KANSAS OFFICE of
  REVISOR of STATUTES

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84-9-316. 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 K.S.A. 2024 Supp. 84-9-301(1) or 84-9-305(c), and amendments thereto, 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 K.S.A. 2024 Supp. 84-9-311(b) or 84-9-313, and amendments thereto, 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.

(h) Effect on filed financing statement of change in governing law. The following rules apply to collateral to which a security interest attaches within four months after the debtor changes its location to another jurisdiction:

(1) A financing statement filed before the change pursuant to law of the jurisdiction designated in K.S.A. 2024 Supp. 84-9-301(1) or 84-9-305(c), and amendments thereto, is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral had the debtor not changed its location.

(2) If a security interest perfected by a financing statement that is effective under paragraph (1) becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in K.S.A. 2024 Supp. 84-9-301(1) or 84-9-305(c), and amendments thereto, or the expiration of the four-month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(i) Effect of change in governing law on financing statement filed against original debtor. If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in K.S.A. 2024 Supp. 84-9-301(1) or 84-9-305(c), and amendments thereto, and the new debtor is located in another jurisdiction, the following rules apply:

(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 K.S.A. 2024 Supp. 84-9-203(d), and amendments thereto, if the financing statement would have been effective to perfect a security interest in the collateral had the collateral been acquired by the original debtor.

(2) A security interest perfected by the financing statement and which becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in K.S.A. 2024 Supp. 84-9-301(1) or 84-9-305(c), and amendments thereto, or the expiration of the four-month period remains perfected thereafter. A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

History: L. 2000, ch. 142, § 36; L. 2002, ch. 159, § 12; L. 2012, ch. 84, § 5; July 1, 2013.

KANSAS COMMENT, 1996

This section does not vary from the 1995 Official Text and has not been amended. It provides one entitled to priority under Part 3 of Article 9 may effectively agree to subordinate that claim. Pre-UCC Kansas law was in accord. In Corbin v. Kincaid, 33 K. 649, 7 P. 145 (1885), it was held that parties may agree on priority between mortgages, and the agreement will be binding even though the mortgage subordinated is executed and recorded prior to the superior mortgage. Nor may a subsequent mortgagee attack a prior mortgage where the subsequent mortgage recites that it is subject to the earlier mortgage. Moffatt v. Fouts, 99 K. 118, 160 P. 1137 (1916). See also Arkansas River Gas Co. v. Molk, 130 K. 30, 285 P. 561 (1930), where the placing of the words "O.K." on a bill of sale by a bank operated as a waiver of the bank's lien or claim of superior title. Former K.S.A. 58-804 provided that written contracts determining priorities concerning assignments of accounts receivable were binding.

The term "agreement" is defined in 84-1-201(3) to mean "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)." This means, for example, that a subordination agreement need not be in writing; a telephone conversation would be sufficient. Williams v. First National Bank & Trust Co., 482 P.2d 595 (Okla. 1971). And a subordination may arise out of a course of dealing between two competing creditors. See Percival Construction Co. v. Miller & Miller Auctioneers, Inc., 532 F.2d 166 (10 th Cir. 1976) (informal subordination agreement by course of dealing voided by mutual mistake of fact). As a general contract matter, a written subordination agreement cannot be contradicted by conflicting parol evidence. Peoples Bank & Trust v. Reiff, 256 N.W.2d 336 (N.D. 1977). A subordination agreement should not render unperfected the security interest of the subordinated creditor. Even in the absence of a subordination agreement under this section, 84-1-103 and 84-1-203 suggests that the general notions of waiver, estoppel and good faith may in some cases be enough to reverse Article 9 priorities. Iola State Bank v. Bolan, 235 K. 175, 679 P.2d 720 (1984).

84-1-209, added to the Code by the Kansas legislature in 1967, makes it clear that a subordination agreement does not of itself create a security interest triggering the filing requirements of Article 9.

Revisor's Note:

Former section 84-9-316 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.

Law Review and Bar Journal References:

"Revised Article 9 in Kansas," Hon. John K. Pearson, 51 K.L.R. 769, 851 (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).


 



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