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Public Act 92-0234
SB978 Enrolled LRB9205797WHcs
AN ACT concerning business transactions.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Uniform Commercial Code is amended by
changing Sections 9-301, 9-310, 9-312, 9-314, and 9-322 and
adding Sections 9-107.1, 9-306.1, and 9-329.1 as follows:
(810 ILCS 5/9-107.1 new)
Sec. 9-107.1. Control of Beneficial Interest in Illinois
Land Trust.
(a) Requirements for Control. A secured party has
control of the beneficial interest in an Illinois land trust
if:
(1) the secured party shall have transmitted to the
trustee for the trust a record authenticated by the
debtor that contains a collateral assignment by the
debtor of, or the grant of a security interest in, a
beneficial interest in the trust; and
(2) in an authenticated record, the trustee for
the trust has accepted the collateral assignment or
security agreement.
(b) Debtor's right to direct disposition and proceeds. A
secured party that has satisfied subsection (a) has control,
even if the debtor retains, subject to the terms and
conditions of the collateral assignment or security
agreement, the power of direction of the trustee and the
right to receive the rents, income and profits thereof.
(810 ILCS 5/9-301) (from Ch. 26, par. 9-301)
(Text of Section before amendment by P.A. 91-893)
Sec. 9-301. Persons Who Take Priority Over Unperfected
Security Interests; Rights of "Lien Creditor".
(1) Except as otherwise provided in subsection (2), an
unperfected security interest is subordinate to the rights of
(a) persons entitled to priority under Section
9-312;
(b) a person who becomes a lien creditor before the
security interest is perfected;
(c) in the case of goods, instruments, documents,
and chattel paper, a person who is not a secured party
and who is a transferee in bulk or other buyer not in
ordinary course of business or is a buyer of farm
products in ordinary course of business, to the extent
that he gives value and receives delivery of the
collateral without knowledge of the security interest and
before it is perfected;
(d) in the case of accounts, general intangibles,
and investment property, a person who is not a secured
party and who is a transferee to the extent that he gives
value without knowledge of the security interest and
before it is perfected;
provided, however, that an unperfected security interest
shall take priority over the rights of a lien creditor if (i)
the lien creditor is a trustee or receiver of a state or
federally chartered financial institution acting in
furtherance of its supervisory authority over the financial
institution and (ii) a security interest is granted by the
financial institution to secure a deposit of public funds
with the financial institution or a repurchase agreement with
the financial institution pursuant to the Government
Securities Act of 1986, as amended.
(2) If the secured party files with respect to a
purchase money security interest before or within 20 days
after the debtor receives possession of the collateral, he
takes priority over the rights of a transferee in bulk or of
a lien creditor which arise between the time the security
interest attaches and the time of filing.
(3) A "lien creditor" means a creditor who has acquired
a lien on the property involved by attachment, levy or the
like and includes an assignee for benefit of creditors from
the time of assignment, and a trustee in bankruptcy from the
date of the filing of the petition or a receiver in equity
from the time of appointment.
(4) A person who becomes a lien creditor while a
security interest is perfected takes subject to the security
interest only to the extent that it secures advances made
before he becomes a lien creditor or within 45 days
thereafter or made without knowledge of the lien or pursuant
to a commitment entered into without knowledge of the lien.
(Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.)
(Text of Section after amendment by P.A. 91-893)
Sec. 9-301. Law governing perfection and priority of
security interests. Except as otherwise provided in Sections
9-303 through 9-306.1 9-306, the following rules determine
the law governing perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral:
(1) Except as otherwise provided in this Section,
while a debtor is located in a jurisdiction, the local
law of that jurisdiction governs perfection, the effect
of perfection or nonperfection, and the priority of a
security interest in collateral.
(2) While collateral is located in a jurisdiction,
the local law of that jurisdiction governs perfection,
the effect of perfection or nonperfection, and the
priority of a possessory security interest in that
collateral.
(3) Except as otherwise provided in paragraph (4),
while negotiable documents, goods, instruments, money, or
tangible chattel paper is located in a jurisdiction, the
local law of that jurisdiction governs:
(A) perfection of a security interest in the
goods by filing a fixture filing;
(B) perfection of a security interest in
timber to be cut; and
(C) the effect of perfection or nonperfection
and the priority of a nonpossessory security
interest in the collateral.
(4) The local law of the jurisdiction in which the
wellhead or minehead is located governs perfection, the
effect of perfection or nonperfection, and the priority
of a security interest in as-extracted collateral.
(Source: P.A. 90-696, eff. 8-7-98; 91-893, eff. 7-1-01.)
(810 ILCS 5/9-306.1 new)
Sec. 9-306.1. Law Governing Perfection and Priority of
Collateral Assignments of Beneficial Interests in Illinois
Land Trusts. The local law of the State of Illinois governs
perfection, the effect of perfection or nonperfection, and
the priority of a collateral assignment of, or other security
interest in, a beneficial interest in an Illinois land trust.
This Section implements the important interest of this State
in matters associated with the administration of Illinois
land trusts created for the principal purpose of owning an
interest in Illinois land and the regulation of restrictions
on the transfer of beneficial interests in, and of the power
of appointments under, such trusts.
(810 ILCS 5/9-310) (from Ch. 26, par. 9-310)
(Text of Section before amendment by P.A. 91-893)
Sec. 9-310. Priority of certain liens arising by
operation of law.
When a person in the ordinary course of his business
furnishes services or materials with respect to goods subject
to a security interest, a lien upon goods in the possession
of such person given by statute or rule of law for such
materials or services takes priority over a perfected
security interest unless the lien is statutory and the
statute expressly provides otherwise.
(Source: Laws 1961, p. 2101.)
(Text of Section after amendment by P.A. 91-893)
Sec. 9-310. When filing required to perfect security
interest or agricultural lien; security interests and
agricultural liens to which filing provisions do not apply.
(a) General rule: perfection by filing. Except as
otherwise provided in subsection (b) and Section 9-312(b), a
financing statement must be filed to perfect all security
interests and agricultural liens.
(b) Exceptions: filing not necessary. The filing of a
financing statement is not necessary to perfect a security
interest:
(1) that is perfected under Section 9-308(d), (e),
(f), or (g);
(2) that is perfected under Section 9-309 when it
attaches;
(3) in property subject to a statute, regulation,
or treaty described in Section 9-311(a);
(4) in goods in possession of a bailee which is
perfected under Section 9-312(d)(1) or (2);
(5) in certificated securities, documents, goods,
or instruments which is perfected without filing or
possession under Section 9-312(e), (f), or (g);
(6) in collateral in the secured party's possession
under Section 9-313;
(7) in a certificated security which is perfected
by delivery of the security certificate to the secured
party under Section 9-313;
(8) in deposit accounts, electronic chattel paper,
investment property, or letter-of-credit rights, or
beneficial interests in Illinois land trusts which is
perfected by control under Section 9-314;
(9) in proceeds which is perfected under Section
9-315; or
(10) that is perfected under Section 9-316.
(c) Assignment of perfected security interest. If a
secured party assigns a perfected security interest or
agricultural lien, a filing under this Article is not
required to continue the perfected status of the security
interest against creditors of and transferees from the
original debtor.
(Source: P.A. 91-893, eff. 7-1-01.)
(810 ILCS 5/9-312) (from Ch. 26, par. 9-312)
(Text of Section before amendment by P.A. 91-893)
Sec. 9-312. Priorities Among Conflicting Security
Interests in the Same Collateral.
(1) The rules of priority stated in other Sections of
this Part and in the following Sections shall govern when
applicable: Section 4-210 with respect to the security
interests of collecting banks in items being collected,
accompanying documents and proceeds; Section 9-103 on
security interests related to other jurisdictions; Section
9-114 on consignments; Section 9-115 on security interests in
investment property.
(2) A perfected security interest in crops for new value
given to enable the debtor to produce the crops during the
production season and given not more than three months before
the crops become growing crops by planting or otherwise takes
priority over an earlier perfected security interest to the
extent that such earlier interest secures obligations due
more than six months before the crops become growing crops by
planting or otherwise, even though the person giving new
value had knowledge of the earlier security interest.
(3) A perfected purchase money security interest in
inventory has priority over a conflicting security interest
in the same inventory and also has priority in identifiable
cash proceeds received on or before the delivery of the
inventory to a buyer if
(a) the purchase money security interest is
perfected at the time the debtor receives possession of
the inventory; and
(b) the purchase money secured party gives
notification in writing to the holder of the conflicting
security interest if the holder had filed a financing
statement covering the same types of inventory (i) before
the date of the filing made by the purchase money secured
party, or (ii) before the beginning of the 21 day period
where the purchase money security interest is temporarily
perfected without filing or possession (subsection (5) of
Section 9-304); and
(c) the holder of the conflicting security interest
receives the notification within 5 years before the
debtor receives possession of the inventory; and
(d) the notification states that the person giving
the notice has or expects to acquire a purchase money
security interest in inventory of the debtor, describing
such inventory by item or type.
(4) A purchase money security interest in collateral
other than inventory has priority over a conflicting security
interest in the same collateral or its proceeds if the
purchase money security interest is perfected at the time the
debtor receives possession of the collateral or within 20
days thereafter.
(5) In all cases not governed by other rules stated in
this Section (including cases of purchase money security
interests which do not qualify for the special priorities set
forth in subsections (3) and (4) of this Section), priority
between conflicting security interests in the same collateral
shall be determined according to the following rules:
(a) Conflicting security interests rank according
to priority in time of filing or perfection. Priority
dates from the time a filing is first made covering the
collateral or the time the security interest is first
perfected, whichever is earlier, provided that there is
no period thereafter when there is neither filing nor
perfection.
(b) So long as conflicting security interests are
unperfected, the first to attach has priority.
(6) For the purposes of subsection (5) a date of filing
or perfection as to collateral is also a date of filing or
perfection as to proceeds.
(7) If future advances are made while a security
interest is perfected by filing, the taking of possession or
under Section 9-115 or 9-116 on investment property, the
security interest has the same priority for the purposes of
subsection (5) with respect to the future advances as it does
with respect to the first advance. If a commitment is made
before or while the security interest is so perfected, the
security interest has the same priority with respect to
advances made pursuant thereto. In other cases a perfected
security interest has priority from the date the advance is
made.
(Source: P.A. 89-364, eff. 1-1-96.)
(Text of Section after amendment by P.A. 91-893)
Sec. 9-312. Perfection of security interests in chattel
paper, deposit accounts, documents, goods covered by
documents, instruments, investment property, letter-of-credit
rights, and money; perfection by permissive filing; temporary
perfection without filing or transfer of possession.
(a) Perfection by filing permitted. A security interest
in chattel paper, negotiable documents, instruments,
beneficial interests in Illinois land trusts, or investment
property may be perfected by filing.
(b) Control or possession of certain collateral. Except
as otherwise provided in Section 9-315(c) and (d) for
proceeds:
(1) a security interest in a deposit account may be
perfected only by control under Section 9-314;
(2) and except as otherwise provided in Section
9-308(d), a security interest in a letter-of-credit right
may be perfected only by control under Section 9-314; and
(3) a security interest in money may be perfected
only by the secured party's taking possession under
Section 9-313.
(c) Goods covered by negotiable document. While goods
are in the possession of a bailee that has issued a
negotiable document covering the goods:
(1) a security interest in the goods may be
perfected by perfecting a security interest in the
document; and
(2) a security interest perfected in the document
has priority over any security interest that becomes
perfected in the goods by another method during that
time.
(d) Goods covered by nonnegotiable document. While
goods are in the possession of a bailee that has issued a
nonnegotiable document covering the goods, a security
interest in the goods may be perfected by:
(1) issuance of a document in the name of the
secured party;
(2) the bailee's receipt of notification of the
secured party's interest; or
(3) filing as to the goods.
(e) Temporary perfection: new value. A security
interest in certificated securities, negotiable documents, or
instruments is perfected without filing or the taking of
possession for a period of 20 days from the time it attaches
to the extent that it arises for new value given under an
authenticated security agreement.
(f) Temporary perfection: goods or documents made
available to debtor. A perfected security interest in a
negotiable document or goods in possession of a bailee, other
than one that has issued a negotiable document for the goods,
remains perfected for 20 days without filing if the secured
party makes available to the debtor the goods or documents
representing the goods for the purpose of:
(1) ultimate sale or exchange; or
(2) loading, unloading, storing, shipping,
transshipping, manufacturing, processing, or otherwise
dealing with them in a manner preliminary to their sale
or exchange.
(g) Temporary perfection: delivery of security
certificate or instrument to debtor. A perfected security
interest in a certificated security or instrument remains
perfected for 20 days without filing if the secured party
delivers the security certificate or instrument to the debtor
for the purpose of:
(1) ultimate sale or exchange; or
(2) presentation, collection, enforcement, renewal,
or registration of transfer.
(h) Expiration of temporary perfection. After the
20-day period specified in subsection (e), (f), or (g)
expires, perfection depends upon compliance with this
Article.
(Source: P.A. 91-893, eff. 7-1-01.)
(810 ILCS 5/9-314) (from Ch. 26, par. 9-314)
(Text of Section before amendment by P.A. 91-893)
Sec. 9-314. Accessions.
(1) A security interest in goods which attaches before
they are installed in or affixed to other goods takes
priority as to the goods installed or affixed (called in this
section "accessions") over the claims of all persons to the
whole except as stated in subsection (3) and subject to
Section 9--315(1).
(2) A security interest which attaches to goods after
they become part of a whole is valid against all persons
subsequently acquiring interests in the whole except as
stated in subsection (3) but is invalid against any person
with an interest in the whole at the time the security
interest attaches to the goods who has not in writing
consented to the security interest or disclaimed an interest
in the goods as part of the whole.
(3) The security interests described in subsections (1)
and (2) do not take priority over
(a) a subsequent purchaser for value of any
interest in the whole; or
(b) a creditor with a lien on the whole
subsequently obtained by judicial proceedings; or
(c) a creditor with a prior perfected security
interest in the whole to the extent that he makes subsequent
advances if the subsequent purchase is made, the lien by
judicial proceedings obtained or the subsequent advance under
the prior perfected security interest is made or contracted
for without knowledge of the security interest and before it
is perfected. A purchaser of the whole at a foreclosure sale
other than the holder of a perfected security interest
purchasing at his own foreclosure sale is a subsequent
purchaser within this Section.
(4) When under subsections (1) or (2) and (3) a secured
party has an interest in accessions which has priority over
the claims of all persons who have interests in the whole, he
may on default subject to the provisions of Part 5 remove his
collateral from the whole but he must reimburse any
encumbrancer or owner of the whole who is not the debtor and
who has not otherwise agreed for the cost of repair of any
physical injury but not for any diminution in value of the
whole caused by the absence of the goods removed or by any
necessity for replacing them. A person entitled to
reimbursement may refuse permission to remove until the
secured party gives adequate security for the performance of
this obligation.
(Source: Laws 1961, p. 2101.)
(Text of Section after amendment by P.A. 91-893)
Sec. 9-314. Perfection by control.
(a) Perfection by control. A security interest in
investment property, deposit accounts, electronic chattel
paper, letter-of-credit rights, or beneficial interests in
Illinois land trusts electronic chattel paper may be
perfected by control of the collateral under Section 9-104,
9-105, 9-106, or 9-107, or 9-107.1.
(b) Specified collateral: time of perfection by
control; continuation of perfection. A security interest in
deposit accounts, electronic chattel paper, or
letter-of-credit rights, or beneficial interests in Illinois
land trusts is perfected by control under Section 9-104,
9-105, or 9-107, or 9-107.1 when the secured party obtains
control and remains perfected by control only while the
secured party retains control.
(c) Investment property: time of perfection by control;
continuation of perfection. A security interest in
investment property is perfected by control under Section
9-106 from the time the secured party obtains control and
remains perfected by control until:
(1) the secured party does not have control; and
(2) one of the following occurs:
(A) if the collateral is a certificated
security, the debtor has or acquires possession of
the security certificate;
(B) if the collateral is an uncertificated
security, the issuer has registered or registers the
debtor as the registered owner; or
(C) if the collateral is a security
entitlement, the debtor is or becomes the
entitlement holder.
(Source: P.A. 91-893, eff. 7-1-01.)
(810 ILCS 5/9-322)
(This Section may contain text from a Public Act with a
delayed effective date)
Sec. 9-322. Priorities among conflicting security
interests in and agricultural liens on same collateral.
(a) General priority rules. Except as otherwise
provided in this Section, priority among conflicting security
interests and agricultural liens in the same collateral is
determined according to the following rules:
(1) Conflicting perfected security interests and
agricultural liens rank according to priority in time of
filing or perfection. Priority dates from the earlier of
the time a filing covering the collateral is first made
or the security interest or agricultural lien is first
perfected, if there is no period thereafter when there is
neither filing nor perfection.
(2) A perfected security interest or agricultural
lien has priority over a conflicting unperfected security
interest or agricultural lien.
(3) The first security interest or agricultural
lien to attach or become effective has priority if
conflicting security interests and agricultural liens are
unperfected.
(b) Time of perfection: proceeds and supporting
obligations. For the purposes of subsection (a)(1):
(1) the time of filing or perfection as to a
security interest in collateral is also the time of
filing or perfection as to a security interest in
proceeds; and
(2) the time of filing or perfection as to a
security interest in collateral supported by a supporting
obligation is also the time of filing or perfection as to
a security interest in the supporting obligation.
(c) Special priority rules: proceeds and supporting
obligations. Except as otherwise provided in subsection (f),
a security interest in collateral which qualifies for
priority over a conflicting security interest under Section
9-327, 9-328, 9-329, 9-329.1, 9-330, or 9-331 also has
priority over a conflicting security interest in:
(1) any supporting obligation for the collateral;
and
(2) proceeds of the collateral if:
(A) the security interest in proceeds is
perfected;
(B) the proceeds are cash proceeds or of the
same type as the collateral; and
(C) in the case of proceeds that are proceeds
of proceeds, all intervening proceeds are cash
proceeds, proceeds of the same type as the
collateral, or an account relating to the
collateral.
(d) First-to-file priority rule for certain collateral.
Subject to subsection (e) and except as otherwise provided in
subsection (f), if a security interest in chattel paper,
deposit accounts, negotiable documents, instruments,
investment property, or letter-of-credit rights, or
beneficial interests in Illinois land trusts is perfected by
a method other than filing, conflicting perfected security
interests in proceeds of the collateral rank according to
priority in time of filing.
(e) Applicability of subsection (d). Subsection (d)
applies only if the proceeds of the collateral are not cash
proceeds, chattel paper, negotiable documents, instruments,
investment property, beneficial interests in Illinois land
trusts, or letter-of-credit rights.
(f) Limitations on subsections (a) through (e).
Subsections (a) through (e) are subject to:
(1) subsection (g) and the other provisions of this
Part;
(2) Section 4-210 with respect to a security
interest of a collecting bank;
(3) Section 5-118 with respect to a security
interest of an issuer or nominated person; and
(4) Section 9-110 with respect to a security
interest arising under Article 2 or 2A.
(g) Priority under agricultural lien statute. A
perfected agricultural lien on collateral has priority over a
conflicting security interest in or agricultural lien on the
same collateral if the statute creating the agricultural lien
so provides.
(Source: P.A. 91-893, eff. 7-1-01.)
(810 ILCS 5/9-329.1 new)
Sec. 9-329.1. Priority of Security Interests in
Beneficial Interest in an Illinois Land Trust. The following
rules govern priority among conflicting security interests in
the same beneficial interest in an Illinois land trust:
(1) A security interest held by a secured party
having control of the beneficial interest under Section
9-107.1 has priority to the extent of its control over a
conflicting security interest held by a secured party
that does not have control.
(2) Security interests perfected by control under
Section 9-314 rank according to priority in time of
obtaining control.
Section 95. No acceleration or delay. Where this Act
makes changes in a statute that is represented in this Act by
text that is not yet or no longer in effect (for example, a
Section represented by multiple versions), the use of that
text does not accelerate or delay the taking effect of (i)
the changes made by this Act or (ii) provisions derived from
any other Public Act.
Passed in the General Assembly May 09, 2001.
Approved August 02, 2001.
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