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84-9-507. Effectiveness of financing statement; disposition of collateral; seriously misleading information; change in debtor's name. (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 K.S.A. 2023 Supp. 84-9-508, and amendments thereto, 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 K.S.A. 2023 Supp. 84-9-506, and amendments thereto.

(c) Change in debtor's name. If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under K.S.A. 2023 Supp. 84-9-503(a), and amendments thereto, so that the financing statement becomes seriously misleading under K.S.A. 2023 Supp. 84-9-506, and amendments thereto:

(1) The financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four months after, the filed financing statement becomes seriously misleading; 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 filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after the financing statement becomes seriously misleading.

History: L. 2000, ch. 142, § 78; L. 2012, ch. 84, § 12; July 1, 2013.


This section does not vary from the 1995 Official Text and it has not been amended in Kansas since 1975.

Subsection (1). This subsection sets forth remedies for creditor misbehavior in proceeding against the collateral under Part 5 of Article 9. If the debtor or competing creditor moves quickly enough, disposition can be enjoined. Mandatory injunction ordering the creditor to proceed with a sale under specified terms and conditions might also be appropriate in given cases. Of course if the debtor files bankruptcy before a disposition under 84-9-504 or 84-9-505, the automatic stay would have the same effect as an injunction, with contempt as a sanction. See 11 U.S.C. § 362(h). For a representative case allowing an injunction under this subsection, see Cox v. Galigher Motor Sales Co., 213 S.E. 2d 475 (W. Va. 1975).

The baseline measure of damages for creditor misbehavior is "any loss" incurred by the debtor or competing creditor. In general, this means the difference between the amount that would have been realized had there been compliance with the rules of Article 9 and the amount actually realized upon foreclosure. The differential is frequently established by expert testimony and tradebook publications. See, e.g., Liberty Nat'l Bank & Trust Co. v. Acme Tool Div. of Rucker Co., 540 F.2d 1375 (10th Cir. 1976). In the Acme Tool case, the plaintiff was not the debtor but a subordinate secured creditor who successfully argued that failure to hold a commercially reasonable foreclosure sale eliminated a surplus which would have gone to the second lienor.

Although the subsection does not say so expressly, punitive damages may also be recoverable, either directly under the subsection or incidental to an action for conversion, as when a repossession is wrongful. See Klingbiel v. Commonwealth Credit Corp., 439 F.2d 1303 (10th Cir. 1971). The last sentence of the subsection provides for a minimum civil penalty where consumer goods are involved. Since the penalty equals the entire original finance charge plus ten percent of the amount financed in the case of ordinary loans, or the time price differential plus ten percent of the cash price for purchase money security interests, it could amount to real money if an expensive car or mobile home is involved. Moreover, it might be triggered by a violation of the Kansas Consumer Credit Code, as with a failure to give the consumer notice of right to cure a default under K.S.A. 16a-5-110 and 16a-5-111. For a case from a neighboring jurisdiction which allows such a "piggybacking" of the UCCC and the UCC, see D.E.B. Adjustment Co. v. Cawthorne, 623 P.2d 82 (Colo. App. 1981).

If the creditor misbehaves under Part 5 of Article 9, does he lose any right to a deficiency judgment? Although the subsection is silent on the point, the Kansas supreme court has held in Westgate State Bank V. Clark, 231 K. 81, 642 P.2d 961 (1982), that a line should be drawn between consumer transactions under the UCCC and commercial transactions governed only by the UCC. In UCCC cases, creditor misbehavior will absolutely bar a deficiency claim as K.S.A. 16a-5-103 expressly provides, at least with respect to consumer credit sales transactions. But when the debtor is a commercial entity (presumably including a farmer), the Kansas courts will use the "rebuttable presumption" approach under which the creditor has the burden of proving that the unpaid balance of the debt exceeds the fair market value of the collateral; if this burden is met, the creditor will be able to obtain a deficiency judgment. If there is no creditor misbehavior, the secured party is automatically entitled to a deficiency judgment unless K.S.A. 16a-5-103(2) precludes it because a consumer credit sale of less than $1000 is involved.

Can a consumer debtor snuff out a deficiency claim and recover the minimum civil penalty under this subsection? The Clark case is silent on this question, and the cases in other jurisdictions are in conflict on the point. Compare Wilmington Trust Co. v. Connor, 415 A.2d 773 (Del. 1980) (double-whammy allowed) with Commercial Credit Corp. v. Holt, 17 U.C.C. Rep. 316 (Tenn. App. 1975) (upon creditor misbehavior, consumer debtor allowed the greater of the minimum civil penalty or relief from the deficiency claim, but not both).

Subsection (2). This subsection formulates certain rules for the determination of "commercial reasonableness" under 84-9-504(3). It generally offers theories of protection for the secured party. First, it suggests that low price, standing by itself, should not be enough to make a foreclosure sale commercially unreasonable. Second, it suggests that wholesale disposition, as through dealer auctions, is in general a commercially reasonable way to make a foreclosure sale. Third, it authorizes judicial confirmation of a foreclosure sale, which will carry with it a conclusive presumption that the sale was commercially reasonable.

Revisor's Note:

Former section 84-9-507 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.

Law Review and Bar Journal References:

"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 27 K.L.R. 301, 310 (1979).

"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 32 K.L.R. 351, 367 (1984).

"Is the Agricultural Security Interest Legally Healthy?" David A. Lander, 34 K.L.R. 505, 508, 512 (1986).

"Debtor's Remedies When Debitor Seeks Deficiency Judgment on a Consumer Installment Contract," John E. Cowles, XIV J.K.T.L.A. No. 4, 18, 19 (1991).

"Creditor Beware: From Default Through Deficiency Judgment," Wanda M. Temm, 60 J.K.B.A. No. 8, 17, 21, 22 (1991).

"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).


1. Referred to in determining self-help provisions of 84-9-503 not violative of due process. Benschoter v. First National Bank of Lawrence, 218 Kan.144, 152, 542 P.2d 1042.

2. Measure of damages less than retail value where goods not in retail condition; court not required to consider purely speculative matters. Transport Equipment Co. v. Guaranty State Bank, 518 F.2d 377, 382, 383, 384.

3. Rules stated; who must carry burden of proof as to commercial reasonableness of sale and amount of loss. Transport Equipment Co. v. Guaranty State Bank, 518 F.2d 377, 384.

4. Subsection (1) construed; failure to make commercially reasonable disposition of secured property; secured party not precluded from obtaining deficiency judgment on note. Barbour v. United States, 562 F.2d 19, 20.

5. Applied; creditor sale of collateral not in "commercially reasonable manner"; test; deficiency not barred. Westgate State Bank v. Clark, 231 Kan.81, 87, 92, 93, 94, 642 P.2d 961 (1982).

6. Bank not liable for failing to sell car where defaulting debtor signed statement renouncing or modifying rights. Kelley v. Commercial National Bank, 235 Kan.45, 49, 50, 678 P.2d 620 (1984).

7. Cited; foreclosing creditor's duty to check UCC files, give notice of pending sale, disclose subsequent purchaser's name examined. Utility Trailers of Wichita, Inc. v. Citizens Nat'l Bank & Tr. Co., 11 Kan. App. 2d 421, 423, 726 P.2d 282 (1986).

8. Cited; provisions dealing with secured party's interest in proceeds prevailing over default provisions after debtor files bankruptcy examined. Maxl Sales Co. v. Critiques, Inc., 796 F.2d 1293, 1296, 1297 (1986).

9. Remedy not applicable to UCCC transaction where commercially reasonable sale of collateral would still result in amount owing by debtor. Topeka Datsun Motor Co. v. Stratton, 12 Kan. App. 2d 95, 96, 104, 105, 106, 107, 736 P.2d 82 (1987).

10. Fact that better price possible if sale held differently does not alone establish sale was not "commercially reasonable". U.S. v. Cox, 731 F. Supp. 1023 (1990).

11. Cited; discussion of attorney fees included in security agreement "if permitted." Halloran v. North Plaza State Bank, 17 Kan. App. 2d 840, 843, 844, 844 P.2d 764 (1993).

12. Debtor not entitled to possession of collateral even if he prevailed on wrongful possession claim against creditor. Clark v. Associates Commercial Corp., 820 F. Supp. 562, 563, 564 (1993).

13. Cited in holding that, under UCCC, disposal of automobile at well-known, regularly scheduled, dealer-only auction may be commercially reasonable. Union Nat'l Bank of Wichita v. Schmitz, 18 Kan. App. 2d 403, 409, 853 P.2d 1180 (1993).

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