Printable Format84-9-314. Perfection by control. (a) Perfection by control. A security interest in investment property, deposit accounts, letter-of-credit rights, electronic chattel paper, or electronic documents may be perfected by control of the collateral under K.S.A. 2023 Supp. 84-7-106, and amendments thereto, and K.S.A. 2023 Supp. 84-9-104, 84-9-105, 84-9-106, or 84-9-107, and amendments thereto.
(b) Specified collateral: Time of perfection by control; continuation of perfection. A security interest in deposit accounts, electronic chattel paper, letter-of-credit rights, or electronic documents is perfected by control under K.S.A. 2023 Supp. 84-7-106, and amendments thereto, and K.S.A. 2023 Supp. 84-9-104, 84-9-105 or 84-9-107, and amendments thereto, 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 K.S.A. 2023 Supp. 84-9-106, and amendments thereto, 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.
History: L. 2000, ch. 142, § 34; L. 2007, ch. 90, § 74; July 1, 2008.
KANSAS COMMENT, 1996
This section, which does not vary from the 1995 Official Text, has not been amended. It determines when a secured party claiming an interest in goods installed in or affixed to other goods is entitled to priority over a party with a security interest in the whole. The priority rules of this section are somewhat parallel to those governing fixtures in the previous section. This section does not apply to goods which are commingled in any manufacturing process so that their original identity is lost; the latter situation is covered by 84-9-315.
The basic rule of this section is that a security interest which attaches to goods (such as a replacement engine on a piece of equipment) before they are affixed to the whole has priority with respect to the accession over the interest in the whole, even though the interest in the whole was previously perfected and even though the security interest in the accession is never perfected. Conversely, a claim to the whole which arises subsequent to the affixation takes priority unless the security interest in the accession is perfected (normally by filing). Thus, the financier of an accession should file even before the goods are affixed to the whole.
Although this section gives priority to the accession financier as against a prior security interest in the whole even without perfection of the accession security interest, it is unclear how this rule would relate to the Kansas certificate of title law, K.S.A. 8-135. For example, if a motor vehicle was subject to a security interest noted on the title, and the owner of the vehicle subsequently purchased a replacement engine on time, could the engine supplier claim first priority to the engine even though its security interest was never noted on the certificate of title? Although the fit between the two statutes is uncertain, at least one decision from another jurisdiction suggests that the certificate of title statute would occupy the field, and that the accession financier would not have priority, particularly if its interest was never noted on the title. Wooden v. Michigan National Bank, 162 S.E.2d 222 (Ga. App. 1968). The mechanic's lien provisions of 58-201 et seq. may provide more certainty.
Pre-UCC Kansas law recognized the general doctrine of accessions. In Johnson v. Interstate Securities Co., 152 K. 346, 103 P.2d 795 (1940), a recorded chattel mortgage on a truck was held inferior to the rights of a good faith purchaser of a grain bed which the mortgagor had attached to the truck, the court concluding that the doctrine of accession was not applicable because the grain bed was removable without injury to the truck. Given the absence of a definition of "accession" in this section, this case may still be good law in Kansas.
Revisor's Note:
Former section 84-9-314 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.
Law Review and Bar Journal References:
"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).