Ohio Code 1309.330 – Priority of purchases of chattel paper or instrument – UCC 9-330
(A) A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed merely as proceeds of inventory subject to a security interest if:
Terms Used In Ohio Code 1309.330
- Cash proceeds: means proceeds that are money, checks, deposit accounts, or the like. See Ohio Code 1309.102
- Chattel paper: means a record that evidences both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. See Ohio Code 1309.102
- Goods: includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. See Ohio Code 1309.102
- Instrument: means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment. See Ohio Code 1309.102
- Inventory: means goods, other than farm products, that:
(a) Are leased by a person as lessor;
(b) Are held by a person for sale or lease or to be furnished under a contract of service;
(c) Are furnished by a person under a contract of service; or
(d) Consist of raw materials, work in process, or materials used or consumed in a business. See Ohio Code 1309.102
- New value: means (i) money, (ii) money's worth in property, services, or new credit, or (iii) release by a transferee of an interest in property previously transferred to the transferee. See Ohio Code 1309.102
- Secured party: means :
(a) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
(b) A person that holds an agricultural lien;
(c) A consignor;
(d) A person to whom accounts, chattel paper, payment intangibles, or promissory notes have been sold;
(e) A trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; or
(f) A person who holds a security interest arising under section 1302. See Ohio Code 1309.102
(1) In good faith and in the ordinary course of the purchaser’s business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under section 1309.105 of the Revised Code; and
(2) The chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.
(B) A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under section 1309.105 of the Revised Code in good faith, in the ordinary course of the purchaser’s business, and without knowledge that the purchase violates the rights of the secured party.
(C) Except as otherwise provided in section 1309.327 of the Revised Code, a purchaser having priority in chattel paper under division (A) or (B) of this section also has priority in proceeds of the chattel paper to the extent that:
(1) Section 1309.322 of the Revised Code provides for priority in the proceeds; or
(2) The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser’s security interest in the proceeds is unperfected.
(D) Except as otherwise provided in division (A) of section 1309.331 of the Revised Code, a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.
(E) For purposes of divisions (A) and (B) of this section, the holder of a purchase money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.
(F) For purposes of divisions (B) and (D) of this section, if chattel paper or an instrument indicates that it has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.