
"Financing agency". Section 2--104.
"Future goods". Section 2--105.
"Goods". Section 2--105.
"Identification". Section 2--501.
"Installment contract". Section 2--612.
"Letter of Credit". Section 2--325.
"Lot". Section 2--105.
"Merchant". Section 2--104.
"Overseas". Section 2--323.
"Person in position of seller". Section 2--707.
"Present sale". Section 2--106.
"Sale". Section 2--106.
"Sale on approval". Section 2--326.
"Sale or return". Section 2--326.
"Termination". Section 2--106.
(3) The following definitions in other Articles apply to
this Article:
"Check". Section 3--104.
"Consignee". Section 7--102.
"Consignor". Section 7--102.
"Consumer goods". Section 9-102 9--109.
"Dishonor". Section 3-502 3--507.
"Draft". Section 3--104.
(4) In addition Article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this Article.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/2-210) (from Ch. 26, par. 2-210)
Sec. 2-210. Delegation of performance; assignment of
rights.
(1) A party may perform his duty through a delegate
unless otherwise agreed or unless the other party has a
substantial interest in having his original promisor perform
or control the acts required by the contract. No delegation
of performance relieves the party delegating of any duty to
perform or any liability for breach.
(2) Except as otherwise provided in Section 9-406,
unless otherwise agreed all rights of either seller or buyer
can be assigned except where the assignment would materially
change the duty of the other party, or increase materially
the burden or risk imposed on him by his contract, or impair
materially his chance of obtaining return performance. A
right to damages for breach of the whole contract or a right
arising out of the assignor's due performance of his entire
obligation can be assigned despite agreement otherwise.
(3) The creation, attachment, perfection, or enforcement
of a security interest in the seller's interest under a
contract is not a transfer that materially changes the duty
of or increases materially the burden or risk imposed on the
buyer or impairs materially the buyer's chance of obtaining
return performance with the purview of subsection (2) unless,
and then only to the extent that, enforcement actually
results in a delegation of material performance of the
seller. Even in that event, the creation, attachment,
perfection, and enforcement of the security interest remain
effective, but (i) the seller is liable to the buyer for
damages caused by the delegation to the extent that the
damages could not reasonably be prevented by the buyer, and
(ii) a court having jurisdiction may grant other appropriate
relief, including cancellation of the contract for sale or an
injunction against enforcement of the security interest or
consummation of the enforcement.
(4) (3) Unless the circumstances indicate the contrary a
prohibition of assignment of "the contract" is to be
construed as barring only the delegation to the assignee of
the assignor's performance.
(5) (4) An assignment of "the contract" or of "all my
rights under the contract" or an assignment in similar
general terms is an assignment of rights and unless the
language or the circumstances (as in an assignment for
security) indicate the contrary, it is a delegation of
performance of the duties of the assignor and its acceptance
by the assignee constitutes a promise by him to perform those
duties. This promise is enforceable by either the assignor or
the other party to the original contract.
(6) (5) The other party may treat any assignment which
delegates performance as creating reasonable grounds for
insecurity and may without prejudice to his rights against
the assignor demand assurances from the assignee (Section
2--609).
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/2-326) (from Ch. 26, par. 2-326)
Sec. 2-326. Sale on approval and sale or return;
consignment sales and rights of creditors.
(1) Unless otherwise agreed, if delivered goods may be
returned by the buyer even though they conform to the
contract, the transaction is
(a) a "sale on approval" if the goods are delivered
primarily for use, and
(b) a "sale or return" if the goods are delivered
primarily for resale.
(2) Except as provided in subsection (3), Goods held on
approval are not subject to the claims of the buyer's
creditors until acceptance; goods held on sale or return are
subject to such claims while in the buyer's possession.
(3) Where goods are delivered to a person for sale and
such person maintains a place of business at which he deals
in goods of the kind involved, under a name other than the
name of the person making delivery, then with respect to
claims of creditors of the person conducting the business the
goods are deemed to be on sale or return. The provisions of
this subsection are applicable even though an agreement
purports to reserve title to the person making delivery until
payment or resale or uses such words as "on consignment" or
"on memorandum". However, this subsection is not applicable
if the person making delivery
(a) complies with an applicable law providing for a
consignor's interest or the like to be evidenced by a sign,
or
(b) establishes that the person conducting the
business is generally known by his creditors to be
substantially engaged in selling the goods of others, or
(c) complies with the filing provisions of the
Article on Secured Transactions (Article 9).
(4) Any "or return" term of a contract for sale is to be
treated as a separate contract for sale within the statute of
frauds section of this Article (Section 2--201) and as
contradicting the sale aspect of the contract within the
provisions of this Article on parol or extrinsic evidence
(Section 2--202).
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/2-502) (from Ch. 26, par. 2-502)
Sec. 2-502. Buyer's right to goods on seller's
insolvency.
(1) Subject to subsections subsection (2) and (3) and
even though the goods have not been shipped a buyer who has
paid a part or all of the price of goods in which he has a
special property under the provisions of the immediately
preceding section may on making and keeping good a tender of
any unpaid portion of their price recover them from the
seller if:
(a) in the case of goods bought for personal,
family, or household purposes, the seller repudiates or
fails to deliver as required by the contract; or
(b) in all cases, the seller becomes insolvent
within 10 days after receipt of the first installment on
their price.
(2) The buyer's right to recover the goods under
subsection (1)(a) vests upon acquisition of a special
property, even if the seller had not then repudiated or
failed to deliver.
(3) If the identification creating his special property
has been made by the buyer he acquires the right to recover
the goods only if they conform to the contract for sale.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/2-716) (from Ch. 26, par. 2-716)
Sec. 2-716. Buyer's right to specific performance or
replevin.
(1) Specific performance may be ordered where the goods
are unique or in other proper circumstances.
(2) The judgment for specific performance may include
such terms and conditions as to payment of the price,
damages, or other relief as the court may deem just.
(3) The buyer has a right of replevin for goods
identified to the contract if after reasonable effort he is
unable to effect cover for such goods or the circumstances
reasonably indicate that such effort will be unavailing or if
the goods have been shipped under reservation and
satisfaction of the security interest in them has been made
or tendered. In the case of goods bought for personal,
family, or household purposes, the buyer's right of replevin
vests upon acquisition of a special property, even if the
seller had not then repudiated or failed to deliver.
(Source: P.A. 84-545.)
(810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103)
Sec. 2A-103. Definitions and index of definitions.
(1) In this Article unless the context otherwise
requires:
(a) "Buyer in ordinary course of business" means a
person who, in good faith and without knowledge that the
sale to him or her is in violation of the ownership
rights or security interest or leasehold interest of a
third party in the goods, buys in ordinary course from a
person in the business of selling goods of that kind but
does not include a pawnbroker. "Buying" may be for cash
or by exchange of other property or on secured or
unsecured credit and includes receiving goods or
documents of title under a pre-existing contract for sale
but does not include a transfer in bulk or as security
for or in total or partial satisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an
end to the lease contract for default by the other party.
(c) "Commercial unit" means such a unit of goods as
by commercial usage is a single whole for purposes of
lease and division of which materially impairs its
character or value on the market or in use. A commercial
unit may be a single article, as a machine, or a set of
articles, as a suite of furniture or a line of machinery,
or a quantity, as a gross or carload, or any other unit
treated in use or in the relevant market as a single
whole.
(d) "Conforming" goods or performance under a lease
contract means goods or performance that are in
accordance with the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor
regularly engaged in the business of leasing or selling
makes to a lessee who is an individual and who takes
under the lease primarily for a personal, family, or
household purpose, if the total payments to be made under
the lease contract, excluding payments for options to
renew or buy, do not exceed $40,000.
(f) "Fault" means wrongful act, omission, breach,
or default.
(g) "Finance lease" means a lease with respect to
which:
(i) the lessor does not select, manufacture,
or supply the goods;
(ii) the lessor acquires the goods or the
right to possession and use of the goods in
connection with the lease; and
(iii) one of the following occurs:
(A) the lessee receives a copy of the
contract by which the lessor acquired the goods
or the right to possession and use of the goods
before signing the lease contract;
(B) the lessee's approval of the contract
by which the lessor acquired the goods or the
right to possession and use of the goods is a
condition to effectiveness of the lease
contract;
(C) the lessee, before signing the lease
contract, receives an accurate and complete
statement designating the promises and
warranties, and any disclaimers of warranties,
limitations or modifications of remedies, or
liquidated damages, including those of a third
party, such as the manufacturer of the goods,
provided to the lessor by the person supplying
the goods in connection with or as part of the
contract by which the lessor acquired the goods
or the right to possession and use of the
goods; or
(D) if the lease is not a consumer lease,
the lessor, before the lessee signs the lease
contract, informs the lessee in writing (a) of
the identity of the person supplying the goods
to the lessor, unless the lessee has selected
that person and directed the lessor to acquire
the goods or the right to possession and use of
the goods from that person, (b) that the lessee
is entitled under this Article to the promises
and warranties, including those of any third
party, provided to the lessor by the person
supplying the goods in connection with or as
part of the contract by which the lessor
acquired the goods or the right to possession
and use of the goods, and (c) that the lessee
may communicate with the person supplying the
goods to the lessor and receive an accurate and
complete statement of those promises and
warranties, including any disclaimers and
limitations of them or of remedies.
(h) "Goods" means all things that are movable at
the time of identification to the lease contract, or are
fixtures (Section 2A-309), but the term does not include
money, documents, instruments, accounts, chattel paper,
general intangibles, or minerals or the like, including
oil and gas, before extraction. The term also includes
the unborn young of animals.
(i) "Installment lease contract" means a lease
contract that authorizes or requires the delivery of
goods in separate lots to be separately accepted, even
though the lease contract contains a clause "each
delivery is a separate lease" or its equivalent.
(j) "Lease" means a transfer of the right to
possession and use of goods for a term in return for
consideration, but a sale, including a sale on approval
or a sale or return, or retention or creation of a
security interest is not a lease. Unless the context
clearly indicates otherwise, the term includes a
sublease.
(k) "Lease agreement" means the bargain, with
respect to the lease, of the lessor and the lessee in
fact as found in their language or by implication from
other circumstances including course of dealing or usage
of trade or course of performance as provided in this
Article. Unless the context clearly indicates otherwise,
the term includes a sublease agreement.
(l) "Lease contract" means the total legal
obligation that results from the lease agreement as
affected by this Article and any other applicable rules
of law. Unless the context clearly indicates otherwise,
the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the
lessor or the lessee under a lease contact.
(n) "Lessee" means a person who acquires the right
to possession and use of goods under a lease. Unless the
context clearly indicates otherwise, the term includes a
sublessee.
(o) "Lessee in ordinary course of business" means a
person who in good faith and without knowledge that the
lease to him or her is in violation of the ownership
rights or security interest or leasehold interest of a
third party in the goods leases in ordinary course from a
person in the business of selling or leasing goods of
that kind but does not include a pawnbroker. "Leasing"
may be for cash or by exchange of other property or on
secured or unsecured credit and includes receiving goods
or documents of title under a pre-existing lease contract
but does not include a transfer in bulk or as security
for or in total or partial satisfaction of a money debt.
(p) "Lessor" means a person who transfers the right
to possession and use of goods under a lease. Unless the
context clearly indicates otherwise, the term includes a
sublessor.
(q) "Lessor's residual interest" means the lessor's
interest in the goods after expiration, termination, or
cancellation of the lease contract.
(r) "Lien" means a charge against or interest in
goods to secure payment of a debt or performance of an
obligation, but the term does not include a security
interest.
(s) "Lot" means a parcel or a single article that
is the subject matter of a separate lease or delivery,
whether or not it is sufficient to perform the lease
contract.
(t) "Merchant lessee" means a lessee that is a
merchant with respect to goods of the kind subject to the
lease.
(u) "Present value" means the amount as of a date
certain of one or more sums payable in the future,
discounted to the date certain. The discount is
determined by the interest rate specified by the parties
if the rate was not manifestly unreasonable at the time
the transaction was entered into; otherwise, the discount
is determined by a commercially reasonable rate that
takes into account the facts and circumstances of each
case at the time the transaction was entered into.
(v) "Purchase" includes taking by sale, lease,
mortgage, security interest, pledge, gift, or any other
voluntary transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to
possession and use of which was acquired by the lessor as
a lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor
buys or leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which
a lessor buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant
to a power created by agreement or law puts an end to the
lease contract otherwise than for default.
(2) Other definitions applying to this Article and the
Sections in which they appear are:
"Accessions". Section 2A-310(1).
"Construction mortgage". Section 2A-309(1)(d).
"Encumbrance". Section 2A-309(1)(e).
"Fixtures". Section 2A-309(1)(a).
"Fixture filing". Section 2A-309(1)(b).
"Purchase money lease". Section 2A-309(1)(c).
(3) The following definitions in other Articles apply to
this Article:
"Account". Section 9-102(a)(2) 9-106.
"Between merchants". Section 2-104(3).
"Buyer". Section 2-103(1)(a).
"Chattel paper". Section 9-102(a)(11) 9-105 (1)(b).
"Consumer goods". Section 9-102(a)(23) 9-109(1).
"Document". Section 9-102(a)(30) 9-105 (1)(f).
"Entrusting". Section 2-403(3).
"General intangible intangibles". Section 9-102(a)(42)
9-106.
"Good faith". Section 2-103(1)(b).
"Instrument". Section 9-102(a)(47) 9-105 (1)(i).
"Merchant". Section 2-104(1).
"Mortgage". Section 9-102(a)(55) 9-105 (1)(j).
"Pursuant to commitment". Section 9-102(a)(68) 9-105
(1)(k).
"Receipt". Section 2-103(1)(c).
"Sale". Section 2-106(1).
"Sale on approval". Section 2-326.
"Sale or return". Section 2-326.
"Seller". Section 2-103(1)(d).
(4) In addition, Article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this Article.
(Source: P.A. 87-493.)
(810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303)
Sec. 2A-303. Alienability of party's interest under
lease contract or of lessor's residual interest in goods;
delegation of performance; transfer of rights.
(1) As used in this Section, "creation of a security
interest" includes the sale of a lease contract that is
subject to Article 9, Secured Transactions, by reason of
Section 9-109(a)(3) 9-102(1)(b).
(2) Except as provided in subsection subsections (3) and
Section 9-407 (4), a provision in a lease agreement which (i)
prohibits the voluntary or involuntary transfer, including a
transfer by sale, sublease, creation or enforcement of a
security interest, or attachment, levy, or other judicial
process, of an interest of a party under the lease contract
or of the lessor's residual interest in the goods, or (ii)
makes such a transfer an event of default, gives rise to the
rights and remedies provided in subsection (4) (5), but a
transfer that is prohibited or is an event of default under
the lease agreement is otherwise effective.
(3) A provision in a lease agreement which (i) prohibits
the creation or enforcement of a security interest in an
interest of a party under the lease contract or in the
lessor's residual interest in the goods, or (ii) makes such a
transfer an event of default, is not enforceable unless, and
then only to the extent that, there is an actual transfer by
the lessee of the lessee's right of possession or use of the
goods in violation of the provision or an actual delegation
of a material performance of either party to the lease
contract in violation of the provision. Neither the granting
nor the enforcement of a security interest in (i) the
lessor's interest under the lease contract or (ii) the
lessor's residual interest in the goods is a transfer that
materially impairs the prospect of obtaining return
performance by, materially changes the duty of, or materially
increases the burden or risk imposed on, the lessee within
the purview of subsection (5) unless, and then only to the
extent that, there is an actual delegation of a material
performance of the lessor.
(4) A provision in a lease agreement which (i) prohibits
a transfer of a right to damages for default with respect to
the whole lease contract or of a right to payment arising out
of the transferor's due performance of the transferor's
entire obligation, or (ii) makes such a transfer an event of
default, is not enforceable, and such a transfer is not a
transfer that materially impairs the prospect of obtaining
return performance by, materially changes the duty of, or
materially increases the burden or risk imposed on, the other
party to the lease contract within the purview of subsection
(4) (5).
(4) (5) Subject to subsection subsections (3) and
Section 9-407 (4):
(a) if a transfer is made which is made an event of
default under a lease agreement, the party to the lease
contract not making the transfer, unless that party
waives the default or otherwise agrees, has the rights
and remedies described in Section 2A-501(2);
(b) if paragraph (a) is not applicable and if a
transfer is made that (i) is prohibited under a lease
agreement or (ii) materially impairs the prospect of
obtaining return performance by, materially changes the
duty of, or materially increases the burden of risk
imposed on, the other party to the lease contract, unless
the party not making the transfer agrees at any time to
the transfer in the lease contract or otherwise, then,
except as limited by contract, (i) the transferor is
liable to the party not making the transfer for damages
caused by the transfer to the extent that the damages
could not reasonably be prevented by the party not making
the transfer and (ii) a court having jurisdiction may
grant other appropriate relief, including cancellation of
the lease contract or an injunction against the transfer.
(5) (6) A transfer of "the lease" or of "all my rights
under the lease", or a transfer in similar general terms, is
a transfer of rights and, unless the language or the
circumstances, as in a transfer for security, indicate the
contrary, the transfer is a delegation of duties by the
transferor to the transferee. Acceptance by the transferee
constitutes a promise by the transferee to perform those
duties. The promise is enforceable by either the transferor
or the other party to the lease contract.
(6) (7) Unless otherwise agreed by the lessor and the
lessee, a delegation of performance does not relieve the
transferor as against the other party of any duty to perform
or of any liability for default.
(7) (8) In a consumer lease, to prohibit the transfer of
an interest of a party under the lease contract or to make a
transfer an event of default, the language must be specific,
by a writing, and conspicuous.
(Source: P.A. 87-493.)
(810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307)
Sec. 2A-307. Priority of liens arising by attachment or
levy on, security interests in, and other claims to goods.
(1) Except as otherwise provided in Section 2A-306, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection
subsections (3) and (4) and in Sections 2A-306 and 2A-308, a
creditor of a lessor takes subject to the lease contract
unless: (a) the creditor holds a lien that attached to the
goods before the lease contract became enforceable,
(b) the creditor holds a security interest in the
goods and the lessee did not give value and receive
delivery of the goods without knowledge of the security
interest; or
(c) the creditor holds a security interest in the
goods which was perfected (Section 9-303) before the
lease contract became enforceable.
(3) Except as otherwise provided in Sections 9-317,
9-321, and 9-323, a lessee takes a leasehold interest subject
to a security interest held by a creditor of the lessor. A
lessee in the ordinary course of business takes the leasehold
interest free of a security interest in the goods created by
the lessor even though the security interest is perfected
(Section 9-303) and the lessee knows of its existence.
(4) A lessee other than a lessee in the ordinary course
of business takes the leasehold interest free of a security
interest to the extent that it secures future advances made
after the secured party acquires knowledge of the lease or
more than 45 days after the lease contract becomes
enforceable, whichever first occurs, unless the future
advances are made pursuant to a commitment entered into
without knowledge of the lease and before the expiration of
the 45-day period.
(Source: P.A. 87-493.)
(810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309)
Sec. 2A-309. Lessor's and lessee's rights when goods
become fixtures.
(1) In this Section:
(a) goods are "fixtures" when they become so
related to particular real estate that an interest in
them arises under real estate law;
(b) a "fixture filing" is the filing, in the office
where a mortgage on the real estate would be filed or
recorded, of a financing statement covering goods that
are or are to become fixtures and conforming to the
requirements of Section 9-502(a) and (b) 9-402(5);
(c) a lease is a "purchase money lease" unless the
lessee has possession or use of the goods or the right to
possession or use of the goods before the lease agreement
is enforceable;
(d) a mortgage is a "construction mortgage" to the
extent it secures an obligation incurred for the
construction of an improvement on land including the
acquisition cost of the land, if the recorded writing so
indicates; and
(e) "encumbrance" includes real estate mortgages
and other liens on real estate and all other rights in
real estate that are not ownership interests.
(2) Under this Article a lease may be of goods that are
fixtures or may continue in goods that become fixtures, but
no lease exists under this Article of ordinary building
materials incorporated into an improvement on land.
(3) This Article does not prevent creation of a lease of
fixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has
priority over a conflicting interest of an encumbrancer or
owner of the real estate if:
(a) the lease is a purchase money lease, the
conflicting interest of the encumbrancer or owner arises
before the goods become fixtures, the interest of the
lessor is perfected by a fixture filing before the goods
become fixtures or within 10 days thereafter, and the
lessee has an interest of record in the real estate or is
in possession of the real estate; or
(b) the interest of the lessor is perfected by a
fixture filing before the interest of the encumbrancer or
owner is of record, the lessor's interest has priority
over any conflicting interest of a predecessor in title
of the encumbrancer or owner, and the lessee has an
interest of record in the real estate or is in possession
of the real estate.
(5) The interest of a lessor of fixtures, whether or not
perfected, has priority over the conflicting interest of an
encumbrancer or owner of the real estate if:
(a) the fixtures are readily removable factory or
office machines, readily removable equipment that is not
primarily used or leased for use in the operation of the
real estate, or readily removable replacements of
domestic appliances that are goods subject to a consumer
lease, and before the goods become fixtures the lease
contract is enforceable; or
(b) the conflicting interest is a lien on the real
estate obtained by legal or equitable proceedings after
the lease contract is enforceable; or
(c) the encumbrancer or owner has consented in
writing to the lease or has disclaimed an interest in the
goods as fixtures; or
(d) the lessee has a right to remove the goods as
against the encumbrancer or owner. If the lessee's right
to remove terminates, the priority of the interest of the
lessor continues for a reasonable time.
(6) Notwithstanding subsection (4)(a) but otherwise
subject to subsections (4) and (5), the interest of a lessor
of fixtures, including the lessor's residual interest, is
subordinate to the conflicting interest of an encumbrancer of
the real estate under a construction mortgage recorded before
the goods become fixtures if the goods become fixtures before
the completion of the construction. To the extent given to
refinance a construction mortgage, the conflicting interest
of an encumbrancer of the real estate under a mortgage has
this priority to the same extent as the encumbrancer of the
real estate under the construction mortgage.
(7) In cases not within the preceding subsections,
priority between the interest of a lessor of fixtures,
including the lessor's residual interest, and the conflicting
interest of an encumbrancer or owner of the real estate who
is not the lessee is determined by the priority rules
governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including
the lessor's residual interest, has priority over all
conflicting interests of all owners and encumbrancers of the
real estate, the lessor or the lessee may (i) on default,
expiration, termination, or cancellation of the lease
agreement but subject to the lease agreement and this
Article, or (ii) if necessary to enforce other rights and
remedies of the lessor or lessee under this Article, remove
the goods from the real estate, free and clear of all
conflicting interests of all owners and encumbrancers of the
real estate, but the lessor or lessee must reimburse any
encumbrancer or owner of the real estate who is not the
lessee and who has not otherwise agreed for the cost of
repair of any physical injury, but not for any diminution in
value of the real estate caused by the absence of the goods
removed or by any necessity of replacing them. A person
entitled to reimbursement may refuse permission to remove
until the party seeking removal gives adequate security for
the performance of this obligation.
(9) Even though the lease agreement does not create a
security interest, the interest of a lessor of fixtures,
including the lessor's residual interest, is perfected by
filing a financing statement as a fixture filing for leased
goods that are or are to become fixtures in accordance with
the relevant provisions of the Article on Secured
Transactions (Article 9).
(Source: P.A. 87-493.)
(810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
Sec. 4-210. Security interest of collecting bank in
items, accompanying documents and proceeds.
(a) A collecting bank has a security interest in an item
and any accompanying documents or the proceeds of either:
(1) in case of an item deposited in an account, to
the extent to which credit given for the item has been
withdrawn or applied;
(2) in case of an item for which it has given
credit available for withdrawal as of right, to the
extent of the credit given, whether or not the credit is
drawn upon or there is a right of charge-back; or
(3) if it makes an advance on or against the item.
(b) If credit given for several items received at one
time or pursuant to a single agreement is withdrawn or
applied in part, the security interest remains upon all the
items, any accompanying documents or the proceeds of either.
For the purpose of this Section, credits first given are
first withdrawn.
(c) Receipt by a collecting bank of a final settlement
for an item is a realization on its security interest in the
item, accompanying documents, and proceeds. So long as the
bank does not receive final settlement for the item or give
up possession of the item or accompanying documents for
purposes other than collection, the security interest
continues to that extent and is subject to Article 9, but:
(1) no security agreement is necessary to make the
security interest enforceable Section 9-203(b)(3)(A)
9-203 (1)(a);
(2) no filing is required to perfect the security
interest; and
(3) the security interest has priority over
conflicting perfected security interests in the item,
accompanying documents, or proceeds.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/5-118 new)
Sec. 5-118. Security interest of issuer or nominated
person.
(a) An issuer or nominated person has a security
interest in a document presented under a letter of credit to
the extent that the issuer or nominated person honors or
gives value for the presentation.
(b) So long as and to the extent that an issuer or
nominated person has not been reimbursed or has not otherwise
recovered the value given with respect to a security interest
in a document under subsection (a), the security interest
continues and is subject to Article 9, but:
(1) a security agreement is not necessary to make
the security interest enforceable under Section
9-203(b)(3);
(2) if the document is presented in a medium other
than a written or other tangible medium, the security
interest is perfected; and
(3) if the document is presented in a written or
other tangible medium and is not a certificated security,
chattel paper, a document of title, an instrument, or a
letter of credit, the security interest is perfected and
has priority over a conflicting security interest in the
document so long as the debtor does not have possession
of the document.
(810 ILCS 5/7-503) (from Ch. 26, par. 7-503)
Sec. 7-503. Document of title to goods defeated in
certain cases.
(1) A document of title confers no right in goods
against a person who before issuance of the document had a
legal interest or a perfected security interest in them and
who neither
(a) delivered or entrusted them or any document of
title covering them to the bailor or his nominee with actual
or apparent authority to ship, store, or sell with power to
obtain delivery under this Article (Section 7--403) or with
power of disposition under this Act (Sections 2--403 and
9-320 9--307) or other statute or rule of law; nor
(b) acquiesced in the procurement by the bailor or
his nominee of any document of title.
(2) Title to goods based upon an unaccepted delivery
order is subject to the rights of anyone to whom a negotiable
warehouse receipt or bill of lading covering the goods has
been duly negotiated. Such a title may be defeated under the
next section to the same extent as the right of the issuer or
a transferee from the issuer.
(3) Title to goods based upon a bill of lading issued to
a freight forwarder is subject to the rights of anyone to
whom a bill issued by the freight forwarder is duly
negotiated; but delivery by the carrier in accordance with
Part 4 of this Article pursuant to its own bill of lading
discharges the carrier's obligation to deliver.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/8-103) (from Ch. 26, par. 8-103)
Sec. 8-103. Rules for determining whether certain
obligations and interests are securities or financial assets.
(a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an
investment company under the federal investment company laws,
an interest in a unit investment trust that is so registered,
or a face-amount certificate issued by a face-amount
certificate company that is so registered. Investment
company security does not include an insurance policy or
endowment policy or annuity contract issued by an insurance
company.
(c) An interest in a partnership or limited liability
company is not a security unless it is dealt in or traded on
securities exchanges or in securities markets, its terms
expressly provide that it is a security governed by this
Article, or it is an investment company security. However,
an interest in a partnership or limited liability company is
a financial asset if it is held in a securities account.
(d) A writing that is a security certificate is governed
by this Article and not by Article 3, even though it also
meets the requirements of that Article. However, a
negotiable instrument governed by Article 3 is a financial
asset if it is held in a securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a
financial asset.
(f) A commodity contract, as defined in Section
9-102(a)(15) 9-115, is not a security or a financial asset.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/8-106) (from Ch. 26, par. 8-106)
Sec. 8-106. Control.
(a) A purchaser has "control" of a certificated security
in bearer form if the certificated security is delivered to
the purchaser.
(b) A purchaser has "control" of a certificated security
in registered form if the certificated security is delivered
to the purchaser, and:
(1) the certificate is indorsed to the purchaser or
in blank by an effective indorsement; or
(2) the certificate is registered in the name of
the purchaser, upon original issue or registration of
transfer by the issuer.
(c) A purchaser has "control" of an uncertificated
security if:
(1) the uncertificated security is delivered to the
purchaser; or
(2) the issuer has agreed that it will comply with
instructions originated by the purchaser without further
consent by the registered owner; or
(3) another person has control of the security
entitlement on behalf of the purchaser or, having
previously acquired control of the security entitlement,
acknowledges that it has control on behalf of the
purchaser.
(d) A purchaser has "control" of a security entitlement
if:
(1) the purchaser becomes the entitlement holder;
or
(2) the securities intermediary has agreed that it
will comply with entitlement orders originated by the
purchaser without further consent by the entitlement
holder.
(e) If an interest in a security entitlement is granted
by the entitlement holder to the entitlement holder's own
securities intermediary, the securities intermediary has
control.
(f) A purchaser who has satisfied the requirements of
subsection (c)(2) or (d)(2) has control even if the
registered owner in the case of subsection (c)(2) or the
entitlement holder in the case of subsection (d)(2) retains
the right to make substitutions for the uncertificated
security or security entitlement, to originate instructions
or entitlement orders to the issuer or securities
intermediary, or otherwise to deal with the uncertificated
security or security entitlement.
(g) An issuer or a securities intermediary may not enter
into an agreement of the kind described in subsection (c)(2)
or (d)(2) without the consent of the registered owner or
entitlement holder, but an issuer or a securities
intermediary is not required to enter into such an agreement
even though the registered owner or entitlement holder so
directs. An issuer or securities intermediary that has
entered into such an agreement is not required to confirm the
existence of the agreement to another party unless requested
to do so by the registered owner or entitlement holder.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/8-110)
Sec. 8-110. Applicability; choice of law.
(a) The local law of the issuer's jurisdiction, as
specified in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with
respect to registration of transfer;
(3) the effectiveness of registration of transfer
by the issuer;
(4) whether the issuer owes any duties to an
adverse claimant to a security; and
(5) whether an adverse claim can be asserted
against a person to whom transfer of a certificated or
uncertificated security is registered or a person who
obtains control of an uncertificated security.
(b) The local law of the securities intermediary's
jurisdiction, as specified in subsection (e), governs:
(1) acquisition of a security entitlement from the
securities intermediary;
(2) the rights and duties of the securities
intermediary and entitlement holder arising out of a
security entitlement;
(3) whether the securities intermediary owes any
duties to an adverse claimant to a security entitlement;
and
(4) whether an adverse claim can be asserted
against a person who acquires a security entitlement from
the securities intermediary or a person who purchases a
security entitlement or interest therein from an
entitlement holder.
(c) The local law of the jurisdiction in which a
security certificate is located at the time of delivery
governs whether an adverse claim can be asserted against a
person to whom the security certificate is delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under
which the issuer of the security is organized or, if
permitted by the law of that jurisdiction, the law of another
jurisdiction specified by the issuer. An issuer organized
under the law of this State may specify the law of another
jurisdiction as the law governing the matters specified in
subsection (a)(2) through (5).
(e) The following rules determine a "securities
intermediary's jurisdiction" for purposes of this Section:
(1) If an agreement between the securities
intermediary and its entitlement holder governing the
securities account expressly provides that a particular
jurisdiction is the securities intermediary's
jurisdiction for purposes of this Part, this Article, or
this Act specifies that it is governed by the law of a
particular jurisdiction, that jurisdiction is the
securities intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an
agreement between the securities intermediary and its
entitlement holder governing the securities account
expressly provides that the agreement is governed by the
law of a particular jurisdiction, that jurisdiction is
the securities intermediary's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2)
applies and an agreement between the securities
intermediary and its entitlement holder governing the
securities account does not specify the governing law as
provided in paragraph (1), but expressly provides
specifies that the securities account is maintained at an
office in a particular jurisdiction, that jurisdiction is
the securities intermediary's jurisdiction.
(4) (3) If none of the preceding paragraphs applies
an agreement between the securities intermediary and its
entitlement holder does not specify a jurisdiction as
provided in paragraph (1) or (2), the securities
intermediary's jurisdiction is the jurisdiction in which
is located the office identified in an account statement
as the office serving the entitlement holder's account is
located.
(5) (4) If none of the preceding paragraphs
applies, an agreement between the securities intermediary
and its entitlement holder does not specify a
jurisdiction as provided in paragraph (1) or (2) and an
account statement does not identify an office serving the
entitlement holder's account as provided in paragraph
(3), the securities intermediary's jurisdiction is the
jurisdiction in which is located the chief executive
office of the securities intermediary is located.
(f) A securities intermediary's jurisdiction is not
determined by the physical location of certificates
representing financial assets, or by the jurisdiction in
which is organized the issuer of the financial asset with
respect to which an entitlement holder has a security
entitlement, or by the location of facilities for data
processing or other record keeping concerning the account.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/8-301) (from Ch. 26, par. 8-301)
Sec. 8-301. Delivery.
(a) Delivery of a certificated security to a purchaser
occurs when:
(1) the purchaser acquires possession of the
security certificate;
(2) another person, other than a securities
intermediary, either acquires possession of the security
certificate on behalf of the purchaser or, having
previously acquired possession of the certificate,
acknowledges that it holds for the purchaser; or
(3) a securities intermediary acting on behalf of
the purchaser acquires possession of the security
certificate, only if the certificate is in registered
form and is (i) registered in the name of the purchaser,
(ii) payable to the order of the purchaser, or (iii) has
been specially indorsed to the purchaser by an effective
indorsement and has not been indorsed to the securities
intermediary or in blank.
(b) Delivery of an uncertificated security to a
purchaser occurs when:
(1) the issuer registers the purchaser as the
registered owner, upon original issue or registration of
transfer; or
(2) another person, other than a securities
intermediary, either becomes the registered owner of the
uncertificated security on behalf of the purchaser or,
having previously become the registered owner,
acknowledges that it holds for the purchaser.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/8-302) (from Ch. 26, par. 8-302)
Sec. 8-302. Rights of purchaser.
(a) Except as otherwise provided in subsections (b) and
(c), upon delivery of a certificated or uncertificated
security to a purchaser, the purchaser acquires all rights in
the security that the transferor had or had power to
transfer.
(b) A purchaser of a limited interest acquires rights
only to the extent of the interest purchased.
(c) A purchaser of a certificated security who as a
previous holder had notice of an adverse claim does not
improve its position by taking from a protected purchaser.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/8-510)
Sec. 8-510. Rights of purchaser of security entitlement
from entitlement holder.
(a) In a case not covered by the priority rules in
Article 9 or the rules stated in subsection (c), an action
based on an adverse claim to a financial asset or security
entitlement, whether framed in conversion, replevin,
constructive trust, equitable lien, or other theory, may not
be asserted against a person who purchases a security
entitlement, or an interest therein, from an entitlement
holder if the purchaser gives value, does not have notice of
the adverse claim, and obtains control.
(b) If an adverse claim could not have been asserted
against an entitlement holder under Section 8-502, the
adverse claim cannot be asserted against a person who
purchases a security entitlement, or an interest therein,
from the entitlement holder.
(c) In a case not covered by the priority rules in
Article 9, a purchaser for value of a security entitlement,
or an interest therein, who obtains control has priority over
a purchaser of a security entitlement, or an interest
therein, who does not obtain control. Except as otherwise
provided in subsection (d), purchasers who have control rank
according to priority in time of:
(1) the purchaser's becoming the person for whom
the securities account, in which the security entitlement
is carried, is maintained, if the purchaser obtained
control under Section 8-106(d)(1);
(2) the securities intermediary's agreement to
comply with the purchaser's entitlement orders with
respect to security entitlements carried or to be
carried in the securities account in which the security
entitlement is carried, if the purchaser obtained control
under Section 8-106(d)(2); or
(3) if the purchaser obtained control through
another person under Section 8-106(d)(3), the time on
which priority would be based under this subsection if
the other person were the secured party.
(d) A equally, except that a securities intermediary as
purchaser has priority over a conflicting purchaser who has
control unless otherwise agreed by the securities
intermediary.
(Source: P.A. 89-364, eff. 1-1-96.)
Section 15. The Local Records Act is amended by changing
Section 14 as follows:
(50 ILCS 205/14) (from Ch. 116, par. 43.114)
Sec. 14. Part 5 4 of Article 9 of the "Uniform Commercial
Code", approved July 31, 1961, as amended, is subject to the
provisions of this Act, as now or hereafter amended.
(Source: P.A. 76-1708.)
Section 20. The Counties Code is amended by changing
Section 3-5018 as follows:
(55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018)
Sec. 3-5018. Fees. The recorder elected as provided for
in this Division shall receive such fees as are or may be
provided for him by law, in case of provision therefor:
otherwise he shall receive the same fees as are or may be
provided in this Section, except when increased by county
ordinance pursuant to the provisions of this Section, to be
paid to the county clerk for his services in the office of
recorder for like services. No filing fee shall be charged
for providing informational copies of financing statements to
the recorder pursuant to subsection (8) of Section 9-403 of
the Uniform Commercial Code.
For recording deeds or other instruments $12 for the
first 4 pages thereof, plus $1 for each additional page
thereof, plus $1 for each additional document number therein
noted. The aggregate minimum fee for recording any one
instrument shall not be less than $12.
For recording deeds or other instruments wherein the
premises affected thereby are referred to by document number
and not by legal description a fee of $1 in addition to that
hereinabove referred to for each document number therein
noted.
For recording assignments of mortgages, leases or liens
$12 for the first 4 pages thereof, plus $1 for each
additional page thereof. However, except for leases and
liens pertaining to oil, gas and other minerals, whenever a
mortgage, lease or lien assignment assigns more than one
mortgage, lease or lien document, a $7 fee shall be charged
for the recording of each such mortgage, lease or lien
document after the first one.
For recording maps or plats of additions or subdivisions
approved by the county or municipality (including the
spreading of the same of record in map case or other proper
books) or plats of condominiums $50 for the first page, plus
$1 for each additional page thereof except that in the case
of recording a single page, legal size 8 1/2 x 14, plat of
survey in which there are no more than two lots or parcels of
land, the fee shall be $12. In each county where such maps
or plats are to be recorded, the recorder may require the
same to be accompanied by such number of exact, true and
legible copies thereof as the recorder deems necessary for
the efficient conduct and operation of his office.
For certified copies of records the same fees as for
recording, but in no case shall the fee for a certified copy
of a map or plat of an addition, subdivision or otherwise
exceed $10.
Each certificate of such recorder of the recording of the
deed or other writing and of the date of recording the same
signed by such recorder, shall be sufficient evidence of the
recording thereof, and such certificate including the
indexing of record, shall be furnished upon the payment of
the fee for recording the instrument, and no additional fee
shall be allowed for the certificate or indexing.
The recorder shall charge an additional fee, in an amount
equal to the fee otherwise provided by law, for recording a
document (other than a document filed under the Plat Act or
the Uniform Commercial Code) that does not conform to the
following standards:
(1) The document shall consist of one or more
individual sheets measuring 8.5 inches by 11 inches, not
permanently bound and not a continuous form. Graphic
displays accompanying a document to be recorded that
measure up to 11 inches by 17 inches shall be recorded
without charging an additional fee.
(2) The document shall be legibly printed in black
ink, by hand, type, or computer. Signatures and dates
may be in contrasting colors if they will reproduce
clearly.
(3) The document shall be on white paper of not
less than 20-pound weight and shall have a clean margin
of at least one-half inch on the top, the bottom, and
each side. Margins may be used for non-essential
notations that will not affect the validity of the
document, including but not limited to form numbers, page
numbers, and customer notations.
(4) The first page of the document shall contain a
blank space, measuring at least 3 inches by 5 inches,
from the upper right corner.
(5) The document shall not have any attachment
stapled or otherwise affixed to any page.
A document that does not conform to these standards shall not
be recorded except upon payment of the additional fee
required under this paragraph. This paragraph, as amended by
this amendatory Act of 1995, applies only to documents dated
after the effective date of this amendatory Act of 1995.
The county board of any county may provide for an
additional charge of $3 for filing every instrument, paper,
or notice for record, in order to defray the cost of
converting the county recorder's document storage system to
computers or micrographics.
A special fund shall be set up by the treasurer of the
county and such funds collected pursuant to Public Act
83-1321 shall be used solely for a document storage system to
provide the equipment, materials and necessary expenses
incurred to help defray the costs of implementing and
maintaining such a document records system.
The foregoing fees allowed by this Section are the
maximum fees that may be collected from any officer, agency,
department or other instrumentality of the State. The county
board may, however, by ordinance, increase the fees allowed
by this Section and collect such increased fees from all
persons and entities other than officers, agencies,
departments and other instrumentalities of the State if the
increase is justified by an acceptable cost study showing
that the fees allowed by this Section are not sufficient to
cover the cost of providing the service.
A statement of the costs of providing each service,
program and activity shall be prepared by the county board.
All supporting documents shall be public record and subject
to public examination and audit. All direct and indirect
costs, as defined in the United States Office of Management
and Budget Circular A-87, may be included in the
determination of the costs of each service, program and
activity.
(Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.)
Section 25. The Public Utilities Act is amended by
changing Section 18-107 as follows:
(220 ILCS 5/18-107)
Sec. 18-107. Security interests in intangible transition
property and grantee instruments.
(a) Notwithstanding any other provision of law, neither
intangible transition property, grantee instruments nor any
right, title or interest therein, shall constitute property
in which a security interest may be created under the Uniform
Commercial Code nor shall any such rights be deemed proceeds
of any property which is not intangible transition property
or grantee instruments, as the case may be. For purposes of
the foregoing, the terms "account", and "general intangible",
(as defined under Section 9-106 of the Uniform Commercial
Code) and the term "instrument", and "payment intangible" (as
defined under Section 9-102 9-105 of the Uniform Commercial
Code) shall, as used in the Uniform Commercial Code, be
deemed to exclude any such intangible transition property,
grantee instruments or any right, title, or interest therein.
(b) The granting, perfection and enforcement of security
interests in intangible transition property or grantee
instruments are governed by this Section rather than by
Article 9 of the Uniform Commercial Code.
(c) A valid and enforceable security interest in
intangible transition property and in grantee instruments
shall attach and be perfected only by the means set forth
below in this subsection (c) of Section 18-107:
(1) To the extent transitional funding instruments
or grantee instruments are purported to be secured by
intangible transition property or to the extent
transitional funding instruments are purported to be
secured by grantee instruments, as the case may be, as
specified in the applicable transitional funding order,
the lien of the transitional funding instruments and
grantee instruments, if any, shall attach automatically
to such intangible transition property and grantee
instruments, if any, from the time of issuance of the
transitional funding instruments and grantee instruments,
if any. Such lien shall be a valid and enforceable
security interest in the intangible transition property
or the grantee instruments, as the case may be, securing
the transitional funding instruments and grantee
instruments, if any, and shall be continuously perfected
if, before the date of issuance of the applicable
transitional funding instruments or grantee instruments,
if any, or within no more than 10 days thereafter, a
filing has been made by or on behalf of the holder with
the Chief Clerk of the Commission stating that such
transitional funding instruments or grantee instruments,
if any, have been issued. Any such filing made with the
Commission in respect to such transitional funding
instruments or grantee instruments shall take precedence
over any subsequent filing except as may otherwise be
provided in the applicable transitional funding order.
(2) The liens under subparagraph (1) are
enforceable against the electric utility, any assignee,
grantee or issuer, and all third parties, including
judicial lien creditors, subject only to the rights of
any third parties holding security interests in the
intangible transition property or grantee instruments
previously perfected in the manner described in this
subsection if value has been given by the purchasers of
transitional funding instruments or grantee instruments.
A perfected lien in intangible transition property and
grantee instruments, if any, is a continuously perfected
security interest in all then existing or thereafter
arising revenues and proceeds arising with respect to the
associated intangible transition property or grantee
instruments, as the case may be, whether or not the
electric power and energy included in the calculation of
such revenues and proceeds have been provided. The lien
created under this subsection is perfected and ranks
prior to any other lien, including any judicial lien,
which subsequently attaches to the intangible transition
property or grantee instruments, as the case may be, and
to any other rights created by the transitional funding
order or any revenues or proceeds of the foregoing. The
relative priority of a lien created under this subsection
is not defeated or adversely affected by changes to the
transitional funding order or to the instrument funding
charges payable by any retail customer, class of retail
customers or other person or group of persons obligated
to pay such charges.
(3) The relative priority of a lien created under
this subsection is not defeated or adversely affected by
the commingling of revenues arising with respect to
intangible transition property or grantee instruments
with funds of the electric utility or other funds of the
assignee, issuer or grantee.
(4) If an event of default occurs under
transitional funding instruments or grantee instruments,
the holders thereof or their authorized representatives,
as secured parties, may foreclose or otherwise enforce
the lien in the grantee instruments or in the intangible
transition property securing the transitional funding
instruments or grantee instruments, as applicable,
subject to the rights of any third parties holding prior
security interests in the intangible transition property
or grantee instruments previously perfected in the manner
provided in this subsection. Upon application by the
holders or their authorized representatives, without
limiting their other remedies, the Commission shall order
the sequestration and payment to the holders or their
authorized representatives of revenues arising with
respect to the intangible transition property or grantee
instruments pledged to the holders. An order under this
subsection shall remain in full force and effect
notwithstanding any bankruptcy, reorganization, or other
insolvency proceedings with respect to the electric
utility, grantee, assignee or issuer.
(5) The Commission shall maintain segregated
records which reflect the date and time of receipt of all
filings made under this subsection. The Commission may
provide that transfers of intangible transition property
or of grantee instruments be filed in accordance with the
same system.
(Source: P.A. 90-561, eff. 12-16-97.)
Section 30. The Illinois Vehicle Code is amended by
changing Section 3-114 as follows:
(625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114)
Sec. 3-114. Transfer by operation of law.
(a) If the interest of an owner in a vehicle passes to
another other than by voluntary transfer, the transferee
shall, except as provided in paragraph (b), promptly mail or
deliver within 20 days to the Secretary of State the last
certificate of title, if available, proof of the transfer,
and his application for a new certificate in the form the
Secretary of State prescribes. It shall be unlawful for any
person having possession of a certificate of title for a
motor vehicle, semi-trailer, or house car by reason of his
having a lien or encumbrance on such vehicle, to fail or
refuse to deliver such certificate to the owner, upon the
satisfaction or discharge of the lien or encumbrance,
indicated upon such certificate of title.
(b) If the interest of an owner in a vehicle passes to
another under the provisions of the Small Estates provisions
of the Probate Act of 1975 the transferee shall promptly mail
or deliver to the Secretary of State, within 120 days, the
last certificate of title, if available, the documentation
required under the provisions of the Probate Act of 1975, and
an application for certificate of title. The Small Estate
Affidavit form shall be furnished by the Secretary of State.
The transfer may be to the transferee or to the nominee of
the transferee.
(c) If the interest of an owner in a vehicle passes to
another under other provisions of the Probate Act of 1975, as
amended, and the transfer is made by a representative or
guardian, such transferee shall promptly mail or deliver to
the Secretary of State, the last certificate of title, if
available, and a certified copy of the letters of office or
guardianship, and an application for certificate of title.
Such application shall be made before the estate is closed.
The transfer may be to the transferee or to the nominee of
the transferee.
(d) If the interest of an owner in joint tenancy passes
to the other joint tenant with survivorship rights as
provided by law, the transferee shall promptly mail or
deliver to the Secretary of State, the last certificate of
title, if available, proof of death of the one joint tenant
and survivorship of the surviving joint tenant, and an
application for certificate of title. Such application shall
be made within 120 days after the death of the joint tenant.
The transfer may be to the transferee or to the nominee of
the transferee.
(e) The Secretary of State shall transfer a decedent's
vehicle title to any legatee, representative or heir of the
decedent who submits to the Secretary a death certificate and
an affidavit by an attorney at law on the letterhead
stationery of the attorney at law stating the facts of the
transfer.
(f) Repossession with assignment of title. In all cases
wherein a lienholder has repossessed a vehicle by other than
judicial process and holds it for resale under a security
agreement, and the owner of record has executed an assignment
of the existing certificate of title after default, the
lienholder may proceed to sell or otherwise dispose of the
vehicle as authorized under the Uniform Commercial Code.
Upon selling the vehicle to another person, the lienholder
need not send the certificate of title to the Secretary of
State, but shall promptly and within 20 days mail or deliver
to the purchaser as transferee the existing certificate of
title for the repossessed vehicle, reflecting the release of
the lienholder's security interest in the vehicle. The
application for a certificate of title made by the purchaser
shall comply with subsection (a) of Section 3-104 and be
accompanied by the existing certificate of title for the
repossessed vehicle. The lienholder shall execute the
assignment and warranty of title showing the name and address
of the purchaser in the spaces provided therefor on the
certificate of title or as the Secretary of State prescribes.
The lienholder shall complete the assignment of title in the
certificate of title to reflect the transfer of the vehicle
to the lienholder and also a reassignment to reflect the
transfer from the lienholder to the purchaser. For this
purpose, the lienholder is specifically authorized to
complete and execute the space reserved in the certificate of
title for a dealer reassignment, notwithstanding that the
lienholder is not a licensed dealer. Nothing herein shall be
construed to mean that the lienholder is taking title to the
repossessed vehicle for purposes of liability for retailer
occupation, vehicle use, or other tax with respect to the
proceeds from the repossession sale. Delivery of the
existing certificate of title to the purchaser shall be
deemed disclosure to the purchaser of the owner of the
vehicle.
(f-5) Repossession without assignment of title. In all
cases wherein a lienholder has repossessed a vehicle by other
than judicial process and holds it for resale under a
security agreement, and the owner of record has not executed
an assignment of the existing certificate of title, the
lienholder shall comply with the following provisions:
(1) Prior to sale, the lienholder shall deliver or
mail to the owner at the owner's last known address and
to any other lienholder of record, a notice of redemption
setting forth the following information: (i) the name of
the owner of record and in bold type at or near the top
of the notice a statement that the owner's vehicle was
repossessed on a specified date for failure to make
payments on the loan (or other reason), (ii) a
description of the vehicle subject to the lien sufficient
to identify it, (iii) the right of the owner to redeem
the vehicle, (iv) the lienholder's intent to sell or
otherwise dispose of the vehicle after the expiration of
21 days from the date of mailing or delivery of the
notice, and (v) the name, address, and telephone number
of the lienholder from whom information may be obtained
concerning the amount due to redeem the vehicle and from
whom the vehicle may be redeemed under Section 9-623
9-506 of the Uniform Commercial Code. At the
lienholder's option, the information required to be set
forth in this notice of redemption may be made a part of
or accompany the notification of sale or other
disposition required under subsection (3) of Section
9-611 9-504 of the Uniform Commercial Code, but none of
the information required by this notice shall be
construed to impose any requirement under Article 9 of
the Uniform Commercial Code.
(2) With respect to the repossession of a vehicle
used primarily for personal, family, or household
purposes, the lienholder shall also deliver or mail to
the owner at the owner's last known address an affidavit
of defense. The affidavit of defense shall accompany the
notice of redemption required in subdivision (f-5)(1) of
this Section. The affidavit of defense shall (i) identify
the lienholder, owner, and the vehicle; (ii) provide
space for the owner to state the defense claimed by the
owner; and (iii) include an acknowledgment by the owner
that the owner may be liable to the lienholder for fees,
charges, and costs incurred by the lienholder in
establishing the insufficiency or invalidity of the
owner's defense. To stop the transfer of title, the
affidavit of defense must be received by the lienholder
no later than 21 days after the date of mailing or
delivery of the notice required in subdivision (f-5)(1)
of this Section. If the lienholder receives the affidavit
from the owner in a timely manner, the lienholder must
apply to a court of competent jurisdiction to determine
if the lienholder is entitled to possession of the
vehicle.
(3) Upon selling the vehicle to another person, the
lienholder need not send the certificate of title to the
Secretary of State, but shall promptly and within 20 days
mail or deliver to the purchaser as transferee (i) the
existing certificate of title for the repossessed
vehicle, reflecting the release of the lienholder's
security interest in the vehicle; and (ii) an affidavit
of repossession made by or on behalf of the lienholder
which provides the following information: that the
vehicle was repossessed, a description of the vehicle
sufficient to identify it, whether the vehicle has been
damaged in excess of 33 1/3% of its fair market value as
required under subdivision (b)(3) of Section 3-117.1,
that the owner and any other lienholder of record were
given the notice required in subdivision (f-5)(1) of this
Section, that the owner of record was given the affidavit
of defense required in subdivision (f-5)(2) of this
Section, that the interest of the owner was lawfully
terminated or sold pursuant to the terms of the security
agreement, and the purchaser's name and address. If the
vehicle is damaged in excess of 33 1/3% of its fair
market value, the lienholder shall make application for a
salvage certificate under Section 3-117.1 and transfer
the vehicle to a person eligible to receive assignments
of salvage certificates identified in Section 3-118.
(4) The application for a certificate of title made
by the purchaser shall comply with subsection (a) of
Section 3-104 and be accompanied by the affidavit of
repossession furnished by the lienholder and the existing
certificate of title for the repossessed vehicle. The
lienholder shall execute the assignment and warranty of
title showing the name and address of the purchaser in
the spaces provided therefor on the certificate of title
or as the Secretary of State prescribes. The lienholder
shall complete the assignment of title in the certificate
of title to reflect the transfer of the vehicle to the
lienholder and also a reassignment to reflect the
transfer from the lienholder to the purchaser. For this
purpose, the lienholder is specifically authorized to
execute the assignment on behalf of the owner as seller
if the owner has not done so and to complete and execute
the space reserved in the certificate of title for a
dealer reassignment, notwithstanding that the lienholder
is not a licensed dealer. Nothing herein shall be
construed to mean that the lienholder is taking title to
the repossessed vehicle for purposes of liability for
retailer occupation, vehicle use, or other tax with
respect to the proceeds from the repossession sale.
Delivery of the existing certificate of title to the
purchaser shall be deemed disclosure to the purchaser of
the owner of the vehicle. In the event the lienholder
does not hold the certificate of title for the
repossessed vehicle, the lienholder shall make
application for and may obtain a new certificate of title
in the name of the lienholder upon furnishing information
satisfactory to the Secretary of State. Upon receiving
the new certificate of title, the lienholder may proceed
with the sale described in subdivision (f-5)(3), except
that upon selling the vehicle the lienholder shall
promptly and within 20 days mail or deliver to the
purchaser the new certificate of title reflecting the
assignment and transfer of title to the purchaser.
(5) Neither the lienholder nor the owner shall file
with the Office of the Secretary of State the notice of
redemption or affidavit of defense described in
subdivisions (f-5)(1) and (f-5)(2) of this Section. The
Office of the Secretary of State shall not determine the
merits of an owner's affidavit of defense, nor consider
any allegations or assertions regarding the validity or
invalidity of a lienholder's claim to the vehicle or an
owner's asserted defenses to the repossession action.
(f-7) Notice of reinstatement in certain cases.
(1) If, at the time of repossession by a lienholder
that is seeking to transfer title pursuant to subsection
(f-5), the owner has paid an amount equal to 30% or more
of the deferred payment price or total of payments due,
the owner may, within 21 days of the date of
repossession, reinstate the contract or loan agreement
and recover the vehicle from the lienholder by tendering
in a lump sum (i) the total of all unpaid amounts,
including any unpaid delinquency or deferral charges due
at the date of reinstatement, without acceleration; and
(ii) performance necessary to cure any default other than
nonpayment of the amounts due; and (iii) all reasonable
costs and fees incurred by the lienholder in retaking,
holding, and preparing the vehicle for disposition and in
arranging for the sale of the vehicle. Reasonable costs
and fees incurred by the lienholder include without
limitation repossession and storage expenses and, if
authorized by the contract or loan agreement, reasonable
attorneys' fees and collection agency charges.
(2) Tender of payment and performance pursuant to
this limited right of reinstatement restores to the owner
his rights under the contract or loan agreement as though
no default had occurred. The owner has the right to
reinstate the contract or loan agreement and recover the
vehicle from the lienholder only once under this
subsection. The lienholder may, in the lienholder's sole
discretion, extend the period during which the owner may
reinstate the contract or loan agreement and recover the
vehicle beyond the 21 days allowed under this subsection,
and the extension shall not subject the lienholder to
liability to the owner under the laws of this State.
(3) The lienholder shall deliver or mail written
notice to the owner at the owner's last known address,
within 3 business days of the date of repossession, of
the owner's right to reinstate the contract or loan
agreement and recover the vehicle pursuant to the limited
right of reinstatement described in this subsection. At
the lienholder's option, the information required to be
set forth in this notice of reinstatement may be made
part of or accompany the notice of redemption required in
subdivision (f-5)(1) of this Section and the notification
of sale or other disposition required under subsection
(3) of Section 9-611 9-504 of the Uniform Commercial
Code, but none of the information required by this notice
of reinstatement shall be construed to impose any
requirement under Article 9 of the Uniform Commercial
Code.
(4) The reinstatement period, if applicable, and
the redemption period described in subdivision (f-5)(1)
of this Section, shall run concurrently if the
information required to be set forth in the notice of
reinstatement is part of or accompanies the notice of
redemption. In any event, the 21 day redemption period
described in subdivision (f-5)(1) of this Section shall
commence on the date of mailing or delivery to the owner
of the information required to be set forth in the notice
of redemption, and the 21 day reinstatement period
described in this subdivision, if applicable, shall
commence on the date of mailing or delivery to the owner
of the information required to be set forth in the notice
of reinstatement.
(5) The Office of the Secretary of State shall not
determine the merits of an owner's claim of right to
reinstatement, nor consider any allegations or assertions
regarding the validity or invalidity of a lienholder's
claim to the vehicle or an owner's asserted right to
reinstatement. Where a lienholder is subject to
licensing and regulatory supervision by the State of
Illinois, the lienholder shall be subject to all of the
powers and authority of the lienholder's primary State
regulator to enforce compliance with the procedures set
forth in this subsection (f-7).
(f-10) Repossession by judicial process. In all cases
wherein a lienholder has repossessed a vehicle by judicial
process and holds it for resale under a security agreement,
order for replevin, or other court order establishing the
lienholder's right to possession of the vehicle, the
lienholder may proceed to sell or otherwise dispose of the
vehicle as authorized under the Uniform Commercial Code or
the court order. Upon selling the vehicle to another person,
the lienholder need not send the certificate of title to the
Secretary of State, but shall promptly and within 20 days
mail or deliver to the purchaser as transferee (i) the
existing certificate of title for the repossessed vehicle
reflecting the release of the lienholder's security interest
in the vehicle; (ii) a certified copy of the court order; and
(iii) a bill of sale identifying the new owner's name and
address and the year, make, model, and vehicle identification
number of the vehicle. The application for a certificate of
title made by the purchaser shall comply with subsection (a)
of Section 3-104 and be accompanied by the certified copy of
the court order furnished by the lienholder and the existing
certificate of title for the repossessed vehicle. The
lienholder shall execute the assignment and warranty of title
showing the name and address of the purchaser in the spaces
provided therefor on the certificate of title or as the
Secretary of State prescribes. The lienholder shall complete
the assignment of title in the certificate of title to
reflect the transfer of the vehicle to the lienholder and
also a reassignment to reflect the transfer from the
lienholder to the purchaser. For this purpose, the
lienholder is specifically authorized to execute the
assignment on behalf of the owner as seller if the owner has
not done so and to complete and execute the space reserved in
the certificate of title for a dealer reassignment,
notwithstanding that the lienholder is not a licensed dealer.
Nothing herein shall be construed to mean that the lienholder
is taking title to the repossessed vehicle for purposes of
liability for retailer occupation, vehicle use, or other tax
with respect to the proceeds from the repossession sale.
Delivery of the existing certificate of title to the
purchaser shall be deemed disclosure to the purchaser of the
owner of the vehicle. In the event the lienholder does not
hold the certificate of title for the repossessed vehicle,
the lienholder shall make application for and may obtain a
new certificate of title in the name of the lienholder upon
furnishing information satisfactory to the Secretary of
State. Upon receiving the new certificate of title, the
lienholder may proceed with the sale described in this
subsection, except that upon selling the vehicle the
lienholder shall promptly and within 20 days mail or deliver
to the purchaser the new certificate of title reflecting the
assignment and transfer of title to the purchaser.
(f-15) The Secretary of State shall not issue a
certificate of title to a purchaser under subsection (f),
(f-5), or (f-10) of this Section, unless the person from whom
the vehicle has been repossessed by the lienholder is shown
to be the last registered owner of the motor vehicle. The
Secretary of State may provide by rule for the standards to
be followed by a lienholder in assigning and transferring
certificates of title with respect to repossessed vehicles.
(f-20) If applying for a salvage certificate or a
junking certificate, the lienholder shall within 20 days make
an application to the Secretary of State for a salvage
certificate or a junking certificate, as set forth in this
Code. The Secretary of State shall not issue a salvage
certificate or a junking certificate to such lienholder
unless the person from whom such vehicle has been repossessed
is shown to be the last registered owner of such motor
vehicle and such lienholder establishes to the satisfaction
of the Secretary of State that he is entitled to such salvage
certificate or junking certificate. The Secretary of State
may provide by rule for the standards to be followed by a
lienholder in order to obtain a salvage certificate or
junking certificate for a repossessed vehicle.
(g) A person holding a certificate of title whose
interest in the vehicle has been extinguished or transferred
other than by voluntary transfer shall mail or deliver the
certificate, within 20 days upon request of the Secretary of
State. The delivery of the certificate pursuant to the
request of the Secretary of State does not affect the rights
of the person surrendering the certificate, and the action of
the Secretary of State in issuing a new certificate of title
as provided herein is not conclusive upon the rights of an
owner or lienholder named in the old certificate.
(h) The Secretary of State may decline to process any
application for a transfer of an interest in a vehicle
hereunder if any fees or taxes due under this Act from the
transferor or the transferee have not been paid upon
reasonable notice and demand.
(i) The Secretary of State shall not be held civilly or
criminally liable to any person because any purported
transferor may not have had the power or authority to make a
transfer of any interest in any vehicle or because a
certificate of title issued in error is subsequently used to
commit a fraudulent act.
(Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.)
Section 31. The Illinois Vehicle Code is amended by
changing Section 3-202 as follows:
(625 ILCS 5/3-202) (from Ch. 95 1/2, par. 3-202)
Sec. 3-202. Perfection of security interest.
(a) Unless excepted by Section 3-201, a security
interest in a vehicle of a type for which a certificate of
title is required is not valid against subsequent transferees
or lienholders of the vehicle unless perfected as provided in
this Act.
(b) A security interest is perfected by the delivery to
the Secretary of State of the existing certificate of title,
if any, an application for a certificate of title containing
the name and address of the lienholder and the required fee.
The security interest It is perfected as of the time of its
creation if the delivery to the Secretary of State is
completed within 21 days after the creation of the security
interest or receipt by the new lienholder of the existing
certificate of title from a prior lienholder or licensed
dealer thereafter, otherwise as of the time of the delivery.
(c) If a vehicle is subject to a security interest when
brought into this State, the validity of the security
interest is determined by the law of the jurisdiction where
the vehicle was when the security interest attached, subject
to the following:
1. If the parties understood at the time the security
interest attached that the vehicle would be kept in this
State and it was brought into this State within 30 days
thereafter for purposes other than transportation through
this State, the validity of the security interest in this
State is determined by the law of this State.
2. If the security interest was perfected under the law
of the jurisdiction where the vehicle was when the security
interest attached, the following rules apply:
(A) If the name of the lienholder is shown on an
existing certificate of title issued by that jurisdiction,
his security interest continues perfected in this State.
(B) If the name of the lienholder is not shown on an
existing certificate of title issued by that jurisdiction, a
security interest may be perfected by the lienholder
delivering to the Secretary of State the prescribed notice
and by payment of the required fee. Such security interest is
perfected as of the time of delivery of the prescribed notice
and payment of the required fee.
3. If the security interest was not perfected under the
law of the jurisdiction where the vehicle was when the
security interest attached, it may be perfected in this
State; in that case perfection dates from the time of
perfection in this State.
4. A security interest may be perfected under paragraph
3 of this subsection either as provided in subsection (b) or
by the lienholder delivering to the Secretary of State a
notice of security interest in the form the Secretary of
State prescribes and the required fee.
(Source: P.A. 81-557.)
Section 33. The Code of Civil Procedure is amended by
changing Section 9-316 as follows:
(735 ILCS 5/9-316) (from Ch. 110, par. 9-316)
Sec. 9-316. Lien upon crops. Every landlord shall have a
lien upon the crops grown or growing upon the demised
premises for the rent thereof, whether the same is payable
wholly or in part in money or specific articles of property
or products of the premises, or labor, and also for the
faithful performance of the terms of the lease. Such lien
shall continue for the period of 6 months after the
expiration of the term for which the premises are demised,
and may be enforced by distraint as provided in Part 3 of
Article IX of this Act.
A good faith purchaser shall, however, take such crops
free of any landlord's lien unless, within 6 months prior to
the purchase, the landlord provides written notice of his
lien to the purchaser by registered or certified mail. Such
notice shall contain the names and addresses of the landlord
and tenant, and clearly identify the leased property.
A landlord may require that, prior to his tenant's
selling any crops grown on the demised premises, the tenant
disclose the name of the person to whom the tenant intends to
sell those crops. Where such a requirement has been imposed,
the tenant shall not sell the crops to any person other than
a person who has been disclosed to the landlord as a
potential buyer of the crops.
A lien arising under this Section and duly perfected
under Article 9 of the Uniform Commercial Code shall have
priority over any other agricultural lien as defined in, and
over any security interest arising under, provisions of
Article 9 of the Uniform Commercial Code.
(Source: P.A. 83-70.)
Section 35. The Uniform Federal Lien Registration Act is
amended by changing Section 4 as follows:
(770 ILCS 110/4) (from Ch. 82, par. 404)
Sec. 4. (a) If a notice of federal lien, a refiling of a
notice of federal lien or a notice of revocation of any
certificate described in subsection (b) is presented to a
filing officer who is:
(1) the Secretary of State, he shall cause the notice to
be marked, held and indexed in accordance with the provisions
of Section 9-519 9-403(4) of the Uniform Commercial Code as
if the notice were a financing statement within the meaning
of that Code; or
(2) any other officer described in Section 2, he shall
endorse thereon his identification and the date and time of
receipt and forthwith file it alphabetically or enter it in
an alphabetical index showing the name and address of the
person named in the notice, the date and time of receipt, the
title and address of the official or entity certifying the
lien, the total amount appearing on the notice of lien, and
in the case of federal tax liens, the collector's serial
number of the notice.
(b) If a certificate of release, nonattachment,
discharge or subordination of any lien is presented to the
Secretary of State for filing he shall:
(1) cause a certificate of release or nonattachment to
be marked, held and indexed as if the certificate were a
termination statement within the meaning of the Uniform
Commercial Code, but the notice of lien to which the
certificate relates may not be removed from the files; and
(2) cause a certificate of discharge or subordination to
be marked, held and indexed as if the certificate were a
release of collateral within the meaning of the Uniform
Commercial Code.
(c) If a refiled notice of federal lien referred to in
subsection (a) or any of the certificates or notices referred
to in subsection (b) is presented for filing to any other
filing officer specified in Section 2, he shall permanently
attach the refiled notice or the certificate to the original
notice of lien and enter the refiled notice or the
certificate with the date of filing in any alphabetical lien
index on the line where the original notice of lien is
entered.
(d) Upon request of any person, the filing officer shall
issue his certificate showing whether there is on file, on
the date and hour stated therein, any notice of lien or
certificate or notice affecting any lien filed under this Act
or "An Act in relation to liens of the United States of
America", approved June 27, 1923, as amended, naming a
particular person, and if a notice or certificate is on file,
giving the date and hour of filing of each notice or
certificate. The fee for a certificate is $5. Upon request,
the filing officer shall furnish a copy of any notice of
federal lien, or notice or certificate affecting a federal
lien, for a fee of 50¢ per page.
(Source: P.A. 86-254.)
Section 37. The Uniform Commercial Code is amended by
adding Section 9-404.5 as follows:
(810 ILCS 5/9-404.5 new)
Sec. 9-404.5. Termination statement; duties of filing
officer.
(1) If a financing statement covering consumer goods is
filed on or after July 1, 1973, then within one month or
within 10 days following written demand by the debtor after
there is no outstanding secured obligation and no commitment
to make advances, incur obligations or otherwise give value,
the secured party must file with each filing officer with
whom the financing statement was filed, a termination
statement to the effect that he no longer claims a security
interest under the financing statement, which shall be
identified by file number. In other cases whenever there is
no outstanding secured obligation and no commitment to make
advances, incur obligations or otherwise give value, the
secured party must on written demand by the debtor send the
debtor, for each filing officer with whom the financing
statement was filed, a termination statement to the effect
that he no longer claims a security interest under the
financing statement, which shall be identified by file
number. A termination statement signed by a person other than
the secured party of record must be accompanied by a separate
written statement of assignment signed by the secured party
of record. If the affected secured party fails to file such
a termination statement as required by this subsection, or to
send such a termination statement within 10 days after proper
demand therefor, he shall be liable to the debtor for $100
and in addition for any loss caused to the debtor by such
failure.
(2) On presentation to the filing officer of such a
termination statement he must note it in the index. If he has
received the termination statement in duplicate, he shall
return one copy of the termination statement to the secured
party stamped to show the time of receipt thereof. If the
filing officer has a microfilm or other photographic record
of the financing statement, and of any related continuation
statement, statement of assignment and statement of release,
he may remove the originals from the files at any time after
receipt of the termination statement, or if he has no such
record, he may remove them from the files at any time after
one year after receipt of the termination statement.
(3) If the termination statement is in the standard form
prescribed by the Secretary of State, the uniform fee for
filing and indexing the termination statement in the office
of a county recorder shall be $5 and otherwise shall be $10,
plus in each case an additional fee of $5 for each name more
than one at each address listed against which the termination
statement is required to be indexed.
Section 40. The Toxic Substances Disclosure to Employees
Act is amended by changing Section 6 as follows:
(820 ILCS 255/6) (from Ch. 48, par. 1406)
Sec. 6. Exemptions. This Act shall not apply to:
(a) Use of toxic substances, compounds or mixtures
regulated by this Act which are:
(1) Intended for personal consumption by employees in
the workplace.
(2) Consumer goods used, stored or sold by an employer,
manufacturer, importer, retailer or supplier in the same
form, approximate amount, concentration and manner as they
are sold to consumers, provided that employee exposure to
such consumer goods is not significantly greater than
consumer exposure occurring during the principal consumer
uses of the consumer goods. For purposes of this Act,
"consumer goods" shall be defined as in Section 9-102 9-109.1
of the Uniform Commercial Code.
(3) Present in a concentration of less than 1%. In the
cases of carcinogens, mutagens or teratogens, only those
substances shall be exempt which are present in a
concentration of 0.1% or less. No substance shall be exempt
under this paragraph which is present in concentrations
exceeding threshold concentrations established by regulation
of the Department.
(b) Laboratories in which a toxic substance, compound or
mixture regulated by this Act is used by or under the direct
supervision of a technically qualified individual, provided
that the toxic substance or mixture is not produced in the
laboratories for commercial sale. The Department shall
promulgate rules prescribing the standards used in
determining whether a laboratory is under the direct
supervision of a technically qualified individual.
(c) All retail trade establishments as listed in the
"Standard Industrial Classification Manual" Division G,
Retail Trade, published by the U.S. Government Printing
Office, except the Act shall apply to those retail trade
establishments listed within Major Groups: 52 - Building
Materials, Hardware, Garden Supply, and Mobile Home Dealers;
and 55 - Automotive Dealers and Gasoline Service Stations,
except for those activities involving the retail sales of
gasoline motor fuels or lubricants, or if the retail trade
establishments are engaged in any of the following specific
activities, this Act shall apply only to the retail trade
establishments' involvement in such specific activities:
paint mixing, other than the tinting of consumer sized
containers of paint; finishing or refinishing operations
using paint or paint related products; automobile battery
servicing, photo finishing operations; and dry cleaning
operations.
(Source: P.A. 85-506.)
Section 99. Effective date. This Act takes effect on
July 1, 2001, except that this Section and Sections 31 and 37
take effect upon becoming law.
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