Ohio Code 1309.615 – Application of proceeds of disposition – liability for deficiency and right to surplus – UCC 9-615
(A) A secured party shall apply or pay over for application the cash proceeds of disposition under section 1309.610 of the Revised Code in the following order to:
Terms Used In Ohio Code 1309.615
- Account: includes health-care insurance receivables. See Ohio Code 1309.102
- Agricultural lien: means an interest, other than a security interest, in farm products:
(a) That secures payment or performance of an obligation for:
(i) Goods or services furnished in connection with a debtor's farming operation; or
(ii) Rent on real property leased by a debtor in connection with its farming operation. See Ohio Code 1309.102
- 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
- Collateral: means the property subject to a security interest or agricultural lien, including:
(a) Proceeds to which a security interest attaches;
(b) Accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and
(c) Goods that are the subject of a consignment. See Ohio Code 1309.102
- Consignor: means a person that delivers goods to a consignee in a consignment. See Ohio Code 1309.102
- Debtor: means :
(a) A person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;
(b) A seller of accounts, chattel paper, payment intangibles, or promissory notes; or
(c) A consignee. See Ohio Code 1309.102
- Lien: A claim against real or personal property in satisfaction of a debt.
- Noncash proceeds: means proceeds other than cash proceeds. See Ohio Code 1309.102
- 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.
- Obligor: means a person who, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. See Ohio Code 1309.102
- Person: includes an individual, corporation, business trust, estate, trust, partnership, and association. See Ohio Code 1.59
- Secondary obligor: means an obligor to the extent that:
(a) The obligor's obligation is secondary; or
(b) The obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either. 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) 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;
(2) The satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;
(3) The satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:
(a) 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
(b) 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
(4) A secured party who 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.
(B) If a secured party so requests, 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 is not required to comply with the holder’s demand under division (A)(3) of this section.
(C) A secured party is not required to apply or pay over for application noncash proceeds of disposition under section 1309.610 unless the failure to do so would be commercially unreasonable. A secured party who applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
(D) 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 division (A) of this section and permitted by division (C) of this section:
(1) Unless division (A)(4) of this section 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
(2) The obligor is liable for any deficiency.
(E) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.
(F) 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 sections 1309.601 to 1309.628 of the Revised Code to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:
(1) The transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and
(2) 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.
(G) A secured party who 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:
(1) Takes the cash proceeds free of the security interest or other lien;
(2) Is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and
(3) Is not obligated to account to or pay the holder of the security interest or other lien for any surplus.