Printable Format84-9-105. Control of electronic chattel paper. (a) General rule: Control of electronic chattel paper. A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to whom the chattel paper was assigned.
(b) Specific facts giving control. A system satisfies subsection (a) 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 amendments that add or change an identified assignee of the authoritative copy can be made only with the consent 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 amendment of the authoritative copy is readily identifiable as authorized or unauthorized.
History: L. 2000, ch. 142, § 5; L. 2012, ch. 84, § 2; July 1, 2013.
KANSAS COMMENT, 1996
This section, which does not vary from the 1995 Official Text, defines and explains certain key terms used in Article 9. The use of terms applicable to pre-UCC security forms might imply that prior law referable to that form is still applicable to Article 9. Consequently, terms have been selected which have no common law or statutory roots associating them to a particular form of security transaction. Other key definitions are found in 84-9-106 to 84-9-109 and in 84-1-201, and often as part of the substantive section involved. Since the UCC relies heavily on "words of art," which the drafters have defined, it is imperative that the practitioner be sensitive to the statutory definitions which apply in a given case. Sometimes Noah Webster would be shocked. For example, the term "buyer" in 84-1-201(9) is not broad enough to include a lender, while the term "purchaser" in 84-1-201(32) and (33) is broad enough, and can include any voluntary transferee, even donees. UCC cases often stand or fall on such fine definitional distinctions.
With respect to the definitions found in this section, several points should be made. The transaction which gave rise to the term is often part of the definition. The definition of "account debtor" includes only persons liable on accounts, chattel paper or other intangibles. Other persons owing money arising from other transactions are not account debtors. "Account debtor" in subsection (1)(a) becomes applicable primarily in 84-9-318 and 84-9-502. The definition of "chattel paper" included in subsection (1)(b) becomes critical to an understanding of the priority rule of 84-9-308. The definition of "debtor" in subsection (1)(d) is broad enough to include guarantors, accommodation parties, co-makers, other persons who owe performance, such as performance on a contract, and person's who provide collateral to insure payment of the debtor's obligation. This can have a major impact on who is entitled to notice in an Article 9 foreclosure. See Kansas Comment 1996 to 84-9-504. The definition of "deposit account" in paragraph (1)(e) excludes certificates of deposit, as described in the Kansas Comment 1996 to the previous section. The definition of "encumbrance" in paragraph (1)(g) deals with realty interests and becomes important in handling fixture priority problems under 84-9-313. The definition of "goods" in (1)(h) includes fixtures. It is also useful in defining all the seven types of intangible personal property which are commonly collateral, but which are not "goods," namely documents, instruments, investment property, commodity contracts, accounts, chattel paper and general intangibles. The definition of "instrument" (from which "investment property" was removed in 1996) in subsection (1)(i) tells us what pieces of paper require possession for perfection under 84-9-304, 84-9-305 and priority is dealt with in 84-9-309.
Subsections (2) and (3) are a handy cross reference to other definitions often used in Article 9.
Revisor's Note:
Former section 84-9-105 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.
Law Review and Bar Journal References:
Paragraph (h) cited in discussion of chattel security under the UCC, David Dewey, 34 J.B.A.K. 189, 190 (1965).
Definition of certain terms; provision of UCC concerning "floor plan financing," Charles H. Oldfather, 14 K.L.R. 571, 572, 573, 580, 588 (1966).
Definition of "goods" mentioned in "Some Secured Transactions With the Farmer," Van Smith, 35 J.B.A.K. 299 (1966).
Subsection (1) (b) discussed in "Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 16 K.L.R. 437, 438 (1968).
"The New UCC Article 9 Amendments," Barkley Clark, 44 J.B.A.K. 131, 132, 172 (1975).
Legislative survey, "Changes in Article Nine of the Kansas Commercial Code," Alan Tipton, 15 W.L.J. 212, 219, 221, 222, 223 (1976).
"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 27 K.L.R. 301, 304 (1979).
"Right of Secured Party to Recover Proceeds Commingled in Debtor's Bank Account," Kristen D. Balloun, 28 K.L.R. 325, 326, 327 (1980).
"Secured Transactions: The Priority of Future Advances," Jennifer A. Strus, 21 W.L.J. 717 (1982).
"Clear Title: A Buyer's Bonus, A Lender's Loss—Repeal of UCC § 9-307(1) Farm Products Exception by Food Security Act § 1324 [7 U.S.C. § 1631]," Mark V. Bodine, 26 W.L.J. 71, 73 (1986).
"Revised Article 9 in Kansas," Hon. John K. Pearson, 51 K.L.R. 769, 812 (2003).
"A Brief Overview of Revised Article 9 in Kansas," John K. Pearson and J. Scott Pohl, 72 J.K.B.A. No. 8, 22 (2003).
Attorney General's Opinions:
Credit agreements; required notice. 89-19.
Banks; trust powers; investment of public moneys by governmental subdivisions, units and entities; repurchase agreements. 92-9.
CASE ANNOTATIONS
1. Description of collateral insufficient to give protection as secured creditor in bankruptcy. In re Fuqua, 330 F. Supp. 1050, 1051.
2. Mentioned in considering assignment by one partner of benefits under contract for sale of partnership assets. Wellsville Bank v. Nicolay, 7 Kan. App. 2d 172, 178, 638 P.2d 975 (1982).
3. Credit company's perfected purchase money security interest in vehicles has priority over banks security interest; vehicles not sold to a buyer in ordinary course of business. First National Bank and Trust Co. v. Ford Motor Credit Co., 231 Kan. 431, 438, 646 P.2d 1057 (1982).
4. Cited; bank not good faith purchaser when enriched by refusing to complete agreement with defaulting bank customer and plaintiff. Dick Hatfield Chevrolet, Inc. v. Bob Watson Motors, Inc., 238 Kan. 41, 45, 46, 708 P.2d 494 (1985).
5. Defense of commercial reasonableness cannot be waived; impairment of collateral rule applicable between guarantor and secured party with collateral. U.S. v. Hunter, 652 F. Supp. 774, 778, 781 (1987).
6. Cited; voluntary transfer of professional corporation stock to one not "qualified" (17-2707) held null and void under 17-2712. Central State Bank v. Albright, 12 Kan. App. 2d 175, 179, 180, 737 P.2d 65 (1987).
7. PIK certificates as nonnegotiable, creditor's protection of security interest therein, right to proceeds therefrom determined. In re George, 85 B.R. 133, 134, 144 (1988).
8. Priority between right of setoff and perfected security interest examined. Bank of Kansas v. Hutchinson Health Services, Inc., 13 Kan. App. 2d 421, 425, 773 P.2d 660 (1989).
9. Instrument defined; mortgagee's transfer and assignment of notes and mortgages as security for borrowing, relative priority of interests examined. Army Nat'l Bank v. Equity Developers, Inc., 245 Kan. 3, 12, 774 P.2d 919 (1989).
10. Priority between bank's perfected security interest and state agency's right of setoff examined. Bank of Kansas v. Hutchinson Health Services, Inc., 246 Kan. 83, 90, 785 P.2d 1349 (1990).
11. Certificate of deposit which states on its face "nontransferable" is not an "instrument" hereunder. Bank IV Topeka v. Topeka Bank & Trust Co., 15 Kan. App. 2d 341, 349, 807 P.2d 686 (1991).
12. Security interest in wife's interest in equipment unperfected; financing statement not listing her name seriously misleading. In re Griffin, 141 B.R. 207, 208, 213 (1992).
13. Whether lessor may acquire security interest in accounts receivable to protect ownership interest in leased property examined. Baldwin v. Hays Asphalt Constr., Inc., 20 Kan. App. 2d 853, 855, 893 P.2d 275 (1995).
14. Where party to security agreement executed in Kansas disposes of collateral out-of-state venue proper in county agreement executed. State v. Jurdan, 258 Kan. 848, 852, 893 P.2d 267 (1995).