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84-9-308. When security interest or agricultural lien is perfected; continuity of perfection. (a) Perfection of security interest. Except as otherwise provided in this section and K.S.A. 2023 Supp. 84-9-309, and amendments thereto, a security interest is perfected if it has attached and all of the applicable requirements for perfection in K.S.A. 2023 Supp. 84-9-310 through 84-9-316, and amendments thereto, 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 K.S.A. 2023 Supp. 84-9-310, and amendments thereto, 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.

History: L. 2000, ch. 142, § 28; July 1, 2001.

KANSAS COMMENT, 1996

This section, which does not vary from the 1995 Official Text, has not been amended since 1972. It is designed to govern the priority conflict between a secured party claiming chattel paper or an instrument as collateral, and third-party purchasers who adversely take possession of the paper. The policy behind the two rules contained in the section is to encourage the discounting of chattel paper and instruments by giving them a negotiable quality. These are two variations on the bona fide purchase theme.

Subsection (a) covers the case where the secured party relying on permissive filing under 84-9-304(1) or temporary automatic possession under 84-9-304(4) and (5) claims the chattel paper or instrument as more than mere proceeds of an inventory loan. In such a case, the purchaser who takes possession of the paper has priority over the inventory lender only if he has no actual knowledge that the paper is subject to a prior perfected security interest. This would be an unusual situation.

Under subsection (b), a purchaser of chattel paper or an instrument who takes delivery in ordinary course of the purchaser's business has priority over the paper claimed as mere proceeds from a prior inventory loan. Specific inclusion of the term "chattel paper" in the security agreement or financing statement should not change the result; if the paper is in substance claimed as proceeds of an inventory loan, the third-party possessor will have priority even though he knows of the perfected security interest in inventory. The moral for the inventory financier is simple: take possession of your debtor's chattel paper and instruments. The term "chattel paper" is defined in 84-9-105(1)(b) essentially as secured installment contracts. The term "purchaser" is defined broadly in 84-1-201(32) and (33) to include third-party lenders taking the chattel paper or instrument in pledge. For cases applying the rule in subsection (b), see Associates Discount Corp. v. Old Freeport Bank, 220 A.2d 621 (Pa. 1966); International Harvester Credit Corp. v. Associates Financial Servs. Co., 211 S.E.2d 430 (Ga. App. 1974); Commercial Credit Corp. v. National Credit Corp., 473 S.W.2d 876 (Ark. 1971). For an interesting Kansas decision which appears to deny priority under subsection (b) when the buyer who created the chattel paper was closely related to the dealer and was guilty of fraud upon the competing floorplan financier, see First National Bank and Trust Co. v. Ford Motor Credit Co., 231 K. 431, 646 P.2d 1057 (1982), discussed at Kansas Comment 1996 to 84-9-307.

Revisor's Note:

Former section 84-9-308 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.

Law Review and Bar Journal References:

"Floor plan financing," Charles H. Oldfather, 14 K.L.R. 571, 580, 581, 585 (1966).

"The New UCC Article 9 Amendments," Barkley Clark, 44 J.B.A.K. 131, 172 (1975).

"Kansas' Unique Treatment of Agricultural Liens," Keith G. Meyer, 53 K.L.R. 1141 (2005).

CASE ANNOTATIONS

1. Credit company's security interest had priority over bank's security interest; debtor's signature was forged. First National Bank and Trust Co. v. Ford Motor Credit Co., 231 Kan. 431, 432, 434, 438, 646 P.2d 1057 (1982).


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