Iowa Code 554.9615 – Application of proceeds of disposition — liability for deficiency and right to surplus
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Terms Used In Iowa Code 554.9615
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Lien: A claim against real or personal property in satisfaction of a debt.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- person: means individual, corporation, limited liability company, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, or any other legal entity. See Iowa Code 4.1
- Uniform Commercial Code: A set of statutes enacted by the various states to provide consistency among the states' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading. Source: OCC
554.9615 Application of proceeds of disposition — liability for deficiency and right to surplus.
1. Application of proceeds. A secured party shall apply or pay over for application the
cash proceeds of disposition under § 554.9610 in the following order to:
a. the reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party;
b. the satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;
c. the satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:
(1) the secured party receives from the holder of the subordinate security interest or other lien an authenticated demand for proceeds before distribution of the proceeds is completed; and
(2) in a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and
d. a secured party that is a consignor of the collateral if the secured party receives from
the consignor an authenticated demand for proceeds before distribution of the proceeds is completed.
2. Proof of subordinate interest. If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder’s demand under subsection 1, paragraph “”c””.
3. Application of noncash proceeds. A secured party need not apply or pay over for
application noncash proceeds of disposition under § 554.9610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
4. Surplus or deficiency if obligation secured. If the security interest under which a
disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection 1 and permitted by subsection 3:
a. unless subsection 1, paragraph “”d””, requires the secured party to apply or pay over cash
proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus;
and
b. the obligor is liable for any deficiency.
5. No surplus or deficiency in sales of certain rights to payment. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes:
a. the debtor is not entitled to any surplus; and
b. the obligor is not liable for any deficiency.
6. Calculation of surplus or deficiency in disposition to person related to secured party. The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this part to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:
a. the transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and
b. the amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.
7. Cash proceeds received by junior secured party. A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:
a. takes the cash proceeds free of the security interest or other lien;
b. is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and
1. Application of proceeds. A secured party shall apply or pay over for application the
cash proceeds of disposition under § 554.9610 in the following order to:
a. the reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party;
b. the satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;
c. the satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:
(1) the secured party receives from the holder of the subordinate security interest or other lien an authenticated demand for proceeds before distribution of the proceeds is completed; and
(2) in a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and
d. a secured party that is a consignor of the collateral if the secured party receives from
the consignor an authenticated demand for proceeds before distribution of the proceeds is completed.
2. Proof of subordinate interest. If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder’s demand under subsection 1, paragraph “”c””.
3. Application of noncash proceeds. A secured party need not apply or pay over for
application noncash proceeds of disposition under § 554.9610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
4. Surplus or deficiency if obligation secured. If the security interest under which a
disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection 1 and permitted by subsection 3:
a. unless subsection 1, paragraph “”d””, requires the secured party to apply or pay over cash
proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus;
and
b. the obligor is liable for any deficiency.
5. No surplus or deficiency in sales of certain rights to payment. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes:
a. the debtor is not entitled to any surplus; and
b. the obligor is not liable for any deficiency.
6. Calculation of surplus or deficiency in disposition to person related to secured party. The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this part to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:
a. the transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and
b. the amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.
7. Cash proceeds received by junior secured party. A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:
a. takes the cash proceeds free of the security interest or other lien;
b. is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and
§554.9615, UNIFORM COMMERCIAL CODE 2
c. is not obligated to account to or pay the holder of the security interest or other lien for any surplus.
2000 Acts, ch 1149, §113, 187
Referred to in §554.9602, 554.9616, 554.9623, 554.9626