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91_SB1231enr SB1231 Enrolled LRB9106284WHdv 1 AN ACT in relation to secured transactions. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Uniform Commercial Code is amended by 5 changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106, 6 9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115, 7 9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1, 8 9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305, 9 9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308, 10 9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316, 11 9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405, 12 9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504, 13 9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections 14 9-209, 9-210, 9-315.01, 9-315.02, 9-319, 9-320, 9-320.1, 15 9-320.2, 9-321, 9-322, 9-323, 9-324, 9-325, 9-326, 9-327, 16 9-328, 9-329, 9-330, 9-331, 9-332, 9-333, 9-334, 9-335, 17 9-336, 9-337, 9-338, 9-339, 9-340, 9-341, 9-342, 9-409, 18 9-508, 9-509, 9-510, 9-511, 9-512, 9-513, 9-514, 9-515, 19 9-516, 9-517, 9-518, 9-519, 9-520, 9-521, 9-522, 9-523, 20 9-524, 9-525, 9-526, 9-527, 9-601, 9-602, 9-603, 9-604, 21 9-605, 9-606, 9-607, 9-608, 9-609, 9-610, 9-611, 9-612, 22 9-613, 9-614, 9-615, 9-616, 9-617, 9-618, 9-619, 9-620, 23 9-621, 9-622, 9-623, 9-624, 9-625, 9-626, 9-627, 9-628, 24 9-701, 9-702, 9-703, 9-704, 9-705, 9-706, 9-707, 9-708, 25 9-709, and 9-710, changing the headings of Article 9 and 26 Parts 1, 2, 3, 4, 5, and 99 of Article 9, and adding headings 27 of Parts 6 and 7 of Article 9, Subparts 1 and 2 of Part 1 of 28 Article 9, Subparts 1 and 2 of Part 2 of Article 9, Subparts 29 1, 2, 3, and 4 of Part 3 of Article 9, Subparts 1 and 2 of 30 Part 5 of Article 9, and Subparts 1 and 2 of Part 6 of 31 Article 9 as follows: SB1231 Enrolled -2- LRB9106284WHdv 1 (810 ILCS 5/Art. 9 heading) 2 ARTICLE 9 3 SECURED TRANSACTIONS: SALES OF ACCOUNTS,4CONTRACT RIGHTS AND CHATTEL PAPER5 (810 ILCS 5/Art. 9, Part 1 heading) 6 PART 1. GENERAL PROVISIONS 7SHORT TITLE, APPLICABILITY AND DEFINITIONS8 (810 ILCS 5/Art. 9, Part 1, Subpart 1 heading new) 9 SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS 10 (810 ILCS 5/9-101) (from Ch. 26, par. 9-101) 11 Sec. 9-101. Short title. This Article may be cited as 12 Uniform Commercial Code-Secured Transactions.Short title.13This Article shall be known and may be cited as Uniform14Commercial Code--Secured Transactions.15 (Source: Laws 1961, p. 2101.) 16 (810 ILCS 5/9-102) (from Ch. 26, par. 9-102) 17 Sec. 9-102. Definitions and index of definitions. 18 (a) Article 9 definitions. In this Article: 19 (1) "Accession" means goods that are physically 20 united with other goods in such a manner that the 21 identity of the original goods is not lost. 22 (2) "Account", except as used in "account for", 23 means a right to payment of a monetary obligation, 24 whether or not earned by performance, (i) for property 25 that has been or is to be sold, leased, licensed, 26 assigned, or otherwise disposed of, (ii) for services 27 rendered or to be rendered, (iii) for a policy of 28 insurance issued or to be issued, (iv) for a secondary 29 obligation incurred or to be incurred, (v) for energy 30 provided or to be provided, (vi) for the use or hire of a SB1231 Enrolled -3- LRB9106284WHdv 1 vessel under a charter or other contract, (vii) arising 2 out of the use of a credit or charge card or information 3 contained on or for use with the card, or (viii) as 4 winnings in a lottery or other game of chance operated or 5 sponsored by a State, governmental unit of a State, or 6 person licensed or authorized to operate the game by a 7 State or governmental unit of a State. The term includes 8 health-care-insurance receivables. The term does not 9 include (i) rights to payment evidenced by chattel paper 10 or an instrument, (ii) commercial tort claims, (iii) 11 deposit accounts, (iv) investment property, (v) 12 letter-of-credit rights or letters of credit, or (vi) 13 rights to payment for money or funds advanced or sold, 14 other than rights arising out of the use of a credit or 15 charge card or information contained on or for use with 16 the card. 17 (3) "Account debtor" means a person obligated on an 18 account, chattel paper, or general intangible. The term 19 does not include persons obligated to pay a negotiable 20 instrument, even if the instrument constitutes part of 21 chattel paper. 22 (4) "Accounting", except as used in "accounting 23 for", means a record: 24 (A) authenticated by a secured party; 25 (B) indicating the aggregate unpaid secured 26 obligations as of a date not more than 35 days 27 earlier or 35 days later than the date of the 28 record; and 29 (C) identifying the components of the 30 obligations in reasonable detail. 31 (5) "Agricultural lien" means an interest, other 32 than a security interest, in farm products: 33 (A) which secures payment or performance of an 34 obligation for: SB1231 Enrolled -4- LRB9106284WHdv 1 (i) goods or services furnished in 2 connection with a debtor's farming operation; 3 or 4 (ii) rent on real property leased by a 5 debtor in connection with its farming 6 operation; 7 (B) which is created by statute in favor of a 8 person that: 9 (i) in the ordinary course of its 10 business furnished goods or services to a 11 debtor in connection with a debtor's farming 12 operation; or 13 (ii) leased real property to a debtor in 14 connection with the debtor's farming operation; 15 and 16 (C) whose effectiveness does not depend on the 17 person's possession of the personal property. 18 (6) "As-extracted collateral" means: 19 (A) oil, gas, or other minerals that are 20 subject to a security interest that: 21 (i) is created by a debtor having an 22 interest in the minerals before extraction; and 23 (ii) attaches to the minerals as 24 extracted; or 25 (B) accounts arising out of the sale at the 26 wellhead or minehead of oil, gas, or other minerals 27 in which the debtor had an interest before 28 extraction. 29 (7) "Authenticate" means: 30 (A) to sign; or 31 (B) to execute or otherwise adopt a symbol, or 32 encrypt or similarly process a record in whole or in 33 part, with the present intent of the authenticating 34 person to identify the person and adopt or accept a SB1231 Enrolled -5- LRB9106284WHdv 1 record. 2 (8) "Bank" means an organization that is engaged in 3 the business of banking. The term includes savings 4 banks, savings and loan associations, credit unions, and 5 trust companies. 6 (9) "Cash proceeds" means proceeds that are money, 7 checks, deposit accounts, or the like. 8 (10) "Certificate of title" means a certificate of 9 title with respect to which a statute provides for the 10 security interest in question to be indicated on the 11 certificate as a condition or result of the security 12 interest's obtaining priority over the rights of a lien 13 creditor with respect to the collateral. 14 (11) "Chattel paper" means a record or records that 15 evidence both a monetary obligation and a security 16 interest in specific goods, a security interest in 17 specific goods and software used in the goods, a security 18 interest in specific goods and license of software used 19 in the goods, a lease of specific goods, or a lease of 20 specified goods and a license of software used in the 21 goods. In this paragraph, "monetary obligation" means a 22 monetary obligation secured by the goods or owed under a 23 lease of the goods and includes a monetary obligation 24 with respect to software used in the goods. The term 25 does not include (i) charters or other contracts 26 involving the use or hire of a vessel or (ii) records 27 that evidence a right to payment arising out of the use 28 of a credit or charge card or information contained on or 29 for use with the card. If a transaction is evidenced by 30 records that include an instrument or series of 31 instruments, the group of records taken together 32 constitutes chattel paper. 33 (12) "Collateral" means the property subject to a 34 security interest or agricultural lien. The term SB1231 Enrolled -6- LRB9106284WHdv 1 includes: 2 (A) proceeds to which a security interest 3 attaches; 4 (B) accounts, chattel paper, payment 5 intangibles, and promissory notes that have been 6 sold; and 7 (C) goods that are the subject of a 8 consignment. 9 (13) "Commercial tort claim" means a claim arising 10 in tort with respect to which: 11 (A) the claimant is an organization; or 12 (B) the claimant is an individual and the 13 claim: 14 (i) arose in the course of the claimant's 15 business or profession; and 16 (ii) does not include damages arising out 17 of personal injury to or the death of an 18 individual. 19 (14) "Commodity account" means an account 20 maintained by a commodity intermediary in which a 21 commodity contract is carried for a commodity customer. 22 (15) "Commodity contract" means a commodity futures 23 contract, an option on a commodity futures contract, a 24 commodity option, or another contract if the contract or 25 option is: 26 (A) traded on or subject to the rules of a 27 board of trade that has been designated as a 28 contract market for such a contract pursuant to 29 federal commodities laws; or 30 (B) traded on a foreign commodity board of 31 trade, exchange, or market, and is carried on the 32 books of a commodity intermediary for a commodity 33 customer. 34 (16) "Commodity customer" means a person for which SB1231 Enrolled -7- LRB9106284WHdv 1 a commodity intermediary carries a commodity contract on 2 its books. 3 (17) "Commodity intermediary" means a person that: 4 (A) is registered as a futures commission 5 merchant under federal commodities law; or 6 (B) in the ordinary course of its business 7 provides clearance or settlement services for a 8 board of trade that has been designated as a 9 contract market pursuant to federal commodities law. 10 (18) "Communicate" means: 11 (A) to send a written or other tangible 12 record; 13 (B) to transmit a record by any means agreed 14 upon by the persons sending and receiving the 15 record; or 16 (C) in the case of transmission of a record to 17 or by a filing office, to transmit a record by any 18 means prescribed by filing-office rule. 19 (19) "Consignee" means a merchant to which goods 20 are delivered in a consignment. 21 (20) "Consignment" means a transaction, regardless 22 of its form, in which a person delivers goods to a 23 merchant for the purpose of sale and: 24 (A) the merchant: 25 (i) deals in goods of that kind under a 26 name other than the name of the person making 27 delivery; 28 (ii) is not an auctioneer; and 29 (iii) is not generally known by its 30 creditors to be substantially engaged in 31 selling the goods of others; 32 (B) with respect to each delivery, the 33 aggregate value of the goods is $1,000 or more at 34 the time of delivery; SB1231 Enrolled -8- LRB9106284WHdv 1 (C) the goods are not consumer goods 2 immediately before delivery; and 3 (D) the transaction does not create a security 4 interest that secures an obligation. 5 (21) "Consignor" means a person that delivers goods 6 to a consignee in a consignment. 7 (22) "Consumer debtor" means a debtor in a consumer 8 transaction. 9 (23) "Consumer goods" means goods that are used or 10 bought for use primarily for personal, family, or 11 household purposes. 12 (24) "Consumer-goods transaction" means a consumer 13 transaction in which: 14 (A) an individual incurs an obligation 15 primarily for personal, family, or household 16 purposes; and 17 (B) a security interest in consumer goods 18 secures the obligation. 19 (25) "Consumer obligor" means an obligor who is an 20 individual and who incurred the obligation as part of a 21 transaction entered into primarily for personal, family, 22 or household purposes. 23 (26) "Consumer transaction" means a transaction in 24 which (i) an individual incurs an obligation primarily 25 for personal, family, or household purposes, (ii) a 26 security interest secures the obligation, and (iii) the 27 collateral is held or acquired primarily for personal, 28 family, or household purposes. The term includes 29 consumer-goods transactions. 30 (27) "Continuation statement" means an amendment of 31 a financing statement which: 32 (A) identifies, by its file number, the 33 initial financing statement to which it relates; and 34 (B) indicates that it is a continuation SB1231 Enrolled -9- LRB9106284WHdv 1 statement for, or that it is filed to continue the 2 effectiveness of, the identified financing 3 statement. 4 (28) "Debtor" means: 5 (A) a person having an interest, other than a 6 security interest or other lien, in the collateral, 7 whether or not the person is an obligor; 8 (B) a seller of accounts, chattel paper, 9 payment intangibles, or promissory notes; or 10 (C) a consignee. 11 (29) "Deposit account" means a demand, time, 12 savings, passbook, nonnegotiable certificates of deposit, 13 uncertificated certificates of deposit, nontransferrable 14 certificates of deposit, or similar account maintained 15 with a bank. The term does not include investment 16 property or accounts evidenced by an instrument. 17 (30) "Document" means a document of title or a 18 receipt of the type described in Section 7-201(2). 19 (31) "Electronic chattel paper" means chattel paper 20 evidenced by a record or records consisting of 21 information stored in an electronic medium. 22 (32) "Encumbrance" means a right, other than an 23 ownership interest, in real property. The term includes 24 mortgages and other liens on real property. 25 (33) "Equipment" means goods other than inventory, 26 farm products, or consumer goods. 27 (34) "Farm products" means goods, other than 28 standing timber, with respect to which the debtor is 29 engaged in a farming operation and which are: 30 (A) crops grown, growing, or to be grown, 31 including: 32 (i) crops produced on trees, vines, and 33 bushes; and 34 (ii) aquatic goods produced in SB1231 Enrolled -10- LRB9106284WHdv 1 aquacultural operations; 2 (B) livestock, born or unborn, including 3 aquatic goods produced in aquacultural operations; 4 (C) supplies used or produced in a farming 5 operation; or 6 (D) products of crops or livestock in their 7 unmanufactured states. 8 (35) "Farming operation" means raising, 9 cultivating, propagating, fattening, grazing, or any 10 other farming, livestock, or aquacultural operation. 11 (36) "File number" means the number assigned to an 12 initial financing statement pursuant to Section 9-519(a). 13 (37) "Filing office" means an office designated in 14 Section 9-501 as the place to file a financing statement. 15 (38) "Filing-office rule" means a rule adopted 16 pursuant to Section 9-526. 17 (39) "Financing statement" means a record or 18 records composed of an initial financing statement and 19 any filed record relating to the initial financing 20 statement. 21 (40) "Fixture filing" means the filing of a 22 financing statement covering goods that are or are to 23 become fixtures and satisfying Section 9-502(a) and (b). 24 The term includes the filing of a financing statement 25 covering goods of a transmitting utility which are or are 26 to become fixtures. 27 (41) "Fixtures" means goods that have become so 28 related to particular real property that an interest in 29 them arises under real property law. 30 (42) "General intangible" means any personal 31 property, including things in action, other than 32 accounts, chattel paper, commercial tort claims, deposit 33 accounts, documents, goods, instruments, investment 34 property, letter-of-credit rights, letters of credit, SB1231 Enrolled -11- LRB9106284WHdv 1 money, and oil, gas, or other minerals before extraction. 2 The term includes payment intangibles and software. 3 (43) "Good faith" means honesty in fact and the 4 observance of reasonable commercial standards of fair 5 dealing. 6 (44) "Goods" means all things that are movable when 7 a security interest attaches. The term includes (i) 8 fixtures, (ii) standing timber that is to be cut and 9 removed under a conveyance or contract for sale, (iii) 10 the unborn young of animals, (iv) crops grown, growing, 11 or to be grown, even if the crops are produced on trees, 12 vines, or bushes, and (v) manufactured homes. The term 13 also includes a computer program embedded in goods and 14 any supporting information provided in connection with a 15 transaction relating to the program if (i) the program is 16 associated with the goods in such a manner that it 17 customarily is considered part of the goods, or (ii) by 18 becoming the owner of the goods, a person acquires a 19 right to use the program in connection with the goods. 20 The term does not include a computer program embedded in 21 goods that consist solely of the medium in which the 22 program is embedded. The term also does not include 23 accounts, chattel paper, commercial tort claims, deposit 24 accounts, documents, general intangibles, instruments, 25 investment property, letter-of-credit rights, letters of 26 credit, money, or oil, gas, or other minerals before 27 extraction. 28 (45) "Governmental unit" means a subdivision, 29 agency, department, county, parish, municipality, or 30 other unit of the government of the United States, a 31 State, or a foreign country. The term includes an 32 organization having a separate corporate existence if the 33 organization is eligible to issue debt on which interest 34 is exempt from income taxation under the laws of the SB1231 Enrolled -12- LRB9106284WHdv 1 United States. 2 (46) "Health-care-insurance receivable" means an 3 interest in or claim under a policy of insurance which is 4 a right to payment of a monetary obligation for 5 health-care goods or services provided. 6 (47) "Instrument" means a negotiable instrument or 7 any other writing that evidences a right to the payment 8 of a monetary obligation, is not itself a security 9 agreement or lease, and is of a type that in ordinary 10 course of business is transferred by delivery with any 11 necessary indorsement or assignment. The term does not 12 include (i) investment property, (ii) letters of credit, 13 (iii) nonnegotiable certificates of deposit, (iv) 14 uncertificated certificates of deposit, (v) 15 nontransferrable certificates of deposit, or (vi) 16 writings that evidence a right to payment arising out of 17 the use of a credit or charge card or information 18 contained on or for use with the card. 19 (48) "Inventory" means goods, other than farm 20 products, which: 21 (A) are leased by a person as lessor; 22 (B) are held by a person for sale or lease or 23 to be furnished under a contract of service; 24 (C) are furnished by a person under a contract 25 of service; or 26 (D) consist of raw materials, work in process, 27 or materials used or consumed in a business. 28 (49) "Investment property" means a security, 29 whether certificated or uncertificated, security 30 entitlement, securities account, commodity contract, or 31 commodity account. 32 (50) "Jurisdiction of organization", with respect 33 to a registered organization, means the jurisdiction 34 under whose law the organization is organized. SB1231 Enrolled -13- LRB9106284WHdv 1 (51) "Letter-of-credit right" means a right to 2 payment or performance under a letter of credit, whether 3 or not the beneficiary has demanded or is at the time 4 entitled to demand payment or performance. The term does 5 not include the right of a beneficiary to demand payment 6 or performance under a letter of credit. 7 (52) "Lien creditor" means: 8 (A) a creditor that has acquired a lien on the 9 property involved by attachment, levy, or the like; 10 (B) an assignee for benefit of creditors from 11 the time of assignment; 12 (C) a trustee in bankruptcy from the date of 13 the filing of the petition; or 14 (D) a receiver in equity from the time of 15 appointment. 16 (53) "Manufactured home" means a structure, 17 transportable in one or more sections, which, in the 18 traveling mode, is eight body feet or more in width or 40 19 body feet or more in length, or, when erected on site, is 20 320 or more square feet, and which is built on a 21 permanent chassis and designed to be used as a dwelling 22 with or without a permanent foundation when connected to 23 the required utilities, and includes the plumbing, 24 heating, air-conditioning, and electrical systems 25 contained therein. The term includes any structure that 26 meets all of the requirements of this paragraph except 27 the size requirements and with respect to which the 28 manufacturer voluntarily files a certification required 29 by the United States Secretary of Housing and Urban 30 Development and complies with the standards established 31 under Title 42 of the United States Code. 32 (54) "Manufactured-home transaction" means a 33 secured transaction: 34 (A) that creates a purchase-money security SB1231 Enrolled -14- LRB9106284WHdv 1 interest in a manufactured home, other than a 2 manufactured home held as inventory; or 3 (B) in which a manufactured home, other than a 4 manufactured home held as inventory, is the primary 5 collateral. 6 (55) "Mortgage" means a consensual interest in real 7 property, including fixtures, which secures payment or 8 performance of an obligation. 9 (56) "New debtor" means a person that becomes bound 10 as debtor under Section 9-203(d) by a security agreement 11 previously entered into by another person. 12 (57) "New value" means (i) money, (ii) money's 13 worth in property, services, or new credit, or (iii) 14 release by a transferee of an interest in property 15 previously transferred to the transferee. The term does 16 not include an obligation substituted for another 17 obligation. 18 (58) "Noncash proceeds" means proceeds other than 19 cash proceeds. 20 (59) "Obligor" means a person that, with respect to 21 an obligation secured by a security interest in or an 22 agricultural lien on the collateral, (i) owes payment or 23 other performance of the obligation, (ii) has provided 24 property other than the collateral to secure payment or 25 other performance of the obligation, or (iii) is 26 otherwise accountable in whole or in part for payment or 27 other performance of the obligation. The term does not 28 include issuers or nominated persons under a letter of 29 credit. 30 (60) "Original debtor", except as used in Section 31 9-310(c), means a person that, as debtor, entered into a 32 security agreement to which a new debtor has become bound 33 under Section 9-203(d). 34 (61) "Payment intangible" means a general SB1231 Enrolled -15- LRB9106284WHdv 1 intangible under which the account debtor's principal 2 obligation is a monetary obligation. 3 (62) "Person related to", with respect to an 4 individual, means: 5 (A) the spouse of the individual; 6 (B) a brother, brother-in-law, sister, or 7 sister-in-law of the individual; 8 (C) an ancestor or lineal descendant of the 9 individual or the individual's spouse; or 10 (D) any other relative, by blood or marriage, 11 of the individual or the individual's spouse who 12 shares the same home with the individual. 13 (63) "Person related to", with respect to an 14 organization, means: 15 (A) a person directly or indirectly 16 controlling, controlled by, or under common control 17 with the organization; 18 (B) an officer or director of, or a person 19 performing similar functions with respect to, the 20 organization; 21 (C) an officer or director of, or a person 22 performing similar functions with respect to, a 23 person described in subparagraph (A); 24 (D) the spouse of an individual described in 25 subparagraph (A), (B), or (C); or 26 (E) an individual who is related by blood or 27 marriage to an individual described in subparagraph 28 (A), (B), (C), or (D) and shares the same home with 29 the individual. 30 (64) "Proceeds", except as used in Section 31 9-609(b), means the following property: 32 (A) whatever is acquired upon the sale, lease, 33 license, exchange, or other disposition of 34 collateral; SB1231 Enrolled -16- LRB9106284WHdv 1 (B) whatever is collected on, or distributed 2 on account of, collateral; 3 (C) rights arising out of collateral; 4 (D) to the extent of the value of collateral, 5 claims arising out of the loss, nonconformity, or 6 interference with the use of, defects or 7 infringement of rights in, or damage to, the 8 collateral; or 9 (E) to the extent of the value of collateral 10 and to the extent payable to the debtor or the 11 secured party, insurance payable by reason of the 12 loss or nonconformity of, defects or infringement of 13 rights in, or damage to, the collateral. 14 (65) "Promissory note" means an instrument that 15 evidences a promise to pay a monetary obligation, does 16 not evidence an order to pay, and does not contain an 17 acknowledgment by a bank that the bank has received for 18 deposit a sum of money or funds. 19 (66) "Proposal" means a record authenticated by a 20 secured party which includes the terms on which the 21 secured party is willing to accept collateral in full or 22 partial satisfaction of the obligation it secures 23 pursuant to Sections 9-620, 9-621, and 9-622. 24 (67) "Public-finance transaction" means a secured 25 transaction in connection with which: 26 (A) debt securities are issued; 27 (B) all or a portion of the securities issued 28 have an initial stated maturity of at least 20 29 years; and 30 (C) the debtor, obligor, secured party, 31 account debtor or other person obligated on 32 collateral, assignor or assignee of a secured 33 obligation, or assignor or assignee of a security 34 interest is a State or a governmental unit of a SB1231 Enrolled -17- LRB9106284WHdv 1 State. 2 (68) "Pursuant to commitment", with respect to an 3 advance made or other value given by a secured party, 4 means pursuant to the secured party's obligation, whether 5 or not a subsequent event of default or other event not 6 within the secured party's control has relieved or may 7 relieve the secured party from its obligation. 8 (69) "Record", except as used in "for record", "of 9 record", "record or legal title", and "record owner", 10 means information that is inscribed on a tangible medium 11 or which is stored in an electronic or other medium and 12 is retrievable in perceivable form. 13 (70) "Registered organization" means an 14 organization organized solely under the law of a single 15 State or the United States and as to which the State or 16 the United States must maintain a public record showing 17 the organization to have been organized. 18 (71) "Secondary obligor" means an obligor to the 19 extent that: 20 (A) the obligor's obligation is secondary; or 21 (B) the obligor has a right of recourse with 22 respect to an obligation secured by collateral 23 against the debtor, another obligor, or property of 24 either. 25 (72) "Secured party" means: 26 (A) a person in whose favor a security 27 interest is created or provided for under a security 28 agreement, whether or not any obligation to be 29 secured is outstanding; 30 (B) a person that holds an agricultural lien; 31 (C) a consignor; 32 (D) a person to which accounts, chattel paper, 33 payment intangibles, or promissory notes have been 34 sold; SB1231 Enrolled -18- LRB9106284WHdv 1 (E) a trustee, indenture trustee, agent, 2 collateral agent, or other representative in whose 3 favor a security interest or agricultural lien is 4 created or provided for; or 5 (F) a person that holds a security interest 6 arising under Section 2-401, 2-505, 2-711(3), 7 2A-508(5), 4-210, or 5-118. 8 (73) "Security agreement" means an agreement that 9 creates or provides for a security interest. 10 (74) "Send", in connection with a record or 11 notification, means: 12 (A) to deposit in the mail, deliver for 13 transmission, or transmit by any other usual means 14 of communication, with postage or cost of 15 transmission provided for, addressed to any address 16 reasonable under the circumstances; or 17 (B) to cause the record or notification to be 18 received within the time that it would have been 19 received if properly sent under subparagraph (A). 20 (75) "Software" means a computer program and any 21 supporting information provided in connection with a 22 transaction relating to the program. The term does not 23 include a computer program that is included in the 24 definition of goods. 25 (76) "State" means a State of the United States, 26 the District of Columbia, Puerto Rico, the United States 27 Virgin Islands, or any territory or insular possession 28 subject to the jurisdiction of the United States. 29 (77) "Supporting obligation" means a 30 letter-of-credit right or secondary obligation that 31 supports the payment or performance of an account, 32 chattel paper, a document, a general intangible, an 33 instrument, or investment property. 34 (78) "Tangible chattel paper" means chattel paper SB1231 Enrolled -19- LRB9106284WHdv 1 evidenced by a record or records consisting of 2 information that is inscribed on a tangible medium. 3 (79) "Termination statement" means an amendment of 4 a financing statement which: 5 (A) identifies, by its file number, the 6 initial financing statement to which it relates; and 7 (B) indicates either that it is a termination 8 statement or that the identified financing statement 9 is no longer effective. 10 (80) "Transmitting utility" means a person 11 primarily engaged in the business of: 12 (A) operating a railroad, subway, street 13 railway, or trolley bus; 14 (B) transmitting communications electrically, 15 electromagnetically, or by light; 16 (C) transmitting goods by pipeline or sewer; 17 or 18 (D) transmitting or producing and transmitting 19 electricity, steam, gas, or water. 20 (b) Definitions in other Articles. The following 21 definitions in other Articles apply to this Article: 22 "Applicant". Section 5-102. 23 "Beneficiary". Section 5-102. 24 "Broker". Section 8-102. 25 "Certificated security". Section 8-102. 26 "Check". Section 3-104. 27 "Clearing corporation". Section 8-102. 28 "Contract for sale". Section 2-106. 29 "Customer". Section 4-104. 30 "Entitlement holder". Section 8-102. 31 "Financial asset". Section 8-102. 32 "Holder in due course". Section 3-302. 33 "Issuer" (with respect to a letter of credit or 34 letter-of-credit right). Section 5-102. SB1231 Enrolled -20- LRB9106284WHdv 1 "Issuer" (with respect to a security). Section 8-201. 2 "Lease". Section 2A-103. 3 "Lease agreement". Section 2A-103. 4 "Lease contract". Section 2A-103. 5 "Leasehold interest". Section 2A-103. 6 "Lessee". Section 2A-103. 7 "Lessee in ordinary course of business". Section 2A-103. 8 "Lessor". Section 2A-103. 9 "Lessor's residual interest". Section 2A-103. 10 "Letter of credit". Section 5-102. 11 "Merchant". Section 2-104. 12 "Negotiable instrument". Section 3-104. 13 "Nominated person". Section 5-102. 14 "Note". Section 3-104. 15 "Proceeds of a letter of credit". Section 5-114. 16 "Prove". Section 3-103. 17 "Sale". Section 2-106. 18 "Securities account". Section 8-501. 19 "Securities intermediary". Section 8-102. 20 "Security". Section 8-102. 21 "Security certificate". Section 8-102. 22 "Security entitlement". Section 8-102. 23 "Uncertificated security". Section 8-102. 24 (c) Article 1 definitions and principles. Article 1 25 contains general definitions and principles of construction 26 and interpretation applicable throughout this Article.Policy27and Subject Matter of Article.28(1) Except as otherwise provided in Section 9--104 on29excluded transactions, this Article applies30(a) to any transaction (regardless of its form)31which is intended to create a security interest in personal32property or fixtures including goods, documents, instruments,33general intangibles, chattel paper or accounts; and also34(b) to any sale of accounts or chattel paper.SB1231 Enrolled -21- LRB9106284WHdv 1(2) This Article applies to security interests created2by contract including pledge, assignment, chattel mortgage,3chattel trust, trust deed, factor's lien, equipment trust,4conditional sale, trust receipt, other lien or title5retention contract and lease or consignment intended as6security. This Article does not apply to statutory liens7except as provided in Section 9--310.8(3) The application of this Article to a security9interest in a secured obligation is not affected by the fact10that the obligation is itself secured by a transaction or11interest to which this Article does not apply.12(4) The application of this Article to a security13interest in a deposit account shall not displace a common law14right of set-off of the secured party as to a deposit account15maintained with the secured party.16 (Source: P.A. 87-1037.) 17 (810 ILCS 5/9-103) (from Ch. 26, par. 9-103) 18 Sec. 9-103. Purchase-money security interest; application 19 of payments; burden of establishing. 20 (a) Definitions. In this Section: 21 (1) "purchase-money collateral" means goods or 22 software that secures a purchase-money obligation 23 incurred with respect to that collateral; and 24 (2) "purchase-money obligation" means an obligation 25 of an obligor incurred as all or part of the price of the 26 collateral or for value given to enable the debtor to 27 acquire rights in or the use of the collateral if the 28 value is in fact so used. 29 (b) Purchase-money security interest in goods. A 30 security interest in goods is a purchase-money security 31 interest: 32 (1) to the extent that the goods are purchase-money 33 collateral with respect to that security interest; SB1231 Enrolled -22- LRB9106284WHdv 1 (2) if the security interest is in inventory that 2 is or was purchase-money collateral, also to the extent 3 that the security interest secures a purchase-money 4 obligation incurred with respect to other inventory in 5 which the secured party holds or held a purchase-money 6 security interest; and 7 (3) also to the extent that the security interest 8 secures a purchase-money obligation incurred with respect 9 to software in which the secured party holds or held a 10 purchase-money security interest. 11 (c) Purchase-money security interest in software. A 12 security interest in software is a purchase-money security 13 interest to the extent that the security interest also 14 secures a purchase-money obligation incurred with respect to 15 goods in which the secured party holds or held a 16 purchase-money security interest if: 17 (1) the debtor acquired its interest in the 18 software in an integrated transaction in which it 19 acquired an interest in the goods; and 20 (2) the debtor acquired its interest in the 21 software for the principal purpose of using the software 22 in the goods. 23 (d) Consignor's inventory purchase-money security 24 interest. The security interest of a consignor in goods that 25 are the subject of a consignment is a purchase-money security 26 interest in inventory. 27 (e) Application of payment in non-consumer-goods 28 transaction. In a transaction other than a consumer-goods 29 transaction, if the extent to which a security interest is a 30 purchase-money security interest depends on the application 31 of a payment to a particular obligation, the payment must be 32 applied: 33 (1) in accordance with any reasonable method of 34 application to which the parties agree; SB1231 Enrolled -23- LRB9106284WHdv 1 (2) in the absence of the parties' agreement to a 2 reasonable method, in accordance with any intention of 3 the obligor manifested at or before the time of payment; 4 or 5 (3) in the absence of an agreement to a reasonable 6 method and a timely manifestation of the obligor's 7 intention, in the following order: 8 (A) to obligations that are not secured; and 9 (B) if more than one obligation is secured, to 10 obligations secured by purchase-money security 11 interests in the order in which those obligations 12 were incurred. 13 (f) No loss of status of purchase-money security 14 interest in non-consumer-goods transaction. In a transaction 15 other than a consumer-goods transaction, a purchase-money 16 security interest does not lose its status as such, even if: 17 (1) the purchase-money collateral also secures an 18 obligation that is not a purchase-money obligation; 19 (2) collateral that is not purchase-money 20 collateral also secures the purchase-money obligation; or 21 (3) the purchase-money obligation has been renewed, 22 refinanced, consolidated, or restructured. 23 (g) Burden of proof in non-consumer-goods transaction. 24 In a transaction other than a consumer-goods transaction, a 25 secured party claiming a purchase-money security interest has 26 the burden of establishing the extent to which the security 27 interest is a purchase-money security interest. 28 (h) Non-consumer-goods transactions; no inference. The 29 limitation of the rules in subsections (e), (f), and (g) to 30 transactions other than consumer-goods transactions is 31 intended to leave to the court the determination of the 32 proper rules in consumer-goods transactions. The court may 33 not infer from that limitation the nature of the proper rule 34 in consumer-goods transactions and may continue to apply SB1231 Enrolled -24- LRB9106284WHdv 1 established approaches.Perfection of Security Interests in2Multiple State Transactions.3(1) Documents, instruments, letters of credit, and4ordinary goods.5(a) This subsection applies to documents,6instruments, rights to proceeds of written letters of7credit, and goods other than those covered by a8certificate of title described in subsection (2), mobile9goods described in subsection (3), and minerals described10in subsection (5).11(b) Except as otherwise provided in this12subsection, perfection and the effect of perfection or13non-perfection of a security interest in collateral are14governed by the law of the jurisdiction where the15collateral is when the last event occurs on which is16based the assertion that the security interest is17perfected or unperfected.18(c) If the parties to a transaction creating a19purchase money security interest in goods in one20jurisdiction understand at the time that the security21interest attaches that the goods will be kept in another22jurisdiction, then the law of the other jurisdiction23governs the perfection and the effect of perfection or24non-perfection of the security interest from the time it25attaches until 30 days after the debtor receives26possession of the goods and thereafter if the goods are27taken to the other jurisdiction before the end of the2830-day period.29(d) When collateral is brought into and kept in30this State while subject to a security interest perfected31under the law of the jurisdiction from which the32collateral was removed, the security interest remains33perfected, but if action is required by Part 3 of this34Article to perfect the security interest,SB1231 Enrolled -25- LRB9106284WHdv 1(i) if the action is not taken before the2expiration of the period of perfection in the other3jurisdiction or the end of 4 months after the4collateral is brought into this State, whichever5period first expires, the security interest becomes6unperfected at the end of that period and is7thereafter deemed to have been unperfected as8against a person who became a purchaser after9removal;10(ii) if the action is taken before the11expiration of the period specified in subparagraph12(i), the security interest continues perfected13thereafter;14(iii) for the purpose of priority over a buyer15of consumer goods (subsection (2) of Section 9-307),16the period of the effectiveness of a filing in the17jurisdiction from which the collateral is removed is18governed by the rules with respect to perfection in19subparagraphs (i) and (ii).20(2) Certificate of title.21(a) This subsection applies to goods covered by a22certificate of title issued under a statute of this State23or of another jurisdiction under the law of which24indication of a security interest on the certificate is25required as a condition of perfection.26(b) Except as otherwise provided in this27subsection, perfection and the effect of perfection or28non-perfection of the security interest are governed by29the law (including the conflict of laws rules) of the30jurisdiction issuing the certificate until 4 months after31the goods are removed from that jurisdiction and32thereafter until the goods are registered in another33jurisdiction, but in any event not beyond surrender of34the certificate. After the expiration of that period,SB1231 Enrolled -26- LRB9106284WHdv 1the goods are not covered by the certificate of title2within the meaning of this Section.3(c) Except with respect to the rights of a buyer4described in the next paragraph, a security interest,5perfected in another jurisdiction otherwise than by6notation on a certificate of title, in goods brought into7this State and thereafter covered by a certificate of8title issued by this State is subject to the rules stated9in paragraph (d) of subsection (1).10(d) If goods are brought into this State while a11security interest therein is perfected in any manner12under the law of the jurisdiction from which the goods13are removed and a certificate of title is issued by this14State and the certificate does not show that the goods15are subject to the security interest or that they may be16subject to security interests not shown on the17certificate, the security interest is subordinate to the18rights of a buyer of the goods to the extent that he19gives value and receives delivery of the goods after20issuance of the certificate and without knowledge of the21security interest.22(3) Accounts, general intangibles and mobile goods.23(a) This subsection applies to accounts (other than24an account described in subsection (5) on minerals) and25general intangibles (other than uncertificated26securities) and to goods which are mobile and which are27of a type normally used in more than one jurisdiction,28such as motor vehicles, trailers, rolling stock,29airplanes, shipping containers, road building and30construction machinery and commercial harvesting31machinery and the like, if the goods are equipment or are32inventory leased or held for lease by the debtor to33others, and are not covered by a certificate of title34described in subsection (2).SB1231 Enrolled -27- LRB9106284WHdv 1(b) The law (including the conflict of laws rules)2of the jurisdiction in which the debtor is located3governs the perfection and the effect of perfection or4non-perfection of the security interest.5(c) If, however, the debtor is located in a6jurisdiction which is not a part of the United States,7and which does not provide for perfection of the security8interest by filing or recording in that jurisdiction, the9law of the jurisdiction in the United States in which the10debtor has its major executive office in the United11States governs the perfection and the effect of12perfection or non-perfection of the security interest13through filing. In the alternative, if the debtor is14located in a jurisdiction which is not a part of the15United States or Canada and the collateral is accounts or16general intangibles for money due or to become due, the17security interest may be perfected by notification to the18account debtor. As used in this paragraph, "United19States" includes its territories and possessions and the20Commonwealth of Puerto Rico.21(d) A debtor shall be deemed located at his place22of business if he has one, at his chief executive office23if he has more than one place of business, otherwise at24his residence. If, however, the debtor is a foreign air25carrier under the Federal Aviation Act of 1958, as26amended, it shall be deemed located at the designated27office of the agent upon whom service of process may be28made on behalf of the foreign air carrier.29(e) A security interest perfected under the law of30the jurisdiction of the location of the debtor is31perfected until the expiration of 4 months after a change32of the debtor's location to another jurisdiction, or33until perfection would have ceased by the law of the34first jurisdiction, whichever period first expires.SB1231 Enrolled -28- LRB9106284WHdv 1Unless perfected in the new jurisdiction before the end2of that period, it becomes unperfected thereafter and is3deemed to have been unperfected as against a person who4became a purchaser after the change.5(4) Chattel paper. The rules stated for goods in6subsection (1) apply to a possessory security interest in7chattel paper. The rules stated for accounts in subsection8(3) apply to a non-possessory security interest in chattel9paper, but the security interest may not be perfected by10notification to the account debtor.11(5) Minerals. Perfection and the effect of perfection12or non-perfection of a security interest which is created by13a debtor who has an interest in minerals or the like14(including oil and gas) before extraction and which attaches15thereto as extracted, or which attaches to an account16resulting from the sale thereof at the wellhead or minehead17are governed by the law (including the conflict of laws18rules) of the jurisdiction wherein the wellhead or minehead19is located.20(6) Investment property.21(a) This subsection applies to investment property.22(b) Except as otherwise provided in paragraph (f),23during the time that a security certificate is located in24a jurisdiction, perfection of a security interest, the25effect of perfection or non-perfection, and the priority26of a security interest in the certificated security27represented thereby are governed by the local law of that28jurisdiction.29(c) Except as otherwise provided in paragraph (f),30perfection of a security interest, the effect of31perfection or non-perfection, and the priority of a32security interest in an uncertificated security are33governed by the local law of the issuer's jurisdiction as34specified in Section 8-110(d).SB1231 Enrolled -29- LRB9106284WHdv 1(d) Except as otherwise provided in paragraph (f),2perfection of a security interest, the effect of3perfection or non-perfection, and the priority of a4security interest in a security entitlement or securities5account are governed by the local law of the securities6intermediary's jurisdiction as specified in Section78-110(e).8(e) Except as otherwise provided in paragraph (f),9perfection of a security interest, the effect of10perfection or non-perfection, and the priority of a11security interest in a commodity contract or commodity12account are governed by the local law of the commodity13intermediary's jurisdiction. The following rules14determine a "commodity intermediary's jurisdiction" for15purposes of this paragraph:16(i) If an agreement between the commodity17intermediary and commodity customer specifies that18it is governed by the law of a particular19jurisdiction, that jurisdiction is the commodity20intermediary's jurisdiction.21(ii) If an agreement between the commodity22intermediary and commodity customer does not specify23the governing law as provided in subparagraph (i),24but expressly specifies that the commodity account25is maintained at an office in a particular26jurisdiction, that jurisdiction is the commodity27intermediary's jurisdiction.28(iii) If an agreement between the commodity29intermediary and commodity customer does not specify30a jurisdiction as provided in subparagraphs (i) or31(ii), the commodity intermediary's jurisdiction is32the jurisdiction in which is located the office33identified in an account statement as the office34serving the commodity customer's account.SB1231 Enrolled -30- LRB9106284WHdv 1(iv) If an agreement between the commodity2intermediary and commodity customer does not specify3a jurisdiction as provided in subparagraphs (i) or4(ii) and an account statement does not identify an5office serving the commodity customer's account as6provided in subparagraph (iii), the commodity7intermediary's jurisdiction is the jurisdiction in8which is located the chief executive office of the9commodity intermediary.10(f) Perfection of a security interest by filing,11automatic perfection of a security interest in investment12property granted by a broker or securities intermediary,13and automatic perfection of a security interest in a14commodity contract or commodity account granted by a15commodity intermediary are governed by the local law of16the jurisdiction in which the debtor is located.17 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97; 18 89-626, eff. 8-9-96.) 19 (810 ILCS 5/9-104) (from Ch. 26, par. 9-104) 20 Sec. 9-104. Control of deposit account. 21 (a) Requirements for control. A secured party has 22 control of a deposit account if: 23 (1) the secured party is the bank with which the 24 deposit account is maintained; 25 (2) the debtor, secured party, and bank have agreed 26 in an authenticated record that the bank will comply with 27 instructions originated by the secured party directing 28 disposition of the funds in the deposit account without 29 further consent by the debtor; or 30 (3) the secured party becomes the bank's customer 31 with respect to the deposit account. 32 (b) Debtor's right to direct disposition. A secured 33 party that has satisfied subsection (a) has control, even if SB1231 Enrolled -31- LRB9106284WHdv 1 the debtor retains the right to direct the disposition of 2 funds from the deposit account.Transactions excluded from3Article.4This Article does not apply5(a) to a security interest subject to any statute6of the United States to the extent that such statute7governs the rights of parties to and third parties8affected by transactions in particular types of property;9or10(b) to a landlord's lien; or11(c) to a lien given by statute or other rule of law12for services or materials except as provided in Section139-310 on priority of such liens; or14(d) to a transfer of a claim for wages, salary or15other compensation of an employee; or16(e) to a transfer by a government or governmental17subdivision or agency; or18(f) to a sale of accounts or chattel paper as part19of a sale of the business out of which they arose, or an20assignment of accounts or chattel paper which is for the21purpose of collection only, or a transfer of a right to22payment under a contract to an assignee who is also to do23the performance under the contract or a transfer of a24single account to an assignee in whole or partial25satisfaction of a preexisting indebtedness; or26(g) to a transfer of an interest or claim in or27under any policy of insurance, except as provided with28respect to proceeds (Section 9-306) and priorities in29proceeds (Section 9-312); or30(h) to a right represented by a judgment (other31than a judgment taken on a right to payment which was32collateral); or33(i) to any right of set-off; or34(j) except to the extent that provision is made forSB1231 Enrolled -32- LRB9106284WHdv 1fixtures in Section 9-313, to the creation or transfer of2an interest in or lien on real estate, including a lease3or rents thereunder; or4(k) to a transfer in whole or in part of any claim5arising out of tort; or6(l) to a transfer of an interest in a letter of7credit other than the rights to proceeds of a written8letter of credit.9 (Source: P.A. 89-534, eff. 1-1-97.) 10 (810 ILCS 5/9-105) (from Ch. 26, par. 9-105) 11 Sec. 9-105. Control of electronic chattel paper. A 12 secured party has control of electronic chattel paper if the 13 record or records comprising the chattel paper are created, 14 stored, and assigned in such a manner that: 15 (1) a single authoritative copy of the record or 16 records exists which is unique, identifiable and, except 17 as otherwise provided in paragraphs (4), (5), and (6), 18 unalterable; 19 (2) the authoritative copy identifies the secured 20 party as the assignee of the record or records; 21 (3) the authoritative copy is communicated to and 22 maintained by the secured party or its designated 23 custodian; 24 (4) copies or revisions that add or change an 25 identified assignee of the authoritative copy can be made 26 only with the participation of the secured party; 27 (5) each copy of the authoritative copy and any 28 copy of a copy is readily identifiable as a copy that is 29 not the authoritative copy; and 30 (6) any revision of the authoritative copy is 31 readily identifiable as an authorized or unauthorized 32 revision.Definitions and index of definitions.33(1) In this Article unless the context otherwiseSB1231 Enrolled -33- LRB9106284WHdv 1requires:2(a) "Account debtor" means the person who is3obligated on an account, chattel paper or general4intangible;5(b) "Chattel paper" means a writing or writings6which evidence both a monetary obligation and a security7interest in or a lease of specific goods, but a charter8or other contract involving the use or hire of a vessel9is not chattel paper. When a transaction is evidenced10both by such a security agreement or a lease and by an11instrument or a series of instruments, the group of12writings taken together constitutes chattel paper;13(c) "Collateral" means the property subject to a14security interest, and includes accounts and chattel15paper which have been sold;16(d) "Debtor" means the person who owes payment or17other performance of the obligation secured, whether or18not he owns or has rights in the collateral, and includes19the seller of accounts or chattel paper. Where the debtor20and the owner of the collateral are not the same person,21the term "debtor" means the owner of the collateral in22any provision of the Article dealing with the collateral,23the obligor in any provision dealing with the obligation,24and may include both where the context so requires;25(e) "Deposit account" means a demand, time,26savings, passbook or like account maintained with a bank,27as defined in subsection (1) of Section 4-105, other than28an account evidenced by a certificate of deposit;29(f) "Document" means document of title as defined30in the general definitions of Article 1 (Section 1-201),31and a receipt of the kind described in subsection (2) of32Section 7-201;33(g) "Encumbrance" includes real estate mortgages34and other liens on real estate and all other rights inSB1231 Enrolled -34- LRB9106284WHdv 1real estate that are not ownership interests;2(h) "Goods" includes all things which are movable3at the time the security interest attaches or which are4fixtures (Section 9-313), but does not include money,5documents, instruments, investment property, commodity6contracts, accounts, chattel paper, general intangibles,7or minerals or the like (including oil and gas) before8extraction. "Goods" also includes standing timber which9is to be cut and removed under a conveyance or contract10for sale, the unborn young of animals, and growing crops;11(i) "Instrument" means a negotiable instrument12(defined in Section 3-104), a non-transferable13certificate of deposit, a non-negotiable certificate of14deposit, or any other writing which evidences a right to15the payment of money and is not itself a security16agreement or lease and is of a type which is in ordinary17course of business transferred by delivery with any18necessary indorsement or assignment. The term does not19include investment property;20(j) "Mortgage" means a consensual interest created21by a real estate mortgage, a trust deed on real estate,22or the like;23(j-5) "Non-negotiable certificate of deposit" means24a written document issued by a bank, as defined in25subsection (1) of Section 4-105, that contains an26acknowledgement that a sum of money has been received by27the issuer and a promise by the issuer to repay the sum28of money, and is not a negotiable instrument as defined29in Section 3-104;30(j-7) "Non-transferable certificate of deposit"31means a non-negotiable certificate of deposit which may32not be transferred except on the books of the issuer,33with the consent of the issuer, or is subject to other34restrictions or conditions of the issuer on transfer;SB1231 Enrolled -35- LRB9106284WHdv 1(k) An advance is made "pursuant to commitment" if2the secured party has bound himself to make it, whether3or not a subsequent event of default or other event not4within his control has relieved or may relieve him from5his obligation;6(l) "Security agreement" means an agreement which7creates or provides for a security interest;8(m) "Secured party" means a lender, seller or other9person in whose favor there is a security interest,10including a person to whom accounts or chattel paper have11been sold. When the holders of obligations issued under12an indenture of trust, equipment trust agreement or the13like are represented by a trustee or other person, the14representative is the secured party;15-10t(n) "Transmitting utility" means any person primarily16engaged in the railroad, street railway or trolley bus17business, the electric or electronics communications18transmission business, the transmission of goods by19pipeline, or the distribution, transmission, or the20production and transmission of electricity, steam, gas or21water, or the provision of sewer service.22(o) "Uncertificated certificate of deposit" means an23obligation of a bank, as defined in subsection (1) of Section244-105, to repay a sum of money it has received, that is not a25deposit account and is not represented by a writing, but only26by an entry on the books of the bank and any documentation27given to the customer by the bank.28(2) Other definitions applying to this Article and the29Sections in which they appear are:30"Account". Section 9-106.31"Attach". Section 9-203.32"Commodity contract". Section 9-115.33"Commodity customer". Section 9-115.34"Commodity intermediary". Section 9-115.SB1231 Enrolled -36- LRB9106284WHdv 1"Construction mortgage". Section 9-313 (1).2"Consumer goods". Section 9-109 (1).3"Control". Section 9-115.4"Equipment". Section 9-109 (2).5"Farm products". Section 9-109 (3).6"Fixture". Section 9-313 (1).7"Fixture filing". Section 9-313 (1).8"General intangibles". Section 9-106.9"Inventory". Section 9-109 (4).10"Investment property". Section 9-115.11"Lien creditor". Section 9-301 (3).12"Proceeds". Section 9-306 (1).13"Purchase money security interest". Section 9-107.14"United States". Section 9-103.15(3) The following definitions in other Articles apply to16this Article:17"Bank". Section 4-105.18"Broker". Section 8-102.19"Certificated security". Section 8-102.20"Check". Section 3-104.21"Clearing corporation". Section 8-102.22"Contract for sale". Section 2-106.23"Control". Section 8-106.24"Delivery". Section 8-301.25"Entitlement holder". Section 8-102.26"Financial asset". Section 8-102.27"Holder in due course". Section 3-302.28"Letter of credit". Section 5-102.29"Note". Section 3-104.30"Proceeds of a letter of credit". Section 5-114(a).31"Sale". Section 2-106.32"Securities intermediary". Section 8-102.33"Security". Section 8-102.34"Security certificate". Section 8-102.SB1231 Enrolled -37- LRB9106284WHdv 1"Security entitlement". Section 8-102.2"Uncertificated security". Section 8-102.3(4) In addition Article 1 contains general definitions4and principles of construction and interpretation applicable5throughout this Article.6 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97; 7 90-665, eff. 7-30-98.) 8 (810 ILCS 5/9-106) (from Ch. 26, par. 9-106) 9 Sec. 9-106. Control of investment property. 10 (a) Control under Section 8-106. A person has control 11 of a certificated security, uncertificated security, or 12 security entitlement as provided in Section 8-106. 13 (b) Control of commodity contract. A secured party has 14 control of a commodity contract if: 15 (1) the secured party is the commodity intermediary 16 with which the commodity contract is carried; or 17 (2) the commodity customer, secured party, and 18 commodity intermediary have agreed that the commodity 19 intermediary will apply any value distributed on account 20 of the commodity contract as directed by the secured 21 party without further consent by the commodity customer. 22 (c) Effect of control of securities account or commodity 23 account. A secured party having control of all security 24 entitlements or commodity contracts carried in a securities 25 account or commodity account has control over the securities 26 account or commodity account.Definitions: "account";27"general intangibles". "Account" means any right to payment28for goods sold or leased or for services rendered which is29not evidenced by an instrument or chattel paper, whether or30not it has been earned by performance. "General intangibles"31means any personal property (including things in action)32other than goods, accounts, chattel paper, documents,33instruments, investment property, rights to proceeds ofSB1231 Enrolled -38- LRB9106284WHdv 1written letters of credit, deposit accounts, uncertificated2certificates of deposit, and money. All rights to payment3earned or unearned under a charter or other contract4involving the use or hire of a vessel and all rights incident5to the charter or contract are accounts.6 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97; 7 90-665, eff. 7-30-98.) 8 (810 ILCS 5/9-107) (from Ch. 26, par. 9-107) 9 Sec. 9-107. Control of letter-of-credit right. A 10 secured party has control of a letter-of-credit right to the 11 extent of any right to payment or performance by the issuer 12 or any nominated person if the issuer or nominated person has 13 consented to an assignment of proceeds of the letter of 14 credit under Section 5-114(c) or otherwise applicable law or 15 practice.Definitions: "purchase money security interest".16A security interest is a "purchase money security17interest" to the extent that it is18(a) taken or retained by the seller of the19collateral to secure all or part of its price; or20(b) taken by a person who by making advances or21incurring an obligation gives value to enable the debtor to22acquire rights in or the use of collateral if such value is23in fact so used.24 (Source: Laws 1961, p. 2101.) 25 (810 ILCS 5/9-108) (from Ch. 26, par. 9-108) 26 Sec. 9-108. Sufficiency of description. 27 (a) Sufficiency of description. Except as otherwise 28 provided in subsections (c), (d), and (e), a description of 29 personal or real property is sufficient, whether or not it is 30 specific, if it reasonably identifies what is described. 31 (b) Examples of reasonable identification. Except as 32 otherwise provided in subsection (d), a description of SB1231 Enrolled -39- LRB9106284WHdv 1 collateral reasonably identifies the collateral if it 2 identifies the collateral by: 3 (1) specific listing; 4 (2) category; 5 (3) except as otherwise provided in subsection (e), 6 a type of collateral defined in the Uniform Commercial 7 Code; 8 (4) quantity; 9 (5) computational or allocational formula or 10 procedure; or 11 (6) except as otherwise provided in subsection (c), 12 any other method, if the identity of the collateral is 13 objectively determinable. 14 (c) Supergeneric description not sufficient. A 15 description of collateral as "all the debtor's assets" or 16 "all the debtor's personal property" or using words of 17 similar import does not reasonably identify the collateral. 18 (d) Investment property. Except as otherwise provided 19 in subsection (e), a description of a security entitlement, 20 securities account, or commodity account is sufficient if it 21 describes: 22 (1) the collateral by those terms or as investment 23 property; or 24 (2) the underlying financial asset or commodity 25 contract. 26 (e) When description by type insufficient. A 27 description only by type of collateral defined in the Uniform 28 Commercial Code is an insufficient description of: 29 (1) a commercial tort claim; or 30 (2) in a consumer transaction, consumer goods, a 31 security entitlement, a securities account, or a 32 commodity account.When after-acquired collateral not33security for antecedent debt.34Where a secured party makes an advance, incurs anSB1231 Enrolled -40- LRB9106284WHdv 1obligation, releases a perfected security interest, or2otherwise gives new value which is to be secured in whole or3in part by after-acquired property his security interest in4the after-acquired collateral shall be deemed to be taken for5new value and not as security for an antecedent debt if the6debtor acquires his rights in such collateral either in the7ordinary course of his business or under a contract of8purchase made pursuant to the security agreement within a9reasonable time after new value is given.10 (Source: Laws 1961, p. 2101.) 11 (810 ILCS 5/Art. 9, Part 1, Subpart 2 heading new) 12 SUBPART 2. APPLICABILITY OF ARTICLE 13 (810 ILCS 5/9-109) (from Ch. 26, par. 9-109) 14 Sec. 9-109. Scope. 15 (a) General scope of Article. Except as otherwise 16 provided in subsections (c) and (d), this Article applies to: 17 (1) a transaction, regardless of its form, that 18 creates a security interest in personal property or 19 fixtures by contract; 20 (2) an agricultural lien; 21 (3) a sale of accounts, chattel paper, payment 22 intangibles, or promissory notes; 23 (4) a consignment; 24 (5) a security interest arising under Section 25 2-401, 2-505, 2-711(3), or 2A-508(5), as provided in 26 Section 9-110; and 27 (6) a security interest arising under Section 4-210 28 or 5-118. 29 (b) Security interest in secured obligation. The 30 application of this Article to a security interest in a 31 secured obligation is not affected by the fact that the 32 obligation is itself secured by a transaction or interest to SB1231 Enrolled -41- LRB9106284WHdv 1 which this Article does not apply. 2 (c) Extent to which Article does not apply. This 3 Article does not apply to the extent that: 4 (1) a statute, regulation, or treaty of the United 5 States preempts this Article; 6 (2) another statute of this State expressly governs 7 the creation, perfection, priority, or enforcement of a 8 security interest created by this State or a governmental 9 unit of this State; 10 (3) a statute of another State, a foreign country, 11 or a governmental unit of another State or a foreign 12 country, other than a statute generally applicable to 13 security interests, expressly governs creation, 14 perfection, priority, or enforcement of a security 15 interest created by the State, country, or governmental 16 unit; 17 (4) the rights of a transferee beneficiary or 18 nominated person under a letter of credit are independent 19 and superior under Section 5-114; 20 (5) this Article is in conflict with Section 21 205-410 of the Department of Agriculture Law of the Civil 22 Administrative Code of Illinois or the Grain Code; or 23 (6) this Article is in conflict with Section 18-107 24 of the Public Utilities Act. 25 (d) Inapplicability of Article. This Article does not 26 apply to: 27 (1) a landlord's lien, other than an agricultural 28 lien; 29 (2) a lien, other than an agricultural lien, given 30 by statute or other rule of law for services or 31 materials, but Section 9-333 applies with respect to 32 priority of the lien; 33 (3) an assignment of a claim for wages, salary, or 34 other compensation of an employee; SB1231 Enrolled -42- LRB9106284WHdv 1 (4) a sale of accounts, chattel paper, payment 2 intangibles, or promissory notes as part of a sale of the 3 business out of which they arose; 4 (5) an assignment of accounts, chattel paper, 5 payment intangibles, or promissory notes which is for the 6 purpose of collection only; 7 (6) an assignment of a right to payment under a 8 contract to an assignee that is also obligated to perform 9 under the contract; 10 (7) an assignment of a single account, payment 11 intangible, or promissory note to an assignee in full or 12 partial satisfaction of a preexisting indebtedness; 13 (8) a transfer of an interest in or an assignment 14 of a claim under a policy of insurance, other than an 15 assignment by or to a health-care provider of a 16 health-care-insurance receivable and any subsequent 17 assignment of the right to payment, but Sections 9-315 18 and 9-322 apply with respect to proceeds and priorities 19 in proceeds; 20 (9) an assignment of a right represented by a 21 judgment, other than a judgment taken on a right to 22 payment that was collateral; 23 (10) a right of recoupment or set-off, but: 24 (A) Section 9-340 applies with respect to the 25 effectiveness of rights of recoupment or set-off 26 against deposit accounts; and 27 (B) Section 9-404 applies with respect to 28 defenses or claims of an account debtor; 29 (11) the creation or transfer of an interest in or 30 lien on real property, including a lease or rents 31 thereunder, except to the extent that provision is made 32 for: 33 (A) liens on real property in Sections 9-203 34 and 9-308; SB1231 Enrolled -43- LRB9106284WHdv 1 (B) fixtures in Section 9-334; 2 (C) fixture filings in Sections 9-501, 9-502, 3 9-512, 9-516, and 9-519; and 4 (D) security agreements covering personal and 5 real property in Section 9-604; 6 (12) an assignment of a claim arising in tort, 7 other than a commercial tort claim, but Sections 9-315 8 and 9-322 apply with respect to proceeds and priorities 9 in proceeds; 10 (13) a transfer by a government or governmental 11 subdivision or agency; 12 (14) a claim or a right to receive compensation for 13 injuries or sickness as described in Section 104(a)(1) or 14 (2) of Title 26 of the United States Code, as amended 15 from time to time; or 16 (15) a claim or right to receive benefits under a 17 special needs trust as described in Section 1396p(d)(4) 18 of Title 42 of the United States Code, as amended from 19 time to time.Classification of goods; "consumer goods";20"equipment"; "farm products"; "inventory". Goods are21(1) "consumer goods" if they are used or bought for use22primarily for personal, family or household purposes;23(2) "equipment" if they are used or bought for use24primarily in business (including farming or a profession) or25by a debtor who is a non-profit organization or a26governmental subdivision or agency or if the goods are not27included in the definitions of inventory, farm products or28consumer goods;29(3) "farm products" if they are crops or livestock or30supplies used or produced in farming operations or if they31are products of crops or livestock in their unmanufactured32states (such as ginned cotton, wool-clip, maple syrup, milk33and eggs) or if they are aquatic products as defined in the34Aquaculture Development Act, and if they are in theSB1231 Enrolled -44- LRB9106284WHdv 1possession of a debtor engaged in raising, fattening, grazing2or other farming or aquacultural operations. If goods are3farm products they are neither equipment nor inventory;4(4) "inventory" if they are held by a person who holds5them for sale or lease or to be furnished under contracts of6service or if he has so furnished them, or if they are raw7materials, work in process or materials used or consumed in a8business. Inventory of a person is not to be classified as9his equipment.10 (Source: P.A. 85-856.) 11 (810 ILCS 5/9-110) (from Ch. 26, par. 9-110) 12 Sec. 9-110. Security interests arising under Article 2 13 or 2A. A security interest arising under Section 2-401, 14 2-505, 2-711(3), or 2A-508(5) is subject to this Article. 15 However, until the debtor obtains possession of the goods: 16 (1) the security interest is enforceable, even if 17 Section 9-203(b)(3) has not been satisfied; 18 (2) filing is not required to perfect the security 19 interest; 20 (3) the rights of the secured party after default 21 by the debtor are governed by Article 2 or 2A; and 22 (4) the security interest has priority over a 23 conflicting security interest created by the debtor. 24Sufficiency of description.25For the purposes of this Article any description of26personal property or real estate is sufficient whether or not27it is specific if it reasonably identifies what is described.28 (Source: Laws 1961, p. 2101.) 29 (810 ILCS 5/9-112) (from Ch. 26, par. 9-112) 30 Sec. 9-112. (Blank).Where collateral is not owned by31debtor.32Unless otherwise agreed, when a secured party knows thatSB1231 Enrolled -45- LRB9106284WHdv 1collateral is owned by a person who is not the debtor, the2owner of the collateral is entitled to receive from the3secured party any surplus under Section 9-- 502(2) or under4Section 9--504(1), and is not liable for the debt or for any5deficiency after resale, and he has the same right as the6debtor7(a) to receive statements under Section 9--208;8(b) to receive notice of and to object to a secured9party's proposal to retain the collateral in satisfaction of10the indebtedness under Section 9--505;11(c) to redeem the collateral under Section 9--506;12(d) to obtain injunctive or other relief under13Section 9--507(1); and14(e) to recover losses caused to him under Section159--208(2).16 (Source: Laws 1961, 1st S.S., p. 7.) 17 (810 ILCS 5/9-113) (from Ch. 26, par. 9-113) 18 Sec. 9-113. (Blank).Security interests arising under19Article on Sales or under Article on Leases.20A security interest arising solely under the Article on21Sales (Article 2) or the Article on Leases (Article 2A) is22subject to the provisions of this Article except that to the23extent that and so long as the debtor does not have or does24not lawfully obtain possession of the goods25(a) no security agreement is necessary to make the26security interest enforceable; and27(b) no filing is required to perfect the security28interest; and29(c) the rights of the secured party on default by30the debtor are governed (i) by the Article on Sales31(Article 2) in the case of a security interest arising32solely under such Article or (ii) by the Article on33Leases (Article 2A) in the case of a security interestSB1231 Enrolled -46- LRB9106284WHdv 1arising solely under such Article.2 (Source: P.A. 87-493.) 3 (810 ILCS 5/9-114) (from Ch. 26, par. 9-114) 4 Sec. 9-114. (Blank).Consignment.5(1) A person who delivers goods under a consignment6which is not a security interest and who would be required to7file under this Article by paragraph (3) (c) of Section 2-3268has priority over a secured party who is or becomes a9creditor of the consignee and who would have a perfected10security interest in the goods if they were the property of11the consignee, and also has priority with respect to12identifiable cash proceeds received on or before delivery of13the goods to a buyer, if14(a) the consignor complies with the filing provision of15the Article on Sales with respect to consignments (paragraph16(3) (c) of Section 2-326 before the consignee receives17possession of the goods; and18(b) the consignor gives notification in writing to the19holder of the security interest if the holder has filed a20financing statement covering the same types of goods before21the date of the filing made by the consignor; and22(c) the holder of the security interest receives the23notification within 5 years before the consignee receives24possession of the goods; and25(d) the notification states that the consignor expects26to deliver goods on consignment to the consignee, describing27the goods by item or type.28(2) In the case of a consignment which is not a security29interest and in which the requirements of the preceding30subsection have not been met, a person who delivers goods to31another is subordinate to a person who would have a perfected32security interest in the goods if they were the property of33the debtor.SB1231 Enrolled -47- LRB9106284WHdv 1 (Source: P. A. 78-238.) 2 (810 ILCS 5/9-115) (from Ch. 26, par. 9-115) 3 Sec. 9-115. (Blank).Investment property.4(1) In this Article:5(a) "Commodity account" means an account maintained6by a commodity intermediary in which a commodity contract7is carried for a commodity customer.8(b) "Commodity contract" means a commodity futures9contract, an option on a commodity futures contract, a10commodity option, or other contract that, in each case,11is:12(i) traded on or subject to the rules of a13board of trade that has been designated as a14contract market for such a contract pursuant to the15federal commodities laws; or16(ii) traded on a foreign commodity board of17trade, exchange, or market, and is carried on the18books of a commodity intermediary for a commodity19customer.20(c) "Commodity customer" means a person for whom a21commodity intermediary carries a commodity contract on22its books.23(d) "Commodity intermediary" means:24(i) a person who is registered as a futures25commission merchant under the federal commodities26laws; or27(ii) a person who in the ordinary course of28its business provides clearance or settlement29services for a board of trade that has been30designated as a contract market pursuant to the31federal commodities laws.32(e) "Control" with respect to a certificated33security, uncertificated security, or securitySB1231 Enrolled -48- LRB9106284WHdv 1entitlement has the meaning specified in Section 8-106.2A secured party has control over a commodity contract if3by agreement among the commodity customer, the commodity4intermediary, and the secured party, the commodity5intermediary has agreed that it will apply any value6distributed on account of the commodity contract as7directed by the secured party without further consent by8the commodity customer. If a commodity customer grants a9security interest in a commodity contract to its own10commodity intermediary, the commodity intermediary as11secured party has control. A secured party has control12over a securities account or commodity account if the13secured party has control over all security entitlements14or commodity contracts carried in the securities account15or commodity account.16(f) "Investment property" means:17(i) a security, whether certificated or18uncertificated;19(ii) a security entitlement;20(iii) a securities account;21(iv) a commodity contract; or22(v) a commodity account.23(2) Attachment or perfection of a security interest in a24securities account is also attachment or perfection of a25security interest in all security entitlements carried in the26securities account. Attachment or perfection of a security27interest in a commodity account is also attachment or28perfection of a security interest in all commodity contracts29carried in the commodity account.30(3) A description of collateral in a security agreement31or financing statement is sufficient to create or perfect a32security interest in a certificated security, uncertificated33security, security entitlement, securities account, commodity34contract, or commodity account whether it describes theSB1231 Enrolled -49- LRB9106284WHdv 1collateral by those terms, or as investment property, or by2description of the underlying security, financial asset, or3commodity contract. A description of investment property4collateral in a security agreement or financing statement is5sufficient if it identifies the collateral by specific6listing, by category, by quantity, by a computational or7allocational formula or procedure, or by any other method, if8the identity of the collateral is objectively determinable.9(4) Perfection of a security interest in investment10property is governed by the following rules:11(a) A security interest in investment property may12be perfected by control.13(b) Except as otherwise provided in paragraphs (c)14and (d), a security interest in investment property may15be perfected by filing.16(c) If the debtor is a broker or securities17intermediary a security interest in investment property18is perfected when it attaches. The filing of a financing19statement with respect to a security interest in20investment property granted by a broker or securities21intermediary has no effect for purposes of perfection or22priority with respect to that security interest.23(d) If a debtor is a commodity intermediary, a24security interest in a commodity contract or a commodity25account is perfected when it attaches. The filing of a26financing statement with respect to a security interest27in a commodity contract or a commodity account granted by28a commodity intermediary has no effect for purposes of29perfection or priority with respect to that security30interest.31(5) Priority between conflicting security interests in32the same investment property is governed by the following33rules:34(a) A security interest of a secured party who hasSB1231 Enrolled -50- LRB9106284WHdv 1control over investment property has priority over a2security interest of a secured party who does not have3control over the investment property.4(b) Except as otherwise provided in paragraphs (c)5and (d), conflicting security interests of secured6parties each of whom has control rank equally.7(c) Except as otherwise agreed by the securities8intermediary, a security interest in a security9entitlement or a securities account granted to the10debtor's own securities intermediary has priority over11any security interest granted by the debtor to another12secured party.13(d) Except as otherwise agreed by the commodity14intermediary, a security interest in a commodity contract15or a commodity account granted to the debtor's own16commodity intermediary has priority over any security17interest granted by the debtor to another secured party.18(e) Conflicting security interests granted by a19broker, a securities intermediary, or a commodity20intermediary which are perfected without control rank21equally.22(f) In all other cases, priority between23conflicting security interests in investment property is24governed by Section 9-312(5), (6), and (7). Section259-312(4) does not apply to investment property.26(6) If a security certificate in registered form is27delivered to a secured party pursuant to agreement, a written28security agreement is not required for attachment or29enforceability of the security interest, delivery suffices30for perfection of the security interest, and the security31interest has priority over a conflicting security interest32perfected by means other than control, even if a necessary33indorsement is lacking.34 (Source: P.A. 89-364, eff. 1-1-96.) SB1231 Enrolled -51- LRB9106284WHdv 1 (810 ILCS 5/9-116) 2 Sec. 9-116. (Blank).Security interest arising in3purchase or delivery of financial asset.4(1) If a person buys a financial asset through a5securities intermediary in a transaction in which the buyer6is obligated to pay the purchase price to the securities7intermediary at the time of the purchase, and the securities8intermediary credits the financial asset to the buyer's9securities account before the buyer pays the securities10intermediary, the securities intermediary has a security11interest in the buyer's security entitlement securing the12buyer's obligation to pay. A security agreement is not13required for attachment or enforceability of the security14interest, and the security interest is automatically15perfected.16(2) If a certificated security, or other financial asset17represented by a writing which in the ordinary course of18business is transferred by delivery with any necessary19indorsement or assignment is delivered pursuant to an20agreement between persons in the business of dealing with21such securities or financial assets and the agreement calls22for delivery versus payment, the person delivering the23certificate or other financial asset has a security interest24in the certificated security or other financial asset25securing the seller's right to receive payment. A security26agreement is not required for attachment or enforceability of27the security interest, and the security interest is28automatically perfected.29 (Source: P.A. 89-364, eff. 1-1-96.) 30 (810 ILCS 5/9-150) 31 Sec. 9-150. (Blank).Secretary of State; rules. The32Secretary of State, under the Illinois Administrative33Procedure Act, may adopt rules necessary to administer theSB1231 Enrolled -52- LRB9106284WHdv 1Secretary of State's responsibilities under this Article.2 (Source: P.A. 89-364, eff. 1-1-96.) 3 (810 ILCS 5/Art. 9, Part 2 heading) 4 PART 2. EFFECTIVENESS OF SECURITY AGREEMENT; 5 ATTACHMENT OF SECURITY INTEREST; 6 RIGHTS OF PARTIES TO SECURITY AGREEMENT 7VALIDITY OF SECURITY AGREEMENT8AND RIGHTS OF PARTIES THERETO9 (810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new) 10 SUBPART 1. EFFECTIVENESS AND ATTACHMENT 11 (810 ILCS 5/9-201) (from Ch. 26, par. 9-201) 12 Sec. 9-201. General effectiveness of security agreement. 13 (a) General effectiveness. Except as otherwise provided 14 in the Uniform Commercial Code, a security agreement is 15 effective according to its terms between the parties, against 16 purchasers of the collateral, and against creditors. 17 (b) Applicable consumer laws and other law. A 18 transaction subject to this Article is subject to any 19 applicable rule of law, statute, or regulation which 20 establishes a different rule for consumers, including: 21 (1) the Retail Installment Sales Act; 22 (2) the Motor Vehicle Retail Installment Sales Act; 23 (3) Article II of Chapter 3 of the Illinois Vehicle 24 Code; 25 (4) Article IIIB of the Boat Registration and 26 Safety Act; 27 (5) the Pawnbroker Regulation Act; 28 (6) the Motor Vehicle Leasing Act; 29 (7) the Consumer Installment Loan Act; and 30 (8) the Consumer Deposit Security Act of 1987. 31 (c) Other applicable law controls. In case of conflict SB1231 Enrolled -53- LRB9106284WHdv 1 between this Article and a rule of law, statute, or 2 regulation described in subsection (b), the rule of law, 3 statute, or regulation controls. Failure to comply with a 4 rule of law, statute, or regulation described in subsection 5 (b) has only the effect such rule of law, statute, or 6 regulation specifies. 7 (d) Further deference to other applicable law. This 8 Article does not: 9 (1) validate any rate, charge, agreement, or 10 practice that violates a rule of law, statute, or 11 regulation described in subsection (b); or 12 (2) extend the application of the rule of law, 13 statute, or regulation to a transaction not otherwise 14 subject to it.General validity of security agreement.15Except as otherwise provided by this Act a security16agreement is effective according to its terms between the17parties, against purchasers of the collateral and against18creditors. Nothing in this Article validates any charge or19practice illegal under any statute or regulation thereunder20governing usury, small loans, retail installment sales, or21the like, or extends the application of any such statute or22regulation to any transaction not otherwise subject thereto.23 (Source: Laws 1961, p. 2101.) 24 (810 ILCS 5/9-202) (from Ch. 26, par. 9-202) 25 Sec. 9-202. Title to collateral immaterial. Except as 26 otherwise provided with respect to consignments or sales of 27 accounts, chattel paper, payment intangibles, or promissory 28 notes, the provisions of this Article with regard to rights 29 and obligations apply whether title to collateral is in the 30 secured party or the debtor. 31Each provision of this Article with regard to rights,32obligations and remedies applies whether title to collateral33is in the secured party or in the debtor.SB1231 Enrolled -54- LRB9106284WHdv 1 (Source: Laws 1961, p. 2101.) 2 (810 ILCS 5/9-203) (from Ch. 26, par. 9-203) 3 Sec. 9-203. Attachment and enforceability of security 4 interest; proceeds; supporting obligations; formal 5 requisites. 6 (a) Attachment. A security interest attaches to 7 collateral when it becomes enforceable against the debtor 8 with respect to the collateral, unless an agreement expressly 9 postpones the time of attachment. 10 (b) Enforceability. Except as otherwise provided in 11 subsections (c) through (i), a security interest is 12 enforceable against the debtor and third parties with respect 13 to the collateral only if: 14 (1) value has been given; 15 (2) the debtor has rights in the collateral or the 16 power to transfer rights in the collateral to a secured 17 party; and 18 (3) one of the following conditions is met: 19 (A) the debtor has authenticated a security 20 agreement that provides a description of the 21 collateral and, if the security interest covers 22 timber to be cut, a description of the land 23 concerned; 24 (B) the collateral is not a certificated 25 security and is in the possession of the secured 26 party under Section 9-313 pursuant to the debtor's 27 security agreement; 28 (C) the collateral is a certificated security 29 in registered form and the security certificate has 30 been delivered to the secured party under Section 31 8-301 pursuant to the debtor's security agreement; 32 or 33 (D) the collateral is deposit accounts, SB1231 Enrolled -55- LRB9106284WHdv 1 electronic chattel paper, investment property, or 2 letter-of-credit rights, and the secured party has 3 control under Section 9-104, 9-105, 9-106, or 9-107 4 pursuant to the debtor's security agreement. 5 (c) Other UCC provisions. Subsection (b) is subject to 6 Section 4-210 on the security interest of a collecting bank, 7 Section 5-118 on the security interest of a letter-of-credit 8 issuer or nominated person, Section 9-110 on a security 9 interest arising under Article 2 or 2A, and Section 9-206 on 10 security interests in investment property. 11 (d) When person becomes bound by another person's 12 security agreement. A person becomes bound as debtor by a 13 security agreement entered into by another person if, by 14 operation of law other than this Article or by contract: 15 (1) the security agreement becomes effective to 16 create a security interest in the person's property; or 17 (2) the person becomes generally obligated for the 18 obligations of the other person, including the obligation 19 secured under the security agreement, and acquires or 20 succeeds to all or substantially all of the assets of the 21 other person. 22 (e) Effect of new debtor becoming bound. If a new 23 debtor becomes bound as debtor by a security agreement 24 entered into by another person: 25 (1) the agreement satisfies subsection (b)(3) with 26 respect to existing or after-acquired property of the new 27 debtor to the extent the property is described in the 28 agreement; and 29 (2) another agreement is not necessary to make a 30 security interest in the property enforceable. 31 (f) Proceeds and supporting obligations. The attachment 32 of a security interest in collateral gives the secured party 33 the rights to proceeds provided by Section 9-315 and is also 34 attachment of a security interest in a supporting obligation SB1231 Enrolled -56- LRB9106284WHdv 1 for the collateral. 2 (g) Lien securing right to payment. The attachment of a 3 security interest in a right to payment or performance 4 secured by a security interest or other lien on personal or 5 real property is also attachment of a security interest in 6 the security interest, mortgage, or other lien. 7 (h) Security entitlement carried in securities account. 8 The attachment of a security interest in a securities account 9 is also attachment of a security interest in the security 10 entitlements carried in the securities account. 11 (i) Commodity contracts carried in commodity account. 12 The attachment of a security interest in a commodity account 13 is also attachment of a security interest in the commodity 14 contracts carried in the commodity account.Attachment and15Enforceability of Security Interest; Proceeds; Requisites.16(1) Subject to the provisions of Section 4-208 on the17security interest of a collecting bank, Sections 9-115 and189-116 on security interests in investment property, and19Section 9-113 on a security interest arising under the20Article on Sales, a security interest is not enforceable21against the debtor or third parties with respect to the22collateral and does not attach unless:23(a) the collateral is in the possession of the24secured party pursuant to agreement, the collateral is25investment property and the secured party has control26pursuant to agreement, or the debtor has signed a27security agreement which contains a description of the28collateral and, in addition, a description of the land29when the security agreement covers (i) crops growing or30to be grown and is signed by the debtor prior to January311, 1996, or (ii) timber to be cut;32(b) value has been given; and33(c) the debtor has rights in the collateral.34(2) A security interest attaches when it becomesSB1231 Enrolled -57- LRB9106284WHdv 1enforceable against the debtor with respect to the2collateral. Attachment occurs as soon as all of the events3specified in subsection (1) have taken place unless explicit4agreement postpones the time of attaching.5(3) Unless otherwise agreed a security agreement gives6the secured party the rights to proceeds provided by Section79-306.8(4) A transaction, although subject to this Article, is9also subject to the "Consumer Finance Act", approved July 10,101935, as now or hereafter amended; the "Retail Installment11Sales Act", approved July 28, 1967, as now or hereafter12amended; the "Motor Vehicle Retail Installment Sales Act",13approved July 28, 1967, as now or hereafter amended; Article14II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of15the "Boat Registration and Safety Act", as now or hereafter16amended; and "An Act for the regulation of pawnbrokers, and17repealing a certain act therein named", approved June 9,181909, as now or hereafter amended; and in the case of19conflict between the provisions of this Article and any such20statute, the provisions of such statute control. Failure to21comply with any applicable statute has only the effect which22is specified therein.23 (Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96; 24 89-626, eff. 8-9-96.) 25 (810 ILCS 5/9-204) (from Ch. 26, par. 9-204) 26 Sec. 9-204. After-acquired property; future advances. 27 (a) After-acquired collateral. Except as otherwise 28 provided in subsection (b), a security agreement may create 29 or provide for a security interest in after-acquired 30 collateral. 31 (b) When after-acquired property clause not effective. 32 A security interest does not attach under a term constituting 33 an after-acquired property clause to: SB1231 Enrolled -58- LRB9106284WHdv 1 (1) consumer goods, other than an accession when 2 given as additional security, unless the debtor acquires 3 rights in them within 10 days after the secured party 4 gives value; or 5 (2) a commercial tort claim. 6 (c) Future advances and other value. A security 7 agreement may provide that collateral secures, or that 8 accounts, chattel paper, payment intangibles, or promissory 9 notes are sold in connection with, future advances or other 10 value, whether or not the advances or value are given 11 pursuant to commitment.After-acquired property; future12advances.13(1) Except as provided in Subsection (2), a security14agreement may provide that any obligations covered by the15security agreement are to be secured by after-acquired16collateral.17(2) No security interest attaches under an18after-acquired property clause to consumer goods other than19accessions (Section 9-314) when given as additional security20unless the debtor acquires rights in them within 10 days21after the secured party gives value.22(3) Obligations covered by a security agreement may23include future advances or other value whether or not the24advances or value are given pursuant to commitment25(subsection (1) of Section 9-105).26 (Source: P. A. 77-2810.) 27 (810 ILCS 5/9-205) (from Ch. 26, par. 9-205) 28 Sec. 9-205. Use or disposition of collateral 29 permissible. 30 (a) When security interest not invalid or fraudulent. A 31 security interest is not invalid or fraudulent against 32 creditors solely because: 33 (1) the debtor has the right or ability to: SB1231 Enrolled -59- LRB9106284WHdv 1 (A) use, commingle, or dispose of all or part 2 of the collateral, including returned or repossessed 3 goods; 4 (B) collect, compromise, enforce, or otherwise 5 deal with collateral; 6 (C) accept the return of collateral or make 7 repossessions; or 8 (D) use, commingle, or dispose of proceeds; or 9 (2) the secured party fails to require the debtor 10 to account for proceeds or replace collateral. 11 (b) Requirements of possession not relaxed. This 12 Section does not relax the requirements of possession if 13 attachment, perfection, or enforcement of a security interest 14 depends upon possession of the collateral by the secured 15 party.Use or Disposition of Collateral Without Accounting16Permissible.17A security interest is not invalid or fraudulent against18creditors by reason of liberty in the debtor to use,19commingle or dispose of all or part of the collateral20(including returned or repossessed goods) or to collect or21compromise accounts or chattel paper, or to accept the return22of goods or make repossessions, or to use, commingle or23dispose of proceeds, or by reason of the failure of the24secured party to require the debtor to account for proceeds25or replace collateral. This Section does not relax the26requirements of possession where perfection of a security27interest depends upon possession of the collateral by the28secured party or by a bailee.29 (Source: P.A. 77-2810.) 30 (810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1) 31 Sec. 9-205.1. Listing by debtor of purchasers or 32 receivers of collateral. A secured party may require that 33 the debtor include as part of the security agreement a list SB1231 Enrolled -60- LRB9106284WHdv 1 of persons to whom the debtor desires to sell or otherwise 2 dispose of the collateral. The debtor shall not sell or 3 otherwise dispose of the collateral to a person not included 4 in that list unless the debtor has notified the secured party 5 of his desire to sell or otherwise dispose of the collateral 6 to such person at least 7 days prior to the sale or other 7 disposition. 8 (Source: P.A. 83-69.) 9 (810 ILCS 5/9-206) (from Ch. 26, par. 9-206) 10 Sec. 9-206. Security interest arising in purchase or 11 delivery of financial asset. 12 (a) Security interest when person buys through 13 securities intermediary. A security interest in favor of a 14 securities intermediary attaches to a person's security 15 entitlement if: 16 (1) the person buys a financial asset through the 17 securities intermediary in a transaction in which the 18 person is obligated to pay the purchase price to the 19 securities intermediary at the time of the purchase; and 20 (2) the securities intermediary credits the 21 financial asset to the buyer's securities account before 22 the buyer pays the securities intermediary. 23 (b) Security interest secures obligation to pay for 24 financial asset. The security interest described in 25 subsection (a) secures the person's obligation to pay for the 26 financial asset. 27 (c) Security interest in payment against delivery 28 transaction. A security interest in favor of a person that 29 delivers a certificated security or other financial asset 30 represented by a writing attaches to the security or other 31 financial asset if: 32 (1) the security or other financial asset: 33 (A) in the ordinary course of business is SB1231 Enrolled -61- LRB9106284WHdv 1 transferred by delivery with any necessary 2 indorsement or assignment; and 3 (B) is delivered under an agreement between 4 persons in the business of dealing with such 5 securities or financial assets; and 6 (2) the agreement calls for delivery against 7 payment. 8 (d) Security interest secures obligation to pay for 9 delivery. The security interest described in subsection (c) 10 secures the obligation to make payment for the delivery. 11Agreement not to assert defenses against assignee;12modification of sales warranties where security agreement13exists.14(1) Subject to any statute or decision which establishes15a different rule for buyers or lessees of consumer goods, an16agreement by a buyer or lessee that he will not assert17against an assignee any claim or defense which he may have18against the seller or lessor is enforceable by an assignee19who takes his assignment for value, in good faith and without20notice of a claim or defense, except as to defenses of a type21which may be asserted against a holder in due course of a22negotiable instrument under the Article on Commercial Paper23(Article 3). A buyer who as part of one transaction signs24both a negotiable instrument and a security agreement makes25such an agreement.26(2) When a seller retains a purchase money security27interest in goods the Article on Sales (Article 2) governs28the sale and any disclaimer, limitation or modification of29the seller's warranties.30 (Source: Laws 1965, p. 803.) 31 (810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new) 32 SUBPART 2. RIGHTS AND DUTIES SB1231 Enrolled -62- LRB9106284WHdv 1 (810 ILCS 5/9-207) (from Ch. 26, par. 9-207) 2 Sec. 9-207. Rights and duties of secured party having 3 possession or control of collateral. 4 (a) Duty of care when secured party in possession. 5 Except as otherwise provided in subsection (d), a secured 6 party shall use reasonable care in the custody and 7 preservation of collateral in the secured party's possession. 8 In the case of chattel paper or an instrument, reasonable 9 care includes taking necessary steps to preserve rights 10 against prior parties unless otherwise agreed. 11 (b) Expenses, risks, duties, and rights when secured 12 party in possession. Except as otherwise provided in 13 subsection (d), if a secured party has possession of 14 collateral: 15 (1) reasonable expenses, including the cost of 16 insurance and payment of taxes or other charges, incurred 17 in the custody, preservation, use, or operation of the 18 collateral are chargeable to the debtor and are secured 19 by the collateral; 20 (2) the risk of accidental loss or damage is on the 21 debtor to the extent of a deficiency in any effective 22 insurance coverage; 23 (3) the secured party shall keep the collateral 24 identifiable, but fungible collateral may be commingled; 25 and 26 (4) the secured party may use or operate the 27 collateral: 28 (A) for the purpose of preserving the 29 collateral or its value; 30 (B) as permitted by an order of a court having 31 competent jurisdiction; or 32 (C) except in the case of consumer goods, in 33 the manner and to the extent agreed by the debtor. 34 (c) Duties and rights when secured party in possession SB1231 Enrolled -63- LRB9106284WHdv 1 or control. Except as otherwise provided in subsection (d), a 2 secured party having possession of collateral or control of 3 collateral under Section 9-104, 9-105, 9-106, or 9-107: 4 (1) may hold as additional security any proceeds, 5 except money or funds, received from the collateral; 6 (2) shall apply money or funds received from the 7 collateral to reduce the secured obligation, unless 8 remitted to the debtor; and 9 (3) may create a security interest in the 10 collateral. 11 (d) Buyer of certain rights to payment. If the secured 12 party is a buyer of accounts, chattel paper, payment 13 intangibles, or promissory notes or a consignor: 14 (1) subsection (a) does not apply unless the 15 secured party is entitled under an agreement: 16 (A) to charge back uncollected collateral; or 17 (B) otherwise to full or limited recourse 18 against the debtor or a secondary obligor based on 19 the nonpayment or other default of an account debtor 20 or other obligor on the collateral; and 21 (2) subsections (b) and (c) do not apply.Rights22and duties when collateral is in secured party's23possession.24(1) A secured party must use reasonable care in the25custody and preservation of collateral in his possession. In26the case of an instrument or chattel paper reasonable care27includes taking necessary steps to preserve rights against28prior parties unless otherwise agreed.29(2) Unless otherwise agreed, when collateral is in the30secured party's possession31(a) reasonable expenses (including the cost of any32insurance and payment of taxes or other charges) incurred in33the custody, preservation, use or operation of the collateral34are chargeable to the debtor and are secured by theSB1231 Enrolled -64- LRB9106284WHdv 1collateral;2(b) the risk of accidental loss or damage is on the3debtor to the extent of any deficiency in any effective4insurance coverage;5(c) the secured party may hold as additional6security any increase or profits (except money) received from7the collateral, but money so received, unless remitted to the8debtor, shall be applied in reduction of the secured9obligation;10(d) the secured party must keep the collateral11identifiable but fungible collateral may be commingled;12(e) the secured party may repledge the collateral13upon terms which do not impair the debtor's right to redeem14it.15(3) A secured party is liable for any loss caused by his16failure to meet any obligation imposed by the preceding17subsections but does not lose his security interest.18(4) A secured party may use or operate the collateral19for the purpose of preserving the collateral or its value or20pursuant to the order of a court of appropriate jurisdiction21or, except in the case of consumer goods, in the manner and22to the extent provided in the security agreement.23 (Source: Laws 1961, p. 2101.) 24 (810 ILCS 5/9-208) (from Ch. 26, par. 9-208) 25 Sec. 9-208. Additional duties of secured party having 26 control of collateral. 27 (a) Applicability of Section. This Section applies to 28 cases in which there is no outstanding secured obligation and 29 the secured party is not committed to make advances, incur 30 obligations, or otherwise give value. 31 (b) Duties of secured party after receiving demand from 32 debtor. Within 10 days after receiving an authenticated 33 demand by the debtor: SB1231 Enrolled -65- LRB9106284WHdv 1 (1) a secured party having control of a deposit 2 account under Section 9-104(a)(2) shall send to the bank 3 with which the deposit account is maintained an 4 authenticated statement that releases the bank from any 5 further obligation to comply with instructions originated 6 by the secured party; 7 (2) a secured party having control of a deposit 8 account under Section 9-104(a)(3) shall: 9 (A) pay the debtor the balance on deposit in 10 the deposit account; or 11 (B) transfer the balance on deposit into a 12 deposit account in the debtor's name; 13 (3) a secured party, other than a buyer, having 14 control of electronic chattel paper under Section 9-105 15 shall: 16 (A) communicate the authoritative copy of the 17 electronic chattel paper to the debtor or its 18 designated custodian; 19 (B) if the debtor designates a custodian that 20 is the designated custodian with which the 21 authoritative copy of the electronic chattel paper 22 is maintained for the secured party, communicate to 23 the custodian an authenticated record releasing the 24 designated custodian from any further obligation to 25 comply with instructions originated by the secured 26 party and instructing the custodian to comply with 27 instructions originated by the debtor; and 28 (C) take appropriate action to enable the 29 debtor or its designated custodian to make copies of 30 or revisions to the authoritative copy which add or 31 change an identified assignee of the authoritative 32 copy without the consent of the secured party; 33 (4) a secured party having control of investment 34 property under Section 8-106(d)(2) or 9-106(b) shall send SB1231 Enrolled -66- LRB9106284WHdv 1 to the securities intermediary or commodity intermediary 2 with which the security entitlement or commodity contract 3 is maintained an authenticated record that releases the 4 securities intermediary or commodity intermediary from 5 any further obligation to comply with entitlement orders 6 or directions originated by the secured party; and 7 (5) a secured party having control of a 8 letter-of-credit right under Section 9-107 shall send to 9 each person having an unfulfilled obligation to pay or 10 deliver proceeds of the letter of credit to the secured 11 party an authenticated release from any further 12 obligation to pay or deliver proceeds of the letter of 13 credit to the secured party.Request for statement of14account or list of collateral.15(1) A debtor may sign a statement indicating what he16believes to be the aggregate amount of unpaid indebtedness as17of a specified date and may send it to the secured party with18a request that the statement be approved or corrected and19returned to the debtor. When the security agreement or any20other record kept by the secured party identifies the21collateral a debtor may similarly request the secured party22to approve or correct a list of the collateral.23(2) The secured party must comply with such a request24within two weeks after receipt by sending a written25correction or approval. If the secured party claims a26security interest in all of a particular type of collateral27owned by the debtor he may indicate that fact in his reply28and need not approve or correct an itemized list of such29collateral. If the secured party without reasonable excuse30fails to comply he is liable for any loss caused to the31debtor thereby; and if the debtor has properly included in32his request a good faith statement of the obligation or a33list of the collateral or both the secured party may claim a34security interest only as shown in the statement againstSB1231 Enrolled -67- LRB9106284WHdv 1persons misled by his failure to comply. If he no longer has2an interest in the obligation or collateral at the time the3request is received he must disclose the name and address of4any successor in interest known to him and he is liable for5any loss caused to the debtor as a result of failure to6disclose. A successor in interest is not subject to this7Section until a request is received by him.8(3) A debtor is entitled to such a statement once every96 months without charge. The secured party may require10payment of a charge not exceeding $10 for each additional11statement furnished.12 (Source: Laws 1961, p. 2101.) 13 (810 ILCS 5/9-209 new) 14 Sec. 9-209. Duties of secured party if account debtor 15 has been notified of assignment. 16 (a) Applicability of Section. Except as otherwise 17 provided in subsection (c), this Section applies if: 18 (1) there is no outstanding secured obligation; and 19 (2) the secured party is not committed to make 20 advances, incur obligations, or otherwise give value. 21 (b) Duties of secured party after receiving demand from 22 debtor. Within 10 days after receiving an authenticated 23 demand by the debtor, a secured party shall send to an 24 account debtor that has received notification of an 25 assignment to the secured party as assignee under Section 26 9-406(a) an authenticated record that releases the account 27 debtor from any further obligation to the secured party. 28 (c) Inapplicability to sales. This Section does not 29 apply to an assignment constituting the sale of an account, 30 chattel paper, or payment intangible. 31 (810 ILCS 5/9-210 new) 32 Sec. 9-210. Request for accounting; request regarding SB1231 Enrolled -68- LRB9106284WHdv 1 list of collateral or statement of account. 2 (a) Definitions. In this Section: 3 (1) "Request" means a record of a type described in 4 paragraph (2), (3), or (4). 5 (2) "Request for an accounting" means a record 6 authenticated by a debtor requesting that the recipient 7 provide an accounting of the unpaid obligations secured 8 by collateral and reasonably identifying the transaction 9 or relationship that is the subject of the request. 10 (3) "Request regarding a list of collateral" means 11 a record authenticated by a debtor requesting that the 12 recipient approve or correct a list of what the debtor 13 believes to be the collateral securing an obligation and 14 reasonably identifying the transaction or relationship 15 that is the subject of the request. 16 (4) "Request regarding a statement of account" 17 means a record authenticated by a debtor requesting that 18 the recipient approve or correct a statement indicating 19 what the debtor believes to be the aggregate amount of 20 unpaid obligations secured by collateral as of a 21 specified date and reasonably identifying the transaction 22 or relationship that is the subject of the request. 23 (b) Duty to respond to requests. Subject to subsections 24 (c), (d), (e), and (f), a secured party, other than a buyer 25 of accounts, chattel paper, payment intangibles, or 26 promissory notes or a consignor, shall comply with a request 27 within 14 days after receipt: 28 (1) in the case of a request for an accounting, by 29 authenticating and sending to the debtor an accounting; 30 and 31 (2) in the case of a request regarding a list of 32 collateral or a request regarding a statement of account, 33 by authenticating and sending to the debtor an approval 34 or correction. SB1231 Enrolled -69- LRB9106284WHdv 1 (c) Request regarding list of collateral; statement 2 concerning type of collateral. A secured party that claims a 3 security interest in all of a particular type of collateral 4 owned by the debtor may comply with a request regarding a 5 list of collateral by sending to the debtor an authenticated 6 record including a statement to that effect within 14 days 7 after receipt. 8 (d) Request regarding list of collateral; no interest 9 claimed. A person that receives a request regarding a list 10 of collateral, claims no interest in the collateral when it 11 receives the request, and claimed an interest in the 12 collateral at an earlier time shall comply with the request 13 within 14 days after receipt by sending to the debtor an 14 authenticated record: 15 (1) disclaiming any interest in the collateral; and 16 (2) if known to the recipient, providing the name 17 and mailing address of any assignee of or successor to 18 the recipient's interest in the collateral. 19 (e) Request for accounting or regarding statement of 20 account; no interest in obligation claimed. A person that 21 receives a request for an accounting or a request regarding a 22 statement of account, claims no interest in the obligations 23 when it receives the request, and claimed an interest in the 24 obligations at an earlier time shall comply with the request 25 within 14 days after receipt by sending to the debtor an 26 authenticated record: 27 (1) disclaiming any interest in the obligations; 28 and 29 (2) if known to the recipient, providing the name 30 and mailing address of any assignee of or successor to 31 the recipient's interest in the obligations. 32 (f) Charges for responses. A debtor is entitled without 33 charge to one response to a request under this Section during 34 any six-month period. The secured party may require payment SB1231 Enrolled -70- LRB9106284WHdv 1 of a charge not exceeding $25 for each additional response. 2 (810 ILCS 5/Art. 9, Part 3 heading) 3 PART 3. PERFECTION AND PRIORITY 4RIGHTS OF THIRD PARTIES;5PERFECTED AND UNPERFECTED SECURITY6INTERESTS: RULES OF PRIORITY7 (810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new) 8 SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY 9 (810 ILCS 5/9-301) (from Ch. 26, par. 9-301) 10 Sec. 9-301. Law governing perfection and priority of 11 security interests. Except as otherwise provided in Sections 12 9-303 through 9-306, the following rules determine the law 13 governing perfection, the effect of perfection or 14 nonperfection, and the priority of a security interest in 15 collateral: 16 (1) Except as otherwise provided in this Section, 17 while a debtor is located in a jurisdiction, the local 18 law of that jurisdiction governs perfection, the effect 19 of perfection or nonperfection, and the priority of a 20 security interest in collateral. 21 (2) While collateral is located in a jurisdiction, 22 the local law of that jurisdiction governs perfection, 23 the effect of perfection or nonperfection, and the 24 priority of a possessory security interest in that 25 collateral. 26 (3) Except as otherwise provided in paragraph (4), 27 while negotiable documents, goods, instruments, money, or 28 tangible chattel paper is located in a jurisdiction, the 29 local law of that jurisdiction governs: 30 (A) perfection of a security interest in the 31 goods by filing a fixture filing; SB1231 Enrolled -71- LRB9106284WHdv 1 (B) perfection of a security interest in 2 timber to be cut; and 3 (C) the effect of perfection or nonperfection 4 and the priority of a nonpossessory security 5 interest in the collateral. 6 (4) The local law of the jurisdiction in which the 7 wellhead or minehead is located governs perfection, the 8 effect of perfection or nonperfection, and the priority 9 of a security interest in as-extracted collateral. 10Persons Who Take Priority Over Unperfected Security11Interests; Rights of "Lien Creditor".12(1) Except as otherwise provided in subsection (2), an13unperfected security interest is subordinate to the rights of14(a) persons entitled to priority under Section159-312;16(b) a person who becomes a lien creditor before the17security interest is perfected;18(c) in the case of goods, instruments, documents,19and chattel paper, a person who is not a secured party20and who is a transferee in bulk or other buyer not in21ordinary course of business or is a buyer of farm22products in ordinary course of business, to the extent23that he gives value and receives delivery of the24collateral without knowledge of the security interest and25before it is perfected;26(d) in the case of accounts, general intangibles,27and investment property, a person who is not a secured28party and who is a transferee to the extent that he gives29value without knowledge of the security interest and30before it is perfected;31provided, however, that an unperfected security interest32shall take priority over the rights of a lien creditor if (i)33the lien creditor is a trustee or receiver of a state or34federally chartered financial institution acting inSB1231 Enrolled -72- LRB9106284WHdv 1furtherance of its supervisory authority over the financial2institution and (ii) a security interest is granted by the3financial institution to secure a deposit of public funds4with the financial institution or a repurchase agreement with5the financial institution pursuant to the Government6Securities Act of 1986, as amended.7(2) If the secured party files with respect to a8purchase money security interest before or within 20 days9after the debtor receives possession of the collateral, he10takes priority over the rights of a transferee in bulk or of11a lien creditor which arise between the time the security12interest attaches and the time of filing.13(3) A "lien creditor" means a creditor who has acquired14a lien on the property involved by attachment, levy or the15like and includes an assignee for benefit of creditors from16the time of assignment, and a trustee in bankruptcy from the17date of the filing of the petition or a receiver in equity18from the time of appointment.19(4) A person who becomes a lien creditor while a20security interest is perfected takes subject to the security21interest only to the extent that it secures advances made22before he becomes a lien creditor or within 45 days23thereafter or made without knowledge of the lien or pursuant24to a commitment entered into without knowledge of the lien.25 (Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.) 26 (810 ILCS 5/9-302) (from Ch. 26, par. 9-302) 27 Sec. 9-302. Law governing perfection and priority of 28 agricultural liens. While farm products are located in a 29 jurisdiction, the local law of that jurisdiction governs 30 perfection, the effect of perfection or nonperfection, and 31 the priority of an agricultural lien on the farm products. 32When filing is required to perfect security interest;33security interests to which filing provisions of this ArticleSB1231 Enrolled -73- LRB9106284WHdv 1do not apply.2(1) A financing statement must be filed to perfect all3security interests except the following:4(a) a security interest in collateral in possession5of the secured party under Section 9-305;6(b) a security interest temporarily perfected in7instruments, certificated securities, or documents8without delivery under Section 9-304 or in proceeds for a920 day period under Section 9-306;10(c) a security interest created by an assignment of11a beneficial interest in a trust or a decedent's estate;12(d) a purchase money security interest in consumer13goods; but filing is required for a motor vehicle14required to be registered; and fixture filing is required15for priority over conflicting interests in fixtures to16the extent provided in Section 9-313;17(e) an assignment of accounts which does not alone18or in conjunction with other assignments to the same19assignee transfer a significant part of the outstanding20accounts of the assignor;21(f) a security interest of a collecting bank22(Section 4-208) or arising under the Article on Sales23(see Section 9-113) or covered in subsection (3) of this24Section;25(g) an assignment for the benefit of all creditors26of the transferor, and subsequent transfers by the27assignee thereunder;28(h) a security interest in investment property29which is perfected without filing under Section 9-115 or30Section 9-116;31(i) a security interest in a deposit account. Such32a security interest is perfected:33(i) as to a deposit account maintained with34the secured party, when the security agreement isSB1231 Enrolled -74- LRB9106284WHdv 1executed;2(ii) as to a deposit account maintained with3any organization other than the secured party, when4notice thereof is given in writing to the5organization with whom the deposit account is6maintained and that organization provides written7acknowledgement of and consent to the notice of the8secured party.9(j) a security interest in an uncertificated10certificate of deposit. Such a security interest is11perfected;12(i) as to an uncertificated certificate of13deposit issued by the secured party, when the14security agreement is executed;15(ii) as to an uncertificated certificate of16deposit issued by any organization other than the17secured party, when notice thereof is given in18writing to the issuer of the uncertificated19certificate of deposit and the issuer provides20written acknowledgement of and consent to the notice21of the secured party.22(2) If a secured party assigns a perfected security23interest, no filing under this Article is required in order24to continue the perfected status of the security interest25against creditors of and transferees from the original26debtor.27(3) The filing of a financing statement otherwise28required by this Article is not necessary or effective to29perfect a security interest in property subject to30(a) a statute or treaty of the United States which31provides for a national or international registration or32a national or international certificate of title or which33specifies a place of filing different from that specified34in this Article for filing of the security interest; orSB1231 Enrolled -75- LRB9106284WHdv 1(b) the following statutes of this State: the2Illinois Vehicle Code; the Boat Registration and Safety3Act; but during any period in which collateral is4inventory held for sale by a person who is in the5business of selling goods of that kind, the filing6provisions of this Article (Part 4) apply to a security7interest in that collateral created by him as debtor; or8(c) a certificate of title statute of another9jurisdiction under the law of which indication of a10security interest on the certificate is required as a11condition of perfection (subsection (2) of Section129-103).13(4) Compliance with a statute or treaty described in14subsection (3) is equivalent to the filing of a financing15statement under this Article, and a security interest in16property subject to the statute or treaty can be perfected17only by compliance therewith except as provided in Section189-103 on multiple state transactions. Duration and renewal of19perfection of a security interest perfected by compliance20with the statute or treaty are governed by the provisions of21the statute or treaty; in other respects the security22interest is subject to this Article.23 (Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.) 24 (810 ILCS 5/9-303) (from Ch. 26, par. 9-303) 25 Sec. 9-303. Law governing perfection and priority of 26 security interests in goods covered by a certificate of 27 title. 28 (a) Applicability of Section. This Section applies to 29 goods covered by a certificate of title, even if there is no 30 other relationship between the jurisdiction under whose 31 certificate of title the goods are covered and the goods or 32 the debtor. 33 (b) When goods covered by certificate of title. Goods SB1231 Enrolled -76- LRB9106284WHdv 1 become covered by a certificate of title when a valid 2 application for the certificate of title and the applicable 3 fee are delivered to the appropriate authority. Goods cease 4 to be covered by a certificate of title at the earlier of the 5 time the certificate of title ceases to be effective under 6 the law of the issuing jurisdiction or the time the goods 7 become covered subsequently by a certificate of title issued 8 by another jurisdiction. 9 (c) Applicable law. The local law of the jurisdiction 10 under whose certificate of title the goods are covered 11 governs perfection, the effect of perfection or 12 nonperfection, and the priority of a security interest in 13 goods covered by a certificate of title from the time the 14 goods become covered by the certificate of title until the 15 goods cease to be covered by the certificate of title.When16security interest is perfected; continuity of perfection.17(1) A security interest is perfected when it has18attached and when all of the applicable steps required for19perfection have been taken. Such steps are specified in20Sections 9--302, 9--304, 9--305 and 9--306. If such steps are21taken before the security interest attaches, it is perfected22at the time when it attaches.23(2) If a security interest is originally perfected in24any way permitted under this Article and is subsequently25perfected in some other way under this Article, without an26intermediate period when it was unperfected, the security27interest shall be deemed to be perfected continuously for the28purposes of this Article.29 (Source: Laws 1961, p. 2101.) 30 (810 ILCS 5/9-304) (from Ch. 26, par. 9-304) 31 Sec. 9-304. Law governing perfection and priority of 32 security interests in deposit accounts. 33 (a) Law of bank's jurisdiction governs. The local law SB1231 Enrolled -77- LRB9106284WHdv 1 of a bank's jurisdiction governs perfection, the effect of 2 perfection or nonperfection, and the priority of a security 3 interest in a deposit account maintained with that bank. 4 (b) Bank's jurisdiction. The following rules determine 5 a bank's jurisdiction for purposes of this Part: 6 (1) If an agreement between the bank and the debtor 7 governing the deposit account expressly provides that a 8 particular jurisdiction is the bank's jurisdiction for 9 purposes of this Part, this Article, or the Uniform 10 Commercial Code, that jurisdiction is the bank's 11 jurisdiction. 12 (2) If paragraph (1) does not apply and an 13 agreement between the bank and its customer governing the 14 deposit account expressly provides that the agreement is 15 governed by the law of a particular jurisdiction, that 16 jurisdiction is the bank's jurisdiction. 17 (3) If neither paragraph (1) nor paragraph (2) 18 applies and an agreement between the bank and its 19 customer governing the deposit account expressly provides 20 that the deposit account is maintained at an office in a 21 particular jurisdiction, that jurisdiction is the bank's 22 jurisdiction. 23 (4) If none of the preceding paragraphs applies, 24 the bank's jurisdiction is the jurisdiction in which the 25 office identified in an account statement as the office 26 serving the customer's account is located. 27 (5) If none of the preceding paragraphs applies, 28 the bank's jurisdiction is the jurisdiction in which the 29 chief executive office of the bank is located.Perfection30of security interest in instruments, documents, proceeds31of a written letter of credit, and goods covered by32documents; perfection by permissive filing; temporary33perfection without filing or transfer of possession.34(1) A security interest in chattel paper or negotiableSB1231 Enrolled -78- LRB9106284WHdv 1documents may be perfected by filing. A security interest in2the rights to proceeds of a written letter of credit can be3perfected only by the secured party's taking possession of4the letter of credit. A security interest in money or5instruments (other than instruments which constitute part of6chattel paper) can be perfected only by the secured party's7taking possession, except as provided in subsections (4) and8(5) of this Section and subsections (2) and (3) of Section99-306 on proceeds.10(2) During the period that goods are in the possession11of the issuer of a negotiable document therefor, a security12interest in the goods is perfected by perfecting a security13interest in the document, and any security interest in the14goods otherwise perfected during such period is subject15thereto.16(3) A security interest in goods in the possession of a17bailee other than one who has issued a negotiable document18therefor is perfected by issuance of a document in the name19of the secured party or by the bailee's receipt of20notification of the secured party's interest or by filing as21to the goods.22(4) A security interest in instruments, certificated23securities, or negotiable documents is perfected without24filing or the taking of possession for a period of 21 days25from the time it attaches to the extent that it arises for26new value given under a written security agreement.27(5) A security interest remains perfected for a period28of 21 days without filing where a secured party having a29perfected security interest in an instrument, a certificated30security, a negotiable document, or goods in possession of a31bailee other than one who has issued a negotiable document32therefor.33(a) makes available to the debtor the goods or34documents representing the goods for the purpose ofSB1231 Enrolled -79- LRB9106284WHdv 1ultimate sale or exchange or for the purpose of loading,2unloading, storing, shipping, transshipping,3manufacturing, processing or otherwise dealing with them4in a manner preliminary to their sale or exchange, but5priority between conflicting security interests in the6goods is subject to subsection (3) of Section 9-312; or7(b) delivers the instrument or certificated8security to the debtor for the purpose of ultimate sale9or exchange or of presentation, collection, renewal or10registration of transfer.11(6) After the 21 day period in subsections (4) and (5)12perfection depends upon compliance with applicable provisions13of this Article.14 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.) 15 (810 ILCS 5/9-305) (from Ch. 26, par. 9-305) 16 Sec. 9-305. Law governing perfection and priority of 17 security interests in investment property. 18 (a) Governing law: general rules. Except as otherwise 19 provided in subsection (c), the following rules apply: 20 (1) While a security certificate is located in a 21 jurisdiction, the local law of that jurisdiction governs 22 perfection, the effect of perfection or nonperfection, 23 and the priority of a security interest in the 24 certificated security represented thereby. 25 (2) The local law of the issuer's jurisdiction as 26 specified in Section 8-110(d) governs perfection, the 27 effect of perfection or nonperfection, and the priority 28 of a security interest in an uncertificated security. 29 (3) The local law of the securities intermediary's 30 jurisdiction as specified in Section 8-110(e) governs 31 perfection, the effect of perfection or nonperfection, 32 and the priority of a security interest in a security 33 entitlement or securities account. SB1231 Enrolled -80- LRB9106284WHdv 1 (4) The local law of the commodity intermediary's 2 jurisdiction governs perfection, the effect of perfection 3 or nonperfection, and the priority of a security interest 4 in a commodity contract or commodity account. 5 (b) Commodity intermediary's jurisdiction. The 6 following rules determine a commodity intermediary's 7 jurisdiction for purposes of this Part: 8 (1) If an agreement between the commodity 9 intermediary and commodity customer governing the 10 commodity account expressly provides that a particular 11 jurisdiction is the commodity intermediary's jurisdiction 12 for purposes of this Part, this Article, or the Uniform 13 Commercial Code, that jurisdiction is the commodity 14 intermediary's jurisdiction. 15 (2) If paragraph (1) does not apply and an 16 agreement between the commodity intermediary and 17 commodity customer governing the commodity account 18 expressly provides that the agreement is governed by the 19 law of a particular jurisdiction, that jurisdiction is 20 the commodity intermediary's jurisdiction. 21 (3) If neither paragraph (1) nor paragraph (2) 22 applies and an agreement between the commodity 23 intermediary and commodity customer governing the 24 commodity account expressly provides that the commodity 25 account is maintained at an office in a particular 26 jurisdiction, that jurisdiction is the commodity 27 intermediary's jurisdiction. 28 (4) If none of the preceding paragraphs applies, 29 the commodity intermediary's jurisdiction is the 30 jurisdiction in which the office identified in an account 31 statement as the office serving the commodity customer's 32 account is located. 33 (5) If none of the preceding paragraphs applies, 34 the commodity intermediary's jurisdiction is the SB1231 Enrolled -81- LRB9106284WHdv 1 jurisdiction in which the chief executive office of the 2 commodity intermediary is located. 3 (c) When perfection governed by law of jurisdiction 4 where debtor located. The local law of the jurisdiction in 5 which the debtor is located governs: 6 (1) perfection of a security interest in investment 7 property by filing; 8 (2) automatic perfection of a security interest in 9 investment property created by a broker or securities 10 intermediary; and 11 (3) automatic perfection of a security interest in 12 a commodity contract or commodity account created by a 13 commodity intermediary.When possession by secured party14perfects security interest without filing. A security15interest in goods, instruments, money, negotiable16documents, or chattel paper may be perfected by the17secured party's taking possession of the collateral. A18security interest in the right to proceeds of a written19letter of credit may be perfected by the secured party's20taking possession of the letter of credit. If such21collateral other than goods covered by a negotiable22document is held by a bailee, the secured party is deemed23to have possession from the time the bailee receives24notification of the secured party's interest. A security25interest is perfected by possession from the time26possession is taken without relation back and continues27only so long as possession is retained, unless otherwise28specified in this Article. The security interest may be29otherwise perfected as provided in this Article before or30after the period of possession by the secured party.31 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.) 32 (810 ILCS 5/9-306) (from Ch. 26, par. 9-306) 33 Sec. 9-306. Law governing perfection and priority of SB1231 Enrolled -82- LRB9106284WHdv 1 security interests in letter-of-credit rights. 2 (a) Governing law: issuer's or nominated person's 3 jurisdiction. Subject to subsection (c), the local law of the 4 issuer's jurisdiction or a nominated person's jurisdiction 5 governs perfection, the effect of perfection or 6 nonperfection, and the priority of a security interest in a 7 letter-of-credit right if the issuer's jurisdiction or 8 nominated person's jurisdiction is a State. 9 (b) Issuer's or nominated person's jurisdiction. For 10 purposes of this Part, an issuer's jurisdiction or nominated 11 person's jurisdiction is the jurisdiction whose law governs 12 the liability of the issuer or nominated person with respect 13 to the letter-of-credit right as provided in Section 5-116. 14 (c) When Section not applicable. This Section does not 15 apply to a security interest that is perfected only under 16 Section 9-308(d)."Proceeds"; Secured Party's Rights on17Disposition of Collateral.18(1) "Proceeds" includes whatever is received upon the19sale, exchange, collection or other disposition of collateral20or proceeds. Insurance payable by reason of loss or damage to21the collateral is proceeds, except to the extent that it is22payable to a person other than a party to the security23agreement. Any payments or distributions made with respect to24investment property collateral are proceeds. Money, checks,25deposit accounts, and the like are "cash proceeds". All other26proceeds are "non-cash proceeds".27(2) Except where this Article otherwise provides, a28security interest continues in collateral notwithstanding29sale, exchange or other disposition thereof unless the30disposition was authorized by the secured party in the31security agreement or otherwise, and also continues in any32identifiable proceeds including collections received by the33debtor.34(3) The security interest in proceeds is a continuouslySB1231 Enrolled -83- LRB9106284WHdv 1perfected security interest if the interest in the original2collateral was perfected but it ceases to be a perfected3security interest and becomes unperfected 20 days after4receipt of the proceeds by the debtor unless5(a) a filed financing statement covers the original6collateral and the proceeds are collateral in which a7security interest may be perfected by filing in the8office or offices where the financing statement has been9filed and, if the proceeds are acquired with cash10proceeds, the description of collateral in the financing11statement indicates the types of property constituting12the proceeds; or13(b) a filed financing statement covers the original14collateral and the proceeds are identifiable cash15proceeds;16(c) the original collateral was investment property17and the proceeds are identifiable cash proceeds; or18(d) the security interest in the proceeds is19perfected before the expiration of the 20 day period.20Except as provided in this Section, a security interest21in proceeds can be perfected only by the methods or under the22circumstances permitted in this Article for original23collateral of the same type.24(4) In the event of insolvency proceedings instituted by25or against a debtor, a secured party with a perfected26security interest in proceeds has a perfected security27interest only in the following proceeds:28(a) in identifiable non-cash proceeds and in29separate deposit accounts containing only proceeds;30(b) in identifiable cash proceeds in the form of31money which is neither commingled with other money nor32deposited in a deposit account prior to the insolvency33proceedings;34(c) in identifiable cash proceeds in the form ofSB1231 Enrolled -84- LRB9106284WHdv 1checks and the like which are not deposited in a deposit2account prior to the insolvency proceedings; and3(d) in all cash and deposit accounts of the debtor4in which proceeds have been commingled with other funds,5but the perfected security interest under this paragraph6(d) is7(i) subject to any right to set-off; and8(ii) limited to an amount not greater than the9amount of any cash proceeds received by the debtor10within 20 days before the institution of the11insolvency proceedings less the sum of (I) the12payments to the secured party on account of cash13proceeds received by the debtor during such period14and (II) the cash proceeds received by the debtor15during such period to which the secured party is16entitled under paragraphs (a) through (c) of this17subsection (4).18(5) If a sale of goods results in an account or chattel19paper which is transferred by the seller to a secured party,20and if the goods are returned to or are repossessed by the21seller or the secured party, the following rules determine22priorities:23(a) If the goods were collateral at the time of24sale, for an indebtedness of the seller which is still25unpaid, the original security interest attaches again to26the goods and continues as a perfected security interest27if it was perfected at the time when the goods were sold.28If the security interest was originally perfected by a29filing which is still effective, nothing further is30required to continue the perfected status; in any other31case, the secured party must take possession of the32returned or repossessed goods or must file.33(b) An unpaid transferee of the chattel paper has a34security interest in the goods against the transferor.SB1231 Enrolled -85- LRB9106284WHdv 1Such security interest is prior to a security interest2asserted under paragraph (a) to the extent that the3transferee of the chattel paper was entitled to priority4under Section 9-308.5(c) An unpaid transferee of the account has a6security interest in the goods against the transferor.7Such security interest is subordinate to a security8interest asserted under paragraph (a).9(d) A security interest of an unpaid transferee10asserted under paragraph (b) or (c) must be perfected for11protection against creditors of the transferor and12purchasers of the returned or repossessed goods.13 (Source: P.A. 89-364, eff. 1-1-96.) 14 (810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01) 15 Sec. 9-306.01. (Blank).Debtor disposing of collateral16and failing to pay secured party amount due under security17agreement; penalties for violation.18(1) It is unlawful for a debtor under the terms of a19security agreement (a) who has no right of sale or other20disposition of the collateral or (b) who has a right of sale21or other disposition of the collateral and is to account to22the secured party for the proceeds of any sale or other23disposition of the collateral, to sell or otherwise dispose24of the collateral and willfully and wrongfully to fail to pay25the secured party the amount of said proceeds due under the26security agreement. Failure to pay such proceeds to the27secured party within 10 days after the sale or other28disposition of the collateral is prima facie evidence of a29willful and wanton failure to pay.30(2) An individual convicted of a violation of this31Section shall be guilty of a Class 3 felony.32(3) A corporation convicted of a violation of this33Section shall be guilty of a business offense and shall beSB1231 Enrolled -86- LRB9106284WHdv 1fined not less than two thousand dollars nor more than ten2thousand dollars.3(4) In the event the debtor under the terms of a4security agreement is a corporation or a partnership, any5officer, director, manager, or managerial agent of the debtor6who violates this Section or causes the debtor to violate7this Section shall be guilty of a Class 3 felony.8 (Source: P.A. 83-69.) 9 (810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02) 10 Sec. 9-306.02. (Blank).(1) Where, pursuant to Section119-205.1, a secured party has required that before the debtor12sells or otherwise disposes of collateral in the debtor's13possession he disclose to the secured party the persons to14whom he desires to sell or otherwise dispose of such15collateral, it is unlawful for the debtor to sell or16otherwise dispose of the collateral to a person other than a17person so disclosed to the secured party.18(2) An individual convicted of a violation of this19Section shall be guilty of a Class A misdemeanor.20(3) A corporation convicted of a violation of this21Section shall be guilty of a business offense and shall be22fined not less than $2,000 nor more than $10,000.23(4) In the event the debtor under the terms of a24security agreement is a corporation or a partnership, any25officer, director, manager or managerial agent of the debtor26who violates this Section or causes the debtor to violate27this Section shall be guilty of a Class A misdemeanor.28(5) It is an affirmative defense to a prosecution for29the violation of this Section that the debtor has paid to the30secured party the proceeds from the sale or other disposition31of the collateral within 10 days after such sale or32disposition.33 (Source: P.A. 84-1372.) SB1231 Enrolled -87- LRB9106284WHdv 1 (810 ILCS 5/9-307) (from Ch. 26, par. 9-307) 2 Sec. 9-307. Location of debtor. 3 (a) "Place of business." In this Section, "place of 4 business" means a place where a debtor conducts its affairs. 5 (b) Debtor's location: general rules. Except as 6 otherwise provided in this Section, the following rules 7 determine a debtor's location: 8 (1) A debtor who is an individual is located at the 9 individual's principal residence. 10 (2) A debtor that is an organization and has only 11 one place of business is located at its place of 12 business. 13 (3) A debtor that is an organization and has more 14 than one place of business is located at its chief 15 executive office. 16 (c) Limitation of applicability of subsection (b). 17 Subsection (b) applies only if a debtor's residence, place of 18 business, or chief executive office, as applicable, is 19 located in a jurisdiction whose law generally requires 20 information concerning the existence of a nonpossessory 21 security interest to be made generally available in a filing, 22 recording, or registration system as a condition or result of 23 the security interest's obtaining priority over the rights of 24 a lien creditor with respect to the collateral. If 25 subsection (b) does not apply, the debtor is located in the 26 District of Columbia. 27 (d) Continuation of location: cessation of existence, 28 etc. A person that ceases to exist, have a residence, or 29 have a place of business continues to be located in the 30 jurisdiction specified by subsections (b) and (c). 31 (e) Location of registered organization organized under 32 State law. A registered organization that is organized under 33 the law of a State is located in that State. 34 (f) Location of registered organization organized under SB1231 Enrolled -88- LRB9106284WHdv 1 federal law; bank branches and agencies. Except as otherwise 2 provided in subsection (i), a registered organization that is 3 organized under the law of the United States and a branch or 4 agency of a bank that is not organized under the law of the 5 United States or a State are located: 6 (1) in the State that the law of the United States 7 designates, if the law designates a State of location; 8 (2) in the State that the registered organization, 9 branch, or agency designates, if the law of the United 10 States authorizes the registered organization, branch, or 11 agency to designate its State of location; or 12 (3) in the District of Columbia, if neither 13 paragraph (1) nor paragraph (2) applies. 14 (g) Continuation of location: change in status of 15 registered organization. A registered organization continues 16 to be located in the jurisdiction specified by subsection (e) 17 or (f) notwithstanding: 18 (1) the suspension, revocation, forfeiture, or 19 lapse of the registered organization's status as such in 20 its jurisdiction of organization; or 21 (2) the dissolution, winding up, or cancellation of 22 the existence of the registered organization. 23 (h) Location of United States. The United States is 24 located in the District of Columbia. 25 (i) Location of foreign bank branch or agency if 26 licensed in only one State. A branch or agency of a bank 27 that is not organized under the law of the United States or a 28 State is located in the State in which the branch or agency 29 is licensed, if all branches and agencies of the bank are 30 licensed in only one State. 31 (j) Location of foreign air carrier. A foreign air 32 carrier under the Federal Aviation Act of 1958, as amended, 33 is located at the designated office of the agent upon which 34 service of process may be made on behalf of the carrier. SB1231 Enrolled -89- LRB9106284WHdv 1 (k) Section applies only to this Part. This Section 2 applies only for purposes of this Part.Protection of Buyers3of Goods.4(1) Except as provided in subsection (4), a buyer in the5ordinary course of business, as defined in subsection (9) of6Section 1-201, takes free of a security interest created by7his seller even though the security interest is perfected and8even though the buyer knows of its existence.9(2) In the case of consumer goods, a buyer takes free of10a security interest even though perfected if he buys without11knowledge of the security interest, for value and for his own12personal, family or household purposes unless prior to the13purchase the secured party has filed a financing statement14covering such goods.15(3) A buyer other than a buyer in ordinary course of16business (subsection (1) of this Section) takes free of a17security interest to the extent that it secures future18advances made after the secured party acquires knowledge of19the purchase, or more than 45 days after the purchase,20whichever first occurs, unless made pursuant to a commitment21entered into without knowledge of the purchase and before the22expiration of the 45 day period.23(4) A buyer of farm products takes subject to a security24interest created by the seller if:25(a) within one year before the sale of the farm26products, the buyer has received from the secured party27or the seller written notice of the security interest28organized according to farm products that:29(i) is an original or reproduced copy thereof;30(ii) contains,31(I) the name and address of the secured32party;33(II) the name and address of the person34indebted to the secured party;SB1231 Enrolled -90- LRB9106284WHdv 1(III) the social security number of the2debtor or, in the case of a debtor doing3business other than as an individual, the4Internal Revenue Service taxpayer5identification number of such debtor;6(IV) a description of the farm products7subject to the security interest created by the8debtor, including the amount of such products9where applicable, crop year, county, and a10reasonable description of the property;11(iii) must be amended in writing, within 312months, similarly signed and transmitted, to reflect13material changes;14(iv) will lapse on either the expiration15period of the statement or the transmission of a16notice signed by the secured party that the17statement has lapsed, whichever occurs first; and18(v) sets forth any payment obligations imposed19on the buyer by the secured party as conditions for20waiver or release of the security interest; and21(b) the buyer has failed to perform the payment22obligations.23For the purposes of this subsection (4), a buyer of farm24products has received notice from the secured party or seller25when written notice of the security interest is sent to the26buyer by registered or certified mail.27 (Source: P.A. 84-1372; revised 10-31-98.) 28 (810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1) 29 Sec. 9-307.1. (Blank).A commission merchant or selling30agent who sells a farm product for others shall be subject to31a security interest created by the seller in such farm32product if-33(a) within one year before the sale of the farmSB1231 Enrolled -91- LRB9106284WHdv 1products, the buyer has received from the secured party or2the seller written notice of the security interest organized3according to farm products that:4(i) is an original or reproduced copy thereof;5(ii) contains,6(I) the name and address of the secured party;7(II) the name and address of the person indebted to the8secured party;9(III) the social security number of the debtor or, in10the case of a debtor doing business other than as an11individual, the Internal Revenue Service taxpayer12identification number of such debtor;13(IV) a description of the farm products subject to the14security interest created by the debtor, including the amount15of such products where applicable, crop year, county, and a16reasonable description of the property;17(iii) must be amended in writing, within 3 months,18similarly signed and transmitted, to reflect material19changes;20(iv) will lapse on either the expiration period of the21statement or the transmission of a notice signed by the22secured party that the statement has lapsed, whichever occurs23first; and24(v) sets forth any payment obligations imposed on the25buyer by the secured party as conditions for waiver or26release of the security interest; and27(b) the commission merchant or selling agent has failed28to perform the payment obligations.29For the purposes of this Section, a commission merchant30or selling agent has received notice from the secured party31or seller when written notice of the security interest is32sent to the commission merchant or selling agent by33registered or certified mail.34 (Source: P.A. 84-1372.) SB1231 Enrolled -92- LRB9106284WHdv 1 (810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2) 2 Sec. 9-307.2. (Blank).A commission merchant or3selling agent who sells farm products for others, and4any person buying farm products in the ordinary course5of business from a person engaged in farming operations,6shall post at each licensed location where said7merchant, agent or person buying farm products in the8ordinary course of business does business a notice9which shall read as follows:10"NOTICE TO SELLERS OF FARM PRODUCTS11It is a criminal offense to sell farm products subject to12a security interest without making payment to the secured13party. You should notify the purchaser if there is a security14interest in the farm products you are selling."15Such notice shall be posted in a conspicuous manner and16shall be in contrasting type, large enough to be read from a17distance of 10 feet.18 (Source: P.A. 83-69.) 19 (810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new) 20 SUBPART 2. PERFECTION 21 (810 ILCS 5/9-308) (from Ch. 26, par. 9-308) 22 Sec. 9-308. When security interest or agricultural lien 23 is perfected; continuity of perfection. 24 (a) Perfection of security interest. Except as 25 otherwise provided in this Section and Section 9-309, a 26 security interest is perfected if it has attached and all of 27 the applicable requirements for perfection in Sections 9-310 28 through 9-316 have been satisfied. A security interest is 29 perfected when it attaches if the applicable requirements are 30 satisfied before the security interest attaches. 31 (b) Perfection of agricultural lien. An agricultural 32 lien is perfected if it has become effective and all of the SB1231 Enrolled -93- LRB9106284WHdv 1 applicable requirements for perfection in Section 9-310 have 2 been satisfied. An agricultural lien is perfected when it 3 becomes effective if the applicable requirements are 4 satisfied before the agricultural lien becomes effective. 5 (c) Continuous perfection; perfection by different 6 methods. A security interest or agricultural lien is 7 perfected continuously if it is originally perfected by one 8 method under this Article and is later perfected by another 9 method under this Article, without an intermediate period 10 when it was unperfected. 11 (d) Supporting obligation. Perfection of a security 12 interest in collateral also perfects a security interest in a 13 supporting obligation for the collateral. 14 (e) Lien securing right to payment. Perfection of a 15 security interest in a right to payment or performance also 16 perfects a security interest in a security interest, 17 mortgage, or other lien on personal or real property securing 18 the right. 19 (f) Security entitlement carried in securities account. 20 Perfection of a security interest in a securities account 21 also perfects a security interest in the security 22 entitlements carried in the securities account. 23 (g) Commodity contract carried in commodity account. 24 Perfection of a security interest in a commodity account also 25 perfects a security interest in the commodity contracts 26 carried in the commodity account.Purchase of Chattel Paper27and Instruments.28A purchaser of chattel paper or an instrument who gives29new value and takes possession of it in the ordinary course30of his business has priority over a security interest in the31chattel paper or instrument32(a) which is perfected under Section 9-304 (permissive33filing and temporary perfection) or under Section 9-30634(perfection as to proceeds) if he acts without knowledge thatSB1231 Enrolled -94- LRB9106284WHdv 1the specific paper or instrument is subject to a security2interest; or3(b) which is claimed merely as proceeds of inventory4subject to a security interest (Section 9-306) even though he5knows that the specific paper or instrument is subject to the6security interest.7 (Source: P. A. 77-2810.) 8 (810 ILCS 5/9-309) (from Ch. 26, par. 9-309) 9 Sec. 9-309. Security interest perfected upon attachment. 10 The following security interests are perfected when they 11 attach: 12 (1) a purchase-money security interest in consumer 13 goods, except as otherwise provided in Section 9-311(b) 14 with respect to consumer goods that are subject to a 15 statute or treaty described in Section 9-311(a); 16 (2) an assignment of accounts or payment 17 intangibles which does not by itself or in conjunction 18 with other assignments to the same assignee transfer a 19 significant part of the assignor's outstanding accounts 20 or payment intangibles; 21 (3) a sale of a payment intangible; 22 (4) a sale of a promissory note; 23 (5) a security interest created by the assignment 24 of a health-care-insurance receivable to the provider of 25 the health-care goods or services; 26 (6) a security interest arising under Section 27 2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor 28 obtains possession of the collateral; 29 (7) a security interest of a collecting bank 30 arising under Section 4-210; 31 (8) a security interest of an issuer or nominated 32 person arising under Section 5-118; 33 (9) a security interest arising in the delivery of SB1231 Enrolled -95- LRB9106284WHdv 1 a financial asset under Section 9-206(c); 2 (10) a security interest in investment property 3 created by a broker or securities intermediary; 4 (11) a security interest in a commodity contract or 5 a commodity account created by a commodity intermediary; 6 (12) an assignment for the benefit of all creditors 7 of the transferor and subsequent transfers by the 8 assignee thereunder; and 9 (13) a security interest created by an assignment 10 of a beneficial interest in a decedent's estate. 11Protection of purchasers of instruments, documents and12securities. Nothing in this Article limits the rights of13a holder in due course of a negotiable instrument14(Section 3-302) or a holder to whom a negotiable document15of title has been duly negotiated (Section 7-501) or a16protected purchaser of a security (Section 8-303) and17such holders or purchasers take priority over an earlier18security interest even though perfected. Filing under19this Article does not constitute notice of the security20interest to such holders or purchasers.21 (Source: P.A. 89-364, eff. 1-1-96.) 22 (810 ILCS 5/9-310) (from Ch. 26, par. 9-310) 23 Sec. 9-310. When filing required to perfect security 24 interest or agricultural lien; security interests and 25 agricultural liens to which filing provisions do not apply. 26 (a) General rule: perfection by filing. Except as 27 otherwise provided in subsection (b) and Section 9-312(b), a 28 financing statement must be filed to perfect all security 29 interests and agricultural liens. 30 (b) Exceptions: filing not necessary. The filing of a 31 financing statement is not necessary to perfect a security 32 interest: 33 (1) that is perfected under Section 9-308(d), (e), SB1231 Enrolled -96- LRB9106284WHdv 1 (f), or (g); 2 (2) that is perfected under Section 9-309 when it 3 attaches; 4 (3) in property subject to a statute, regulation, 5 or treaty described in Section 9-311(a); 6 (4) in goods in possession of a bailee which is 7 perfected under Section 9-312(d)(1) or (2); 8 (5) in certificated securities, documents, goods, 9 or instruments which is perfected without filing or 10 possession under Section 9-312(e), (f), or (g); 11 (6) in collateral in the secured party's possession 12 under Section 9-313; 13 (7) in a certificated security which is perfected 14 by delivery of the security certificate to the secured 15 party under Section 9-313; 16 (8) in deposit accounts, electronic chattel paper, 17 investment property, or letter-of-credit rights which is 18 perfected by control under Section 9-314; 19 (9) in proceeds which is perfected under Section 20 9-315; or 21 (10) that is perfected under Section 9-316. 22 (c) Assignment of perfected security interest. If a 23 secured party assigns a perfected security interest or 24 agricultural lien, a filing under this Article is not 25 required to continue the perfected status of the security 26 interest against creditors of and transferees from the 27 original debtor.Priority of certain liens arising by28operation of law.29When a person in the ordinary course of his business30furnishes services or materials with respect to goods subject31to a security interest, a lien upon goods in the possession32of such person given by statute or rule of law for such33materials or services takes priority over a perfected34security interest unless the lien is statutory and theSB1231 Enrolled -97- LRB9106284WHdv 1statute expressly provides otherwise.2 (Source: Laws 1961, p. 2101.) 3 (810 ILCS 5/9-311) (from Ch. 26, par. 9-311) 4 Sec. 9-311. Perfection of security interests in property 5 subject to certain statutes, regulations, and treaties. 6 (a) Security interest subject to other law. Except as 7 otherwise provided in subsection (d), the filing of a 8 financing statement is not necessary or effective to perfect 9 a security interest in property subject to: 10 (1) a statute, regulation, or treaty of the United 11 States whose requirements for a security interest's 12 obtaining priority over the rights of a lien creditor 13 with respect to the property preempt Section 9-310(a); 14 (2) the Illinois Vehicle Code or the Boat 15 Registration and Safety Act; or 16 (3) a certificate-of-title statute of another 17 jurisdiction which provides for a security interest to be 18 indicated on the certificate as a condition or result of 19 the security interest's obtaining priority over the 20 rights of a lien creditor with respect to the property. 21 (b) Compliance with other law. Compliance with the 22 requirements of a statute, regulation, or treaty described in 23 subsection (a) for obtaining priority over the rights of a 24 lien creditor is equivalent to the filing of a financing 25 statement under this Article. Except as otherwise provided 26 in subsection (d) and Sections 9-313 and 9-316(d) and (e) for 27 goods covered by a certificate of title, a security interest 28 in property subject to a statute, regulation, or treaty 29 described in subsection (a) may be perfected only by 30 compliance with those requirements, and a security interest 31 so perfected remains perfected notwithstanding a change in 32 the use or transfer of possession of the collateral. 33 (c) Duration and renewal of perfection. Except as SB1231 Enrolled -98- LRB9106284WHdv 1 otherwise provided in subsection (d) and Section 9-316(d) and 2 (e), duration and renewal of perfection of a security 3 interest perfected by compliance with the requirements 4 prescribed by a statute, regulation, or treaty described in 5 subsection (a) are governed by the statute, regulation, or 6 treaty. In other respects, the security interest is subject 7 to this Article. 8 (d) Inapplicability to certain inventory. During any 9 period in which collateral subject to a statute specified in 10 subsection (a)(2) is inventory held for sale or lease by a 11 person or leased by that person as lessor and that person is 12 in the business of selling or leasing goods of that kind, 13 this Section does not apply to a security interest in that 14 collateral created by that person as debtor.Alienability of15debtor's rights: judicial process.16The debtor's rights in collateral may be voluntarily or17involuntarily transferred (by way of sale, creation of a18security interest, attachment, levy, garnishment or other19judicial process) notwithstanding a provision in the security20agreement prohibiting any transfer or making the transfer21constitute a default.22 (Source: Laws 1961, p. 2101.) 23 (810 ILCS 5/9-312) (from Ch. 26, par. 9-312) 24 Sec. 9-312. Perfection of security interests in chattel 25 paper, deposit accounts, documents, goods covered by 26 documents, instruments, investment property, letter-of-credit 27 rights, and money; perfection by permissive filing; temporary 28 perfection without filing or transfer of possession. 29 (a) Perfection by filing permitted. A security interest 30 in chattel paper, negotiable documents, instruments, or 31 investment property may be perfected by filing. 32 (b) Control or possession of certain collateral. Except 33 as otherwise provided in Section 9-315(c) and (d) for SB1231 Enrolled -99- LRB9106284WHdv 1 proceeds: 2 (1) a security interest in a deposit account may be 3 perfected only by control under Section 9-314; 4 (2) and except as otherwise provided in Section 5 9-308(d), a security interest in a letter-of-credit right 6 may be perfected only by control under Section 9-314; and 7 (3) a security interest in money may be perfected 8 only by the secured party's taking possession under 9 Section 9-313. 10 (c) Goods covered by negotiable document. While goods 11 are in the possession of a bailee that has issued a 12 negotiable document covering the goods: 13 (1) a security interest in the goods may be 14 perfected by perfecting a security interest in the 15 document; and 16 (2) a security interest perfected in the document 17 has priority over any security interest that becomes 18 perfected in the goods by another method during that 19 time. 20 (d) Goods covered by nonnegotiable document. While 21 goods are in the possession of a bailee that has issued a 22 nonnegotiable document covering the goods, a security 23 interest in the goods may be perfected by: 24 (1) issuance of a document in the name of the 25 secured party; 26 (2) the bailee's receipt of notification of the 27 secured party's interest; or 28 (3) filing as to the goods. 29 (e) Temporary perfection: new value. A security 30 interest in certificated securities, negotiable documents, or 31 instruments is perfected without filing or the taking of 32 possession for a period of 20 days from the time it attaches 33 to the extent that it arises for new value given under an 34 authenticated security agreement. SB1231 Enrolled -100- LRB9106284WHdv 1 (f) Temporary perfection: goods or documents made 2 available to debtor. A perfected security interest in a 3 negotiable document or goods in possession of a bailee, other 4 than one that has issued a negotiable document for the goods, 5 remains perfected for 20 days without filing if the secured 6 party makes available to the debtor the goods or documents 7 representing the goods for the purpose of: 8 (1) ultimate sale or exchange; or 9 (2) loading, unloading, storing, shipping, 10 transshipping, manufacturing, processing, or otherwise 11 dealing with them in a manner preliminary to their sale 12 or exchange. 13 (g) Temporary perfection: delivery of security 14 certificate or instrument to debtor. A perfected security 15 interest in a certificated security or instrument remains 16 perfected for 20 days without filing if the secured party 17 delivers the security certificate or instrument to the debtor 18 for the purpose of: 19 (1) ultimate sale or exchange; or 20 (2) presentation, collection, enforcement, renewal, 21 or registration of transfer. 22 (h) Expiration of temporary perfection. After the 23 20-day period specified in subsection (e), (f), or (g) 24 expires, perfection depends upon compliance with this 25 Article.Priorities Among Conflicting Security Interests in26the Same Collateral.27(1) The rules of priority stated in other Sections of28this Part and in the following Sections shall govern when29applicable: Section 4-210 with respect to the security30interests of collecting banks in items being collected,31accompanying documents and proceeds; Section 9-103 on32security interests related to other jurisdictions; Section339-114 on consignments; Section 9-115 on security interests in34investment property.SB1231 Enrolled -101- LRB9106284WHdv 1(2) A perfected security interest in crops for new value2given to enable the debtor to produce the crops during the3production season and given not more than three months before4the crops become growing crops by planting or otherwise takes5priority over an earlier perfected security interest to the6extent that such earlier interest secures obligations due7more than six months before the crops become growing crops by8planting or otherwise, even though the person giving new9value had knowledge of the earlier security interest.10(3) A perfected purchase money security interest in11inventory has priority over a conflicting security interest12in the same inventory and also has priority in identifiable13cash proceeds received on or before the delivery of the14inventory to a buyer if15(a) the purchase money security interest is16perfected at the time the debtor receives possession of17the inventory; and18(b) the purchase money secured party gives19notification in writing to the holder of the conflicting20security interest if the holder had filed a financing21statement covering the same types of inventory (i) before22the date of the filing made by the purchase money secured23party, or (ii) before the beginning of the 21 day period24where the purchase money security interest is temporarily25perfected without filing or possession (subsection (5) of26Section 9-304); and27(c) the holder of the conflicting security interest28receives the notification within 5 years before the29debtor receives possession of the inventory; and30(d) the notification states that the person giving31the notice has or expects to acquire a purchase money32security interest in inventory of the debtor, describing33such inventory by item or type.34(4) A purchase money security interest in collateralSB1231 Enrolled -102- LRB9106284WHdv 1other than inventory has priority over a conflicting security2interest in the same collateral or its proceeds if the3purchase money security interest is perfected at the time the4debtor receives possession of the collateral or within 205days thereafter.6(5) In all cases not governed by other rules stated in7this Section (including cases of purchase money security8interests which do not qualify for the special priorities set9forth in subsections (3) and (4) of this Section), priority10between conflicting security interests in the same collateral11shall be determined according to the following rules:12(a) Conflicting security interests rank according13to priority in time of filing or perfection. Priority14dates from the time a filing is first made covering the15collateral or the time the security interest is first16perfected, whichever is earlier, provided that there is17no period thereafter when there is neither filing nor18perfection.19(b) So long as conflicting security interests are20unperfected, the first to attach has priority.21(6) For the purposes of subsection (5) a date of filing22or perfection as to collateral is also a date of filing or23perfection as to proceeds.24(7) If future advances are made while a security25interest is perfected by filing, the taking of possession or26under Section 9-115 or 9-116 on investment property, the27security interest has the same priority for the purposes of28subsection (5) with respect to the future advances as it does29with respect to the first advance. If a commitment is made30before or while the security interest is so perfected, the31security interest has the same priority with respect to32advances made pursuant thereto. In other cases a perfected33security interest has priority from the date the advance is34made.SB1231 Enrolled -103- LRB9106284WHdv 1 (Source: P.A. 89-364, eff. 1-1-96.) 2 (810 ILCS 5/9-313) (from Ch. 26, par. 9-313) 3 Sec. 9-313. When possession by or delivery to secured 4 party perfects security interest without filing. 5 (a) Perfection by possession or delivery. Except as 6 otherwise provided in subsection (b), a secured party may 7 perfect a security interest in negotiable documents, goods, 8 instruments, money, or tangible chattel paper by taking 9 possession of the collateral. A secured party may perfect a 10 security interest in certificated securities by taking 11 delivery of the certificated securities under Section 8-301. 12 (b) Goods covered by certificate of title. With respect 13 to goods covered by a certificate of title issued by this 14 State, a secured party may perfect a security interest in the 15 goods by taking possession of the goods only in the 16 circumstances described in Section 9-316(d). 17 (c) Collateral in possession of person other than 18 debtor. With respect to collateral other than certificated 19 securities and goods covered by a document, a secured party 20 takes possession of collateral in the possession of a person 21 other than the debtor, the secured party, or a lessee of the 22 collateral from the debtor in the ordinary course of the 23 debtor's business, when: 24 (1) the person in possession authenticates a record 25 acknowledging that it holds possession of the collateral 26 for the secured party's benefit; or 27 (2) the person takes possession of the collateral 28 after having authenticated a record acknowledging that it 29 will hold possession of collateral for the secured 30 party's benefit. 31 (d) Time of perfection by possession; continuation of 32 perfection. If perfection of a security interest depends upon 33 possession of the collateral by a secured party, perfection SB1231 Enrolled -104- LRB9106284WHdv 1 occurs no earlier than the time the secured party takes 2 possession and continues only while the secured party retains 3 possession. 4 (e) Time of perfection by delivery; continuation of 5 perfection. A security interest in a certificated security in 6 registered form is perfected by delivery when delivery of the 7 certificated security occurs under Section 8-301 and remains 8 perfected by delivery until the debtor obtains possession of 9 the security certificate. 10 (f) Acknowledgment not required. A person in possession 11 of collateral is not required to acknowledge that it holds 12 possession for a secured party's benefit. 13 (g) Effectiveness of acknowledgment; no duties or 14 confirmation. If a person acknowledges that it holds 15 possession for the secured party's benefit: 16 (1) the acknowledgment is effective under 17 subsection (c) or Section 8-301(a), even if the 18 acknowledgment violates the rights of a debtor; and 19 (2) unless the person otherwise agrees or law other 20 than this Article otherwise provides, the person does not 21 owe any duty to the secured party and is not required to 22 confirm the acknowledgment to another person. 23 (h) Secured party's delivery to person other than 24 debtor. A secured party having possession of collateral does 25 not relinquish possession by delivering the collateral to a 26 person other than the debtor or a lessee of the collateral 27 from the debtor in the ordinary course of the debtor's 28 business if the person was instructed before the delivery or 29 is instructed contemporaneously with the delivery: 30 (1) to hold possession of the collateral for the 31 secured party's benefit; or 32 (2) to redeliver the collateral to the secured 33 party. 34 (i) Effect of delivery under subsection (h); no duties SB1231 Enrolled -105- LRB9106284WHdv 1 or confirmation. A secured party does not relinquish 2 possession, even if a delivery under subsection (h) violates 3 the rights of a debtor. A person to which collateral is 4 delivered under subsection (h) does not owe any duty to the 5 secured party and is not required to confirm the delivery to 6 another person unless the person otherwise agrees or law 7 other than this Article otherwise provides. 8Priority of Security Interests in Fixtures.9(1) In this Section and in the provisions of Part 4 of10this Article referring to fixture filing, unless the context11otherwise requires12(a) Goods are "fixtures" when they become so13related to particular real estate that an interest in14them arises under real estate law15(b) A "fixture filing" is the filing in the office16where a mortgage on the real estate would be filed or17recorded of a financing statement covering goods which18are or are to become fixtures and conforming to the19requirements of subsection (5) of Section 9-40220(c) A mortgage is a "construction mortgage" to the21extent that it secures an obligation incurred for the22construction of an improvement on land including the23acquisition cost of the land, if the recorded writing so24indicates.25(2) A security interest under this Article may be26created in goods which are fixtures or may continue in goods27which become fixtures, but no security interest exists under28this Article in ordinary building materials incorporated into29an improvement on land.30(3) This Article does not prevent creation of an31encumbrance upon fixtures pursuant to real estate law.32(4) A perfected security interest in fixtures has33priority over the conflicting interest of an encumbrancer or34owner of the real estate whereSB1231 Enrolled -106- LRB9106284WHdv 1(a) the security interest is a purchase money2security interest, the interest of the encumbrancer or3owner arises before the goods become fixtures, the4security interest is perfected by a fixture filing before5the goods become fixtures or within 10 days thereafter,6and the debtor has an interest of record in the real7estate or is in possession of the real estate; or8(b) the security interest is perfected by a fixture9filing before the interest of the encumbrancer or owner10is of record, the security interest has priority over any11conflicting interest of a predecessor in title of the12encumbrancer or owner, and the debtor has an interest of13record in the real estate or is in possession of the real14estate; or15(c) the fixtures are readily removable factory or16office machines or readily removable replacements of17domestic appliances which are consumer goods, and before18the goods become fixtures the security interest is19perfected by any method permitted by this Article; or20(d) the conflicting interest is a lien on the real21estate obtained by legal or equitable proceedings after22the security interest was perfected by any method23permitted by this Article.24(5) A security interest in fixtures, whether or not25perfected, has priority over the conflicting interest of an26encumbrancer or owner of the real estate where27(a) the encumbrancer or owner has consented in28writing to the security interest or has disclaimed an29interest in the goods as fixtures; or30(b) the debtor has a right to remove the goods as31against the encumbrancer or owner. If the debtor's right32terminates, the priority of the security interest33continues for a reasonable time.34(6) Notwithstanding paragraph (a) of subsection (4) butSB1231 Enrolled -107- LRB9106284WHdv 1otherwise subject to subsections (4) and (5), a security2interest in fixtures is subordinate to a construction3mortgage recorded before the goods become fixtures if the4goods become fixtures before the completion of the5construction. To the extent that it is given to refinance a6construction mortgage, a mortgage has this priority to the7same extent as the construction mortgage.8(7) In cases not within the preceding subsections, a9security interest in fixtures is subordinate to the10conflicting interest of an encumbrancer or owner of the11related real estate who is not the debtor.12(8) When the secured party has priority over all owners13and encumbrancers of the real estate, he may, on default,14subject to the provisions of Part 5, remove his collateral15from the real estate but he must reimburse any encumbrancer16or owner of the real estate who is not the debtor and who has17not otherwise agreed for the cost of repair of any physical18injury, but not for any diminution in value of the real19estate caused by the absence of the goods removed or by any20necessity of replacing them. A person entitled to21reimbursement may refuse permission to remove until the22secured party gives adequate security for the performance of23this obligation.24 (Source: P. A. 78-238; revised 10-31-98.) 25 (810 ILCS 5/9-314) (from Ch. 26, par. 9-314) 26 Sec. 9-314. Perfection by control. 27 (a) Perfection by control. A security interest in 28 investment property, deposit accounts, letter-of-credit 29 rights, or electronic chattel paper may be perfected by 30 control of the collateral under Section 9-104, 9-105, 9-106, 31 or 9-107. 32 (b) Specified collateral: time of perfection by 33 control; continuation of perfection. A security interest in SB1231 Enrolled -108- LRB9106284WHdv 1 deposit accounts, electronic chattel paper, or 2 letter-of-credit rights is perfected by control under Section 3 9-104, 9-105, or 9-107 when the secured party obtains control 4 and remains perfected by control only while the secured party 5 retains control. 6 (c) Investment property: time of perfection by control; 7 continuation of perfection. A security interest in 8 investment property is perfected by control under Section 9 9-106 from the time the secured party obtains control and 10 remains perfected by control until: 11 (1) the secured party does not have control; and 12 (2) one of the following occurs: 13 (A) if the collateral is a certificated 14 security, the debtor has or acquires possession of 15 the security certificate; 16 (B) if the collateral is an uncertificated 17 security, the issuer has registered or registers the 18 debtor as the registered owner; or 19 (C) if the collateral is a security 20 entitlement, the debtor is or becomes the 21 entitlement holder.Accessions.22(1) A security interest in goods which attaches before23they are installed in or affixed to other goods takes24priority as to the goods installed or affixed (called in this25section "accessions") over the claims of all persons to the26whole except as stated in subsection (3) and subject to27Section 9--315(1).28(2) A security interest which attaches to goods after29they become part of a whole is valid against all persons30subsequently acquiring interests in the whole except as31stated in subsection (3) but is invalid against any person32with an interest in the whole at the time the security33interest attaches to the goods who has not in writing34consented to the security interest or disclaimed an interestSB1231 Enrolled -109- LRB9106284WHdv 1in the goods as part of the whole.2(3) The security interests described in subsections (1)3and (2) do not take priority over4(a) a subsequent purchaser for value of any5interest in the whole; or6(b) a creditor with a lien on the whole7subsequently obtained by judicial proceedings; or8(c) a creditor with a prior perfected security9interest in the whole to the extent that he makes subsequent10advances if the subsequent purchase is made, the lien by11judicial proceedings obtained or the subsequent advance under12the prior perfected security interest is made or contracted13for without knowledge of the security interest and before it14is perfected. A purchaser of the whole at a foreclosure sale15other than the holder of a perfected security interest16purchasing at his own foreclosure sale is a subsequent17purchaser within this Section.18(4) When under subsections (1) or (2) and (3) a secured19party has an interest in accessions which has priority over20the claims of all persons who have interests in the whole, he21may on default subject to the provisions of Part 5 remove his22collateral from the whole but he must reimburse any23encumbrancer or owner of the whole who is not the debtor and24who has not otherwise agreed for the cost of repair of any25physical injury but not for any diminution in value of the26whole caused by the absence of the goods removed or by any27necessity for replacing them. A person entitled to28reimbursement may refuse permission to remove until the29secured party gives adequate security for the performance of30this obligation.31 (Source: Laws 1961, p. 2101.) 32 (810 ILCS 5/9-315) (from Ch. 26, par. 9-315) 33 Sec. 9-315. Secured party's rights on disposition of SB1231 Enrolled -110- LRB9106284WHdv 1 collateral and in proceeds. 2 (a) Disposition of collateral: continuation of security 3 interest or agricultural lien; proceeds. Except as otherwise 4 provided in this Article and in Section 2-403(2): 5 (1) a security interest or agricultural lien 6 continues in collateral notwithstanding sale, lease, 7 license, exchange, or other disposition thereof unless 8 the secured party authorized the disposition free of the 9 security interest or agricultural lien; and 10 (2) a security interest attaches to any 11 identifiable proceeds of collateral. 12 (b) When commingled proceeds identifiable. Proceeds 13 that are commingled with other property are identifiable 14 proceeds: 15 (1) if the proceeds are goods, to the extent 16 provided by Section 9-336; and 17 (2) if the proceeds are not goods, to the extent 18 that the secured party identifies the proceeds by a 19 method of tracing, including application of equitable 20 principles, that is permitted under law other than this 21 Article with respect to commingled property of the type 22 involved. 23 (c) Perfection of security interest in proceeds. A 24 security interest in proceeds is a perfected security 25 interest if the security interest in the original collateral 26 was perfected. 27 (d) Continuation of perfection. A perfected security 28 interest in proceeds becomes unperfected on the 21st day 29 after the security interest attaches to the proceeds unless: 30 (1) the following conditions are satisfied: 31 (A) a filed financing statement covers the 32 original collateral; 33 (B) the proceeds are collateral in which a 34 security interest may be perfected by filing in the SB1231 Enrolled -111- LRB9106284WHdv 1 office in which the financing statement has been 2 filed; and 3 (C) the proceeds are not acquired with cash 4 proceeds; 5 (2) the proceeds are identifiable cash proceeds; or 6 (3) the security interest in the proceeds is 7 perfected other than under subsection (c) when the 8 security interest attaches to the proceeds or within 20 9 days thereafter. 10 (e) When perfected security interest in proceeds becomes 11 unperfected. If a filed financing statement covers the 12 original collateral, a security interest in proceeds which 13 remains perfected under subsection (d)(1) becomes unperfected 14 at the later of: 15 (1) when the effectiveness of the filed financing 16 statement lapses under Section 9-515 or is terminated 17 under Section 9-513; or 18 (2) the 21st day after the security interest 19 attaches to the proceeds.Priority when goods are20commingled or processed.21(1) If a security interest in goods was perfected and22subsequently the goods or a part thereof have become part of23a product or mass, the security interest continues in the24product or mass if25(a) the goods are so manufactured, processed,26assembled or commingled that their identity is lost in the27product or mass; or28(b) a financing statement covering the original29goods also covers the product into which the goods have been30manufactured, processed or assembled. In a case to which31paragraph (b) applies, no separate security interest in that32part of the original goods which has been manufactured,33processed or assembled into the product may be claimed under34Section 9--314.SB1231 Enrolled -112- LRB9106284WHdv 1(2) When under subsection (1) more than one security2interest attaches to the product or mass, they rank equally3according to the ratio that the cost of the goods to which4each interest originally attached bears to the cost of the5total product or mass.6 (Source: Laws 1961, p. 2101.) 7 (810 ILCS 5/9-315.01 new) 8 Sec. 9-315.01. Debtor disposing of collateral and 9 failing to pay secured party amount due under security 10 agreement; penalties for violation. 11 (1) It is unlawful for a debtor under the terms of a 12 security agreement (a) who has no right of sale or other 13 disposition of the collateral or (b) who has a right of sale 14 or other disposition of the collateral and is to account to 15 the secured party for the proceeds of any sale or other 16 disposition of the collateral, to sell or otherwise dispose 17 of the collateral and willfully and wrongfully to fail to pay 18 the secured party the amount of said proceeds due under the 19 security agreement. Failure to pay such proceeds to the 20 secured party within 10 days after the sale or other 21 disposition of the collateral is prima facie evidence of a 22 willful and wanton failure to pay. 23 (2) An individual convicted of a violation of this 24 Section shall be guilty of a Class 3 felony. 25 (3) A corporation convicted of a violation of this 26 Section shall be guilty of a business offense and shall be 27 fined not less than $2,000 nor more than $10,000. 28 (4) In the event the debtor under the terms of a 29 security agreement is a corporation or a partnership, any 30 officer, director, manager, or managerial agent of the debtor 31 who violates this Section or causes the debtor to violate 32 this Section shall be guilty of a Class 3 felony. SB1231 Enrolled -113- LRB9106284WHdv 1 (810 ILCS 5/9-315.02 new) 2 Sec. 315.02. Disposal of collateral by debtor to persons 3 other than those previously disclosed to secured 4 party-penalties for violation-defense. 5 (1) Where, pursuant to Section 9-205.1, a secured party 6 has required that before the debtor sells or otherwise 7 disposes of collateral in the debtor's possession he disclose 8 to the secured party the persons to whom he desires to sell 9 or otherwise dispose of such collateral, it is unlawful for 10 the debtor to sell or otherwise dispose of the collateral to 11 a person other than a person so disclosed to the secured 12 party. 13 (2) An individual convicted of a violation of this 14 Section shall be guilty of a Class A misdemeanor. 15 (3) A corporation convicted of a violation of this 16 Section shall be guilty of a business offense and shall be 17 fined not less than $2,000 nor more than $10,000. 18 (4) In the event the debtor under the terms of a 19 security agreement is a corporation or a partnership, any 20 officer, director, manager, or managerial agent of the debtor 21 who violates this Section or causes the debtor to violate 22 this Section shall be guilty of a Class A misdemeanor. 23 (5) It is an affirmative defense to a prosecution for 24 the violation of this Section that the debtor has paid to the 25 secured party the proceeds from the sale or other disposition 26 of the collateral within 10 days after such sale or 27 disposition. 28 (810 ILCS 5/9-316) (from Ch. 26, par. 9-316) 29 Sec. 9-316. Continued perfection of security interest 30 following change in governing law. 31 (a) General rule: effect on perfection of change in 32 governing law. A security interest perfected pursuant to the 33 law of the jurisdiction designated in Section 9-301(1) or SB1231 Enrolled -114- LRB9106284WHdv 1 9-305(c) remains perfected until the earliest of: 2 (1) the time perfection would have ceased under the 3 law of that jurisdiction; 4 (2) the expiration of four months after a change of 5 the debtor's location to another jurisdiction; or 6 (3) the expiration of one year after a transfer of 7 collateral to a person that thereby becomes a debtor and 8 is located in another jurisdiction. 9 (b) Security interest perfected or unperfected under law 10 of new jurisdiction. If a security interest described in 11 subsection (a) becomes perfected under the law of the other 12 jurisdiction before the earliest time or event described in 13 that subsection, it remains perfected thereafter. If the 14 security interest does not become perfected under the law of 15 the other jurisdiction before the earliest time or event, it 16 becomes unperfected and is deemed never to have been 17 perfected as against a purchaser of the collateral for value. 18 (c) Possessory security interest in collateral moved to 19 new jurisdiction. A possessory security interest in 20 collateral, other than goods covered by a certificate of 21 title and as-extracted collateral consisting of goods, 22 remains continuously perfected if: 23 (1) the collateral is located in one jurisdiction 24 and subject to a security interest perfected under the 25 law of that jurisdiction; 26 (2) thereafter the collateral is brought into 27 another jurisdiction; and 28 (3) upon entry into the other jurisdiction, the 29 security interest is perfected under the law of the other 30 jurisdiction. 31 (d) Goods covered by certificate of title from this 32 State. Except as otherwise provided in subsection (e), a 33 security interest in goods covered by a certificate of title 34 which is perfected by any method under the law of another SB1231 Enrolled -115- LRB9106284WHdv 1 jurisdiction when the goods become covered by a certificate 2 of title from this State remains perfected until the security 3 interest would have become unperfected under the law of the 4 other jurisdiction had the goods not become so covered. 5 (e) When subsection (d) security interest becomes 6 unperfected against purchasers. A security interest 7 described in subsection (d) becomes unperfected as against a 8 purchaser of the goods for value and is deemed never to have 9 been perfected as against a purchaser of the goods for value 10 if the applicable requirements for perfection under Section 11 9-311(b) or 9-313 are not satisfied before the earlier of: 12 (1) the time the security interest would have 13 become unperfected under the law of the other 14 jurisdiction had the goods not become covered by a 15 certificate of title from this State; or 16 (2) the expiration of four months after the goods 17 had become so covered. 18 (f) Change in jurisdiction of bank, issuer, nominated 19 person, securities intermediary, or commodity intermediary. 20 A security interest in deposit accounts, letter-of-credit 21 rights, or investment property which is perfected under the 22 law of the bank's jurisdiction, the issuer's jurisdiction, a 23 nominated person's jurisdiction, the securities 24 intermediary's jurisdiction, or the commodity intermediary's 25 jurisdiction, as applicable, remains perfected until the 26 earlier of: 27 (1) the time the security interest would have 28 become unperfected under the law of that jurisdiction; or 29 (2) the expiration of four months after a change of 30 the applicable jurisdiction to another jurisdiction. 31 (g) Subsection (f) security interest perfected or 32 unperfected under law of new jurisdiction. If a security 33 interest described in subsection (f) becomes perfected under 34 the law of the other jurisdiction before the earlier of the SB1231 Enrolled -116- LRB9106284WHdv 1 time or the end of the period described in that subsection, 2 it remains perfected thereafter. If the security interest 3 does not become perfected under the law of the other 4 jurisdiction before the earlier of that time or the end of 5 that period, it becomes unperfected and is deemed never to 6 have been perfected as against a purchaser of the collateral 7 for value.Priority subject to subordination.8Nothing in this Article prevents subordination by9agreement by any person entitled to priority.10 (Source: Laws 1961, p. 2101.) 11 (810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new) 12 SUBPART 3. PRIORITY 13 (810 ILCS 5/9-317) (from Ch. 26, par. 9-317) 14 Sec. 9-317. Interests that take priority over or take 15 free of security interest or agricultural lien. 16 (a) Conflicting security interests and rights of lien 17 creditors. A security interest or agricultural lien is 18 subordinate to the rights of: 19 (1) a person entitled to priority under Section 20 9-322; and 21 (2) except as otherwise provided in subsection (e) 22 or (f), a person that becomes a lien creditor before the 23 earlier of the time: 24 (A) the security interest or agricultural lien 25 is perfected; or 26 (B) one of the conditions specified in Section 27 9-203(b)(3) is met and a financing statement 28 covering the collateral is filed. 29 (b) Buyers that receive delivery. Except as otherwise 30 provided in subsection (e), a buyer, other than a secured 31 party, of tangible chattel paper, documents, goods, 32 instruments, or a security certificate takes free of a SB1231 Enrolled -117- LRB9106284WHdv 1 security interest or agricultural lien if the buyer gives 2 value and receives delivery of the collateral without 3 knowledge of the security interest or agricultural lien and 4 before it is perfected. 5 (c) Lessees that receive delivery. Except as otherwise 6 provided in subsection (e), a lessee of goods takes free of a 7 security interest or agricultural lien if the lessee gives 8 value and receives delivery of the collateral without 9 knowledge of the security interest or agricultural lien and 10 before it is perfected. 11 (d) Licensees and buyers of certain collateral. A 12 licensee of a general intangible or a buyer, other than a 13 secured party, of accounts, electronic chattel paper, general 14 intangibles, or investment property other than a certificated 15 security takes free of a security interest if the licensee or 16 buyer gives value without knowledge of the security interest 17 and before it is perfected. 18 (e) Purchase-money security interest. Except as 19 otherwise provided in Sections 9-320 and 9-321, if a person 20 files a financing statement with respect to a purchase-money 21 security interest before or within 20 days after the debtor 22 receives delivery of the collateral, the security interest 23 takes priority over the rights of a buyer, lessee, or lien 24 creditor which arise between the time the security interest 25 attaches and the time of filing. 26 (f) Public deposits. An unperfected security interest 27 shall take priority over the rights of a lien creditor if (i) 28 the lien creditor is a trustee or receiver of a bank or 29 acting in furtherance of its supervisory authority over such 30 bank and (ii) a security interest is granted by the bank to 31 secure a deposit of public funds with the bank or a 32 repurchase agreement with the bank pursuant to the Government 33 Securities Act of 1986, as amended.Secured party not34obligated on contract of debtor.SB1231 Enrolled -118- LRB9106284WHdv 1The mere existence of a security interest or authority2given to the debtor to dispose of or use collateral does not3impose contract or tort liability upon the secured party for4the debtor's acts or omissions.5 (Source: Laws 1961, p. 2101.) 6 (810 ILCS 5/9-318) (from Ch. 26, par. 9-318) 7 Sec. 9-318. No interest retained in right to payment 8 that is sold; rights and title of seller of account or 9 chattel paper with respect to creditors and purchasers. 10 (a) Seller retains no interest. A debtor that has sold 11 an account, chattel paper, payment intangible, or promissory 12 note does not retain a legal or equitable interest in the 13 collateral sold. 14 (b) Deemed rights of debtor if buyer's security interest 15 unperfected. For purposes of determining the rights of 16 creditors of, and purchasers for value of an account or 17 chattel paper from, a debtor that has sold an account or 18 chattel paper, while the buyer's security interest is 19 unperfected, the debtor is deemed to have rights and title to 20 the account or chattel paper identical to those the debtor 21 sold.Defenses Against Assignee; Modification of Contract22After Notification of Assignment; Term Prohibiting Assignment23Ineffective; Identification and Proof of Assignment.24(1) Unless an account debtor has made an enforceable25agreement not to assert defenses or claims arising out of a26sale as provided in Section 9-- 206 the rights of an assignee27are subject to28(a) all the terms of the contract between the29account debtor and assignor and any defense or claim arising30therefrom; and31(b) any other defense or claim of the account32debtor against the assignor which accrues before the account33debtor receives notification of the assignment.SB1231 Enrolled -119- LRB9106284WHdv 1(2) So far as the right to payment or a part thereof2under an assigned contract has not been fully earned by3performance, and notwithstanding notification of the4assignment, any modification of or substitution for the5contract made in good faith and in accordance with reasonable6commercial standards is effective against an assignee unless7the account debtor has otherwise agreed but the assignee8acquires corresponding rights under the modified or9substituted contract. The assignment may provide that such10modification or substitution is a breach by the assignor.11(3) The account debtor is authorized to pay the assignor12until the account debtor receives notification that the13amount due or to become due has been assigned and that14payment is to be made to the assignee. A notification which15does not reasonably identify the rights assigned is16ineffective. If requested by the account debtor, the assignee17must seasonably furnish reasonable proof that the assignment18has been made and unless he does so the account debtor may19pay the assignor.20(4) A term in any contract between an account debtor and21an assignor is ineffective if it prohibits assignment of an22account or prohibits creation of a security interest in a23general intangible for money due or to become due or requires24the account debtor's consent to such assignment or security25interest.26 (Source: P. A. 77-2810.) 27 (810 ILCS 5/9-319 new) 28 Sec. 9-319. Rights and title of consignee with respect 29 to creditors and purchasers. 30 (a) Consignee has consignor's rights. Except as 31 otherwise provided in subsection (b), for purposes of 32 determining the rights of creditors of, and purchasers for 33 value of goods from, a consignee, while the goods are in the SB1231 Enrolled -120- LRB9106284WHdv 1 possession of the consignee, the consignee is deemed to have 2 rights and title to the goods identical to those the 3 consignor had or had power to transfer. 4 (b) Applicability of other law. For purposes of 5 determining the rights of a creditor of a consignee, law 6 other than this Article determines the rights and title of a 7 consignee while goods are in the consignee's possession if, 8 under this Part, a perfected security interest held by the 9 consignor would have priority over the rights of the 10 creditor. 11 (810 ILCS 5/9-320 new) 12 Sec. 9-320. Buyer of goods and farm products. 13 (a) Buyer in ordinary course of business. Except as 14 otherwise provided in subsections (e) and (f), a buyer in the 15 ordinary course of business takes free of a security interest 16 created by the buyer's seller, even if the security interest 17 is perfected and the buyer knows of its existence. 18 (b) Buyer of consumer goods. Except as otherwise 19 provided in subsection (e), a buyer of goods from a person 20 who used or bought the goods for use primarily for personal, 21 family, or household purposes takes free of a security 22 interest, even if perfected, if the buyer buys: 23 (1) without knowledge of the security interest; 24 (2) for value; 25 (3) primarily for the buyer's personal, family, or 26 household purposes; and 27 (4) before the filing of a financing statement 28 covering the goods. 29 (c) Effectiveness of filing for subsection (b). To the 30 extent that it affects the priority of a security interest 31 over a buyer of goods under subsection (b), the period of 32 effectiveness of a filing made in the jurisdiction in which 33 the seller is located is governed by Section 9-316(a) and SB1231 Enrolled -121- LRB9106284WHdv 1 (b). 2 (d) Buyer in ordinary course of business at wellhead or 3 minehead. A buyer in ordinary course of business buying oil, 4 gas, or other minerals at the wellhead or minehead or after 5 extraction takes free of an interest arising out of an 6 encumbrance. 7 (e) Possessory security interest not affected. 8 Subsections (a) and (b) do not affect a security interest in 9 goods in the possession of the secured party under Section 10 9-313. 11 (f) Buyer of farm products. 12 (1) A buyer of farm products takes subject to a 13 security interest created by the seller if: 14 (A) within one year before the sale of the 15 farm products, the buyer has received from the 16 secured party or the seller written notice of the 17 security interest organized according to farm 18 products that: 19 (i) is an original or reproduced copy 20 thereof; 21 (ii) contains: (a) the name and address 22 of the secured party; (b) the name and address 23 of the person indebted to the secured party; 24 (c) the social security number of the debtor 25 or, in the case of a debtor doing business 26 other than as an individual, the Internal 27 Revenue Service taxpayer identification number 28 of such debtor; (d) a description of the farm 29 products subject to the security interest 30 created by the debtor, including the amount of 31 such products where applicable, crop year, 32 county, and a reasonable description of the 33 property; 34 (iii) must be amended in writing, within SB1231 Enrolled -122- LRB9106284WHdv 1 3 months, similarly signed and transmitted, to 2 reflect material changes; 3 (iv) will lapse on either the expiration 4 period of the statement or the transmission of 5 a notice signed by the secured party that the 6 statement has lapsed, whichever occurs first; 7 and 8 (v) sets forth any payment obligations 9 imposed on the buyer by the secured party as 10 conditions for waiver or release of the 11 security interest; and 12 (B) the buyer has failed to perform the 13 payment obligations. 14 (2) For the purposes of this subsection (f), a 15 buyer of farm products has received notice from the 16 secured party or seller when written notice of the 17 security interest is sent to the buyer by registered or 18 certified mail. 19 (810 ILCS 5/9-320.1 new) 20 Sec. 9-320.1. Liability of commission merchant or 21 selling agent engaged in sale of livestock or other farm 22 products to holder of security interest. 23 (a) A commission merchant or selling agent who sells a 24 farm product for others shall be subject to a security 25 interest created by the seller in such farm product if: 26 (1) within one year before the sale of the farm 27 products, the buyer has received from the secured party 28 or the seller written notice of the security interest 29 organized according to farm products that: 30 (A) is an original or reproduced copy thereof; 31 (B) contains: (i) the name and address of the 32 secured party; (ii) the name and address of the 33 person indebted to the secured party; (iii) the SB1231 Enrolled -123- LRB9106284WHdv 1 social security number of the debtor or, in case of 2 a debtor doing business other than as an individual, 3 the Internal Revenue Service taxpayer identification 4 number of such debtor; (iv) a description of the 5 farm products subject to the security interest 6 created by the debtor, including the amount of such 7 products where applicable, crop year, county, and a 8 reasonable description of the property; 9 (C) must be amended in writing, within 3 10 months, similarly signed and transmitted, to reflect 11 material changes; 12 (D) will lapse on either the expiration period 13 of the statement or the transmission of a notice 14 signed by the secured party that the statement has 15 lapsed, whichever occurs first; and 16 (E) sets forth any payment obligations imposed 17 on the buyer by the secured party as conditions for 18 waiver or release of the security interest; and 19 (2) the commission merchant or selling agent has 20 failed to perform the payment obligations. 21 (b) For the purposes of this Section, a commission 22 merchant or selling agent has received notice from the 23 secured party or seller when written notice of the security 24 interest is sent to the commission merchant or selling agent 25 by registered or certified mail. 26 (810 ILCS 5/9-320.2 new) 27 Sec. 9-320.2. Notice to seller of farm products. A 28 commission merchant or selling agent who sells farm products 29 for others, and any person buying farm products in the 30 ordinary course of business from a person engaged in farming 31 operations, shall post at each licensed location where the 32 merchant, agent, or person buying farm products in the 33 ordinary course of business does business a notice that shall SB1231 Enrolled -124- LRB9106284WHdv 1 read as follows: 2 "NOTICE TO SELLERS OF FARM PRODUCTS 3 It is a criminal offense to sell farm products subject to 4 a security interest without making payment to the secured 5 party. You should notify the purchaser if there is a 6 security interest in the farm products you are selling.". 7 The notice shall be posted in a conspicuous manner and 8 shall be in contrasting type, large enough to be read from a 9 distance of 10 feet. 10 (810 ILCS 5/9-321 new) 11 Sec. 9-321. Licensee of general intangible and lessee of 12 goods in ordinary course of business. 13 (a) "Licensee in ordinary course of business." In this 14 Section, "licensee in ordinary course of business" means a 15 person that becomes a licensee of a general intangible in 16 good faith, without knowledge that the license violates the 17 rights of another person in the general intangible, and in 18 the ordinary course from a person in the business of 19 licensing general intangibles of that kind. A person becomes 20 a licensee in the ordinary course if the license to the 21 person comports with the usual or customary practices in the 22 kind of business in which the licensor is engaged or with the 23 licensor's own usual or customary practices. 24 (b) Rights of licensee in ordinary course of business. 25 A licensee in ordinary course of business takes its rights 26 under a nonexclusive license free of a security interest in 27 the general intangible created by the licensor, even if the 28 security interest is perfected and the licensee knows of its 29 existence. 30 (c) Rights of lessee in ordinary course of business. A 31 lessee in ordinary course of business takes its leasehold 32 interest free of a security interest in the goods created by 33 the lessor, even if the security interest is perfected and SB1231 Enrolled -125- LRB9106284WHdv 1 the lessee knows of its existence. 2 (810 ILCS 5/9-322 new) 3 Sec. 9-322. Priorities among conflicting security 4 interests in and agricultural liens on same collateral. 5 (a) General priority rules. Except as otherwise 6 provided in this Section, priority among conflicting security 7 interests and agricultural liens in the same collateral is 8 determined according to the following rules: 9 (1) Conflicting perfected security interests and 10 agricultural liens rank according to priority in time of 11 filing or perfection. Priority dates from the earlier of 12 the time a filing covering the collateral is first made 13 or the security interest or agricultural lien is first 14 perfected, if there is no period thereafter when there is 15 neither filing nor perfection. 16 (2) A perfected security interest or agricultural 17 lien has priority over a conflicting unperfected security 18 interest or agricultural lien. 19 (3) The first security interest or agricultural 20 lien to attach or become effective has priority if 21 conflicting security interests and agricultural liens are 22 unperfected. 23 (b) Time of perfection: proceeds and supporting 24 obligations. For the purposes of subsection (a)(1): 25 (1) the time of filing or perfection as to a 26 security interest in collateral is also the time of 27 filing or perfection as to a security interest in 28 proceeds; and 29 (2) the time of filing or perfection as to a 30 security interest in collateral supported by a supporting 31 obligation is also the time of filing or perfection as to 32 a security interest in the supporting obligation. 33 (c) Special priority rules: proceeds and supporting SB1231 Enrolled -126- LRB9106284WHdv 1 obligations. Except as otherwise provided in subsection (f), 2 a security interest in collateral which qualifies for 3 priority over a conflicting security interest under Section 4 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a 5 conflicting security interest in: 6 (1) any supporting obligation for the collateral; 7 and 8 (2) proceeds of the collateral if: 9 (A) the security interest in proceeds is 10 perfected; 11 (B) the proceeds are cash proceeds or of the 12 same type as the collateral; and 13 (C) in the case of proceeds that are proceeds 14 of proceeds, all intervening proceeds are cash 15 proceeds, proceeds of the same type as the 16 collateral, or an account relating to the 17 collateral. 18 (d) First-to-file priority rule for certain collateral. 19 Subject to subsection (e) and except as otherwise provided in 20 subsection (f), if a security interest in chattel paper, 21 deposit accounts, negotiable documents, instruments, 22 investment property, or letter-of-credit rights is perfected 23 by a method other than filing, conflicting perfected security 24 interests in proceeds of the collateral rank according to 25 priority in time of filing. 26 (e) Applicability of subsection (d). Subsection (d) 27 applies only if the proceeds of the collateral are not cash 28 proceeds, chattel paper, negotiable documents, instruments, 29 investment property, or letter-of-credit rights. 30 (f) Limitations on subsections (a) through (e). 31 Subsections (a) through (e) are subject to: 32 (1) subsection (g) and the other provisions of this 33 Part; 34 (2) Section 4-210 with respect to a security SB1231 Enrolled -127- LRB9106284WHdv 1 interest of a collecting bank; 2 (3) Section 5-118 with respect to a security 3 interest of an issuer or nominated person; and 4 (4) Section 9-110 with respect to a security 5 interest arising under Article 2 or 2A. 6 (g) Priority under agricultural lien statute. A 7 perfected agricultural lien on collateral has priority over a 8 conflicting security interest in or agricultural lien on the 9 same collateral if the statute creating the agricultural lien 10 so provides. 11 (810 ILCS 5/9-323 new) 12 Sec. 9-323. Future advances. 13 (a) When priority based on time of advance. Except as 14 otherwise provided in subsection (c), for purposes of 15 determining the priority of a perfected security interest 16 under Section 9-322(a)(1), perfection of the security 17 interest dates from the time an advance is made to the extent 18 that the security interest secures an advance that: 19 (1) is made while the security interest is 20 perfected only: 21 (A) under Section 9-309 when it attaches; or 22 (B) temporarily under Section 9-312(e), (f), 23 or (g); and 24 (2) is not made pursuant to a commitment entered 25 into before or while the security interest is perfected 26 by a method other than under Section 9-309 or 9-312(e), 27 (f), or (g). 28 (b) Lien creditor. Except as otherwise provided in 29 subsection (c), a security interest is subordinate to the 30 rights of a person that becomes a lien creditor to the extent 31 that the security interest secures an advance made more than 32 45 days after the person becomes a lien creditor unless the 33 advance is made: SB1231 Enrolled -128- LRB9106284WHdv 1 (1) without knowledge of the lien; or 2 (2) pursuant to a commitment entered into without 3 knowledge of the lien. 4 (c) Buyer of receivables. Subsections (a) and (b) do 5 not apply to a security interest held by a secured party that 6 is a buyer of accounts, chattel paper, payment intangibles, 7 or promissory notes or a consignor. 8 (d) Buyer of goods. Except as otherwise provided in 9 subsection (e), a buyer of goods other than a buyer in 10 ordinary course of business takes free of a security interest 11 to the extent that it secures advances made after the earlier 12 of: 13 (1) the time the secured party acquires knowledge 14 of the buyer's purchase; or 15 (2) 45 days after the purchase. 16 (e) Advances made pursuant to commitment: priority of 17 buyer of goods. Subsection (d) does not apply if the advance 18 is made pursuant to a commitment entered into without 19 knowledge of the buyer's purchase and before the expiration 20 of the 45-day period. 21 (f) Lessee of goods. Except as otherwise provided in 22 subsection (g), a lessee of goods, other than a lessee in 23 ordinary course of business, takes the leasehold interest 24 free of a security interest to the extent that it secures 25 advances made after the earlier of: 26 (1) the time the secured party acquires knowledge 27 of the lease; or 28 (2) 45 days after the lease contract becomes 29 enforceable. 30 (g) Advances made pursuant to commitment: priority of 31 lessee of goods. Subsection (f) does not apply if the 32 advance is made pursuant to a commitment entered into without 33 knowledge of the lease and before the expiration of the 34 45-day period. SB1231 Enrolled -129- LRB9106284WHdv 1 (810 ILCS 5/9-324 new) 2 Sec. 9-324. Priority of purchase-money security 3 interests. 4 (a) General rule: purchase-money priority. Except as 5 otherwise provided in subsection (g), a perfected 6 purchase-money security interest in goods other than 7 inventory or livestock has priority over a conflicting 8 security interest in the same goods, and, except as otherwise 9 provided in Section 9-327, a perfected security interest in 10 its identifiable proceeds also has priority, if the 11 purchase-money security interest is perfected when the debtor 12 receives possession of the collateral or within 20 days 13 thereafter. 14 (b) Inventory purchase-money priority. Subject to 15 subsection (c) and except as otherwise provided in subsection 16 (g), a perfected purchase-money security interest in 17 inventory has priority over a conflicting security interest 18 in the same inventory, has priority over a conflicting 19 security interest in chattel paper or an instrument 20 constituting proceeds of the inventory and in proceeds of the 21 chattel paper, if so provided in Section 9-330, and, except 22 as otherwise provided in Section 9-327, also has priority in 23 identifiable cash proceeds of the inventory to the extent the 24 identifiable cash proceeds are received on or before the 25 delivery of the inventory to a buyer, if: 26 (1) the purchase-money security interest is 27 perfected when the debtor receives possession of the 28 inventory; 29 (2) the purchase-money secured party sends an 30 authenticated notification to the holder of the 31 conflicting security interest; 32 (3) the holder of the conflicting security interest 33 receives the notification within five years before the 34 debtor receives possession of the inventory; and SB1231 Enrolled -130- LRB9106284WHdv 1 (4) the notification states that the person sending 2 the notification has or expects to acquire a 3 purchase-money security interest in inventory of the 4 debtor and describes the inventory. 5 (c) Holders of conflicting inventory security interests 6 to be notified. Subsections (b)(2) through (4) apply only if 7 the holder of the conflicting security interest had filed a 8 financing statement covering the same types of inventory: 9 (1) if the purchase-money security interest is 10 perfected by filing, before the date of the filing; or 11 (2) if the purchase-money security interest is 12 temporarily perfected without filing or possession under 13 Section 9-312(f), before the beginning of the 20-day 14 period thereunder. 15 (d) Livestock purchase-money priority. Subject to 16 subsection (e) and except as otherwise provided in subsection 17 (g), a perfected purchase-money security interest in 18 livestock that are farm products has priority over a 19 conflicting security interest in the same livestock, and, 20 except as otherwise provided in Section 9-327, a perfected 21 security interest in their identifiable proceeds and 22 identifiable products in their unmanufactured states also has 23 priority, if: 24 (1) the purchase-money security interest is 25 perfected when the debtor receives possession of the 26 livestock; 27 (2) the purchase-money secured party sends an 28 authenticated notification to the holder of the 29 conflicting security interest; 30 (3) the holder of the conflicting security interest 31 receives the notification within six months before the 32 debtor receives possession of the livestock; and 33 (4) the notification states that the person sending 34 the notification has or expects to acquire a SB1231 Enrolled -131- LRB9106284WHdv 1 purchase-money security interest in livestock of the 2 debtor and describes the livestock. 3 (e) Holders of conflicting livestock security interests 4 to be notified. Subsections (d)(2) through (4) apply only if 5 the holder of the conflicting security interest had filed a 6 financing statement covering the same types of livestock: 7 (1) if the purchase-money security interest is 8 perfected by filing, before the date of the filing; or 9 (2) if the purchase-money security interest is 10 temporarily perfected without filing or possession under 11 Section 9-312(f), before the beginning of the 20-day 12 period thereunder. 13 (f) Software purchase-money priority. Except as 14 otherwise provided in subsection (g), a perfected 15 purchase-money security interest in software has priority 16 over a conflicting security interest in the same collateral, 17 and, except as otherwise provided in Section 9-327, a 18 perfected security interest in its identifiable proceeds also 19 has priority, to the extent that the purchase-money security 20 interest in the goods in which the software was acquired for 21 use has priority in the goods and proceeds of the goods under 22 this Section. 23 (g) Conflicting purchase-money security interests. If 24 more than one security interest qualifies for priority in the 25 same collateral under subsection (a), (b), (d), or (f): 26 (1) a security interest securing an obligation 27 incurred as all or part of the price of the collateral 28 has priority over a security interest securing an 29 obligation incurred for value given to enable the debtor 30 to acquire rights in or the use of collateral; and 31 (2) in all other cases, Section 9-322(a) applies to 32 the qualifying security interests. 33 (810 ILCS 5/9-325 new) SB1231 Enrolled -132- LRB9106284WHdv 1 Sec. 9-325. Priority of security interests in 2 transferred collateral. 3 (a) Subordination of security interest in transferred 4 collateral. Except as otherwise provided in subsection (b), a 5 security interest created by a debtor is subordinate to a 6 security interest in the same collateral created by another 7 person if: 8 (1) the debtor acquired the collateral subject to 9 the security interest created by the other person; 10 (2) the security interest created by the other 11 person was perfected when the debtor acquired the 12 collateral; and 13 (3) there is no period thereafter when the security 14 interest is unperfected. 15 (b) Limitation of subsection (a) subordination. 16 Subsection (a) subordinates a security interest only if the 17 security interest: 18 (1) otherwise would have priority solely under 19 Section 9-322(a) or 9-324; or 20 (2) arose solely under Section 2-711(3) or 21 2A-508(5). 22 (810 ILCS 5/9-326 new) 23 Sec. 9-326. Priority of security interests created by 24 new debtor. 25 (a) Subordination of security interest created by new 26 debtor. Subject to subsection (b), a security interest 27 created by a new debtor which is perfected by a filed 28 financing statement that is effective solely under Section 29 9-508 in collateral in which a new debtor has or acquires 30 rights is subordinate to a security interest in the same 31 collateral which is perfected other than by a filed financing 32 statement that is effective solely under Section 9-508. 33 (b) Priority under other provisions; multiple original SB1231 Enrolled -133- LRB9106284WHdv 1 debtors. The other provisions of this Part determine the 2 priority among conflicting security interests in the same 3 collateral perfected by filed financing statements that are 4 effective solely under Section 9-508. However, if the 5 security agreements to which a new debtor became bound as 6 debtor were not entered into by the same original debtor, the 7 conflicting security interests rank according to priority in 8 time of the new debtor's having become bound. 9 (810 ILCS 5/9-327 new) 10 Sec. 9-327. Priority of security interests in deposit 11 account. The following rules govern priority among 12 conflicting security interests in the same deposit account: 13 (1) A security interest held by a secured party having 14 control of the deposit account under Section 9-104 has 15 priority over a conflicting security interest held by a 16 secured party that does not have control. 17 (2) Except as otherwise provided in paragraphs (3) and 18 (4), security interests perfected by control under Section 19 9-314 rank according to priority in time of obtaining 20 control. 21 (3) Except as otherwise provided in paragraph (4), a 22 security interest held by the bank with which the deposit 23 account is maintained has priority over a conflicting 24 security interest held by another secured party. 25 (4) A security interest perfected by control under 26 Section 9-104(a)(3) has priority over a security interest 27 held by the bank with which the deposit account is 28 maintained. 29 (810 ILCS 5/9-328 new) 30 Sec. 9-328. Priority of security interests in investment 31 property. The following rules govern priority among 32 conflicting security interests in the same investment SB1231 Enrolled -134- LRB9106284WHdv 1 property: 2 (1) A security interest held by a secured party having 3 control of investment property under Section 9-106 has 4 priority over a security interest held by a secured party 5 that does not have control of the investment property. 6 (2) Except as otherwise provided in paragraphs (3) and 7 (4), conflicting security interests held by secured parties 8 each of which has control under Section 9-106 rank according 9 to priority in time of: 10 (A) if the collateral is a security, obtaining 11 control; 12 (B) if the collateral is a security entitlement 13 carried in a securities account and: 14 (i) if the secured party obtained control 15 under Section 8-106(d)(1), the secured party's 16 becoming the person for which the securities account 17 is maintained; 18 (ii) if the secured party obtained control 19 under Section 8-106(d)(2), the securities 20 intermediary's agreement to comply with the secured 21 party's entitlement orders with respect to security 22 entitlements carried or to be carried in the 23 securities account; or 24 (iii) if the secured party obtained control 25 through another person under Section 8-106(d)(3), 26 the time on which priority would be based under this 27 paragraph if the other person were the secured 28 party; or 29 (C) if the collateral is a commodity contract 30 carried with a commodity intermediary, the satisfaction 31 of the requirement for control specified in Section 32 9-106(b)(2) with respect to commodity contracts carried 33 or to be carried with the commodity intermediary. 34 (3) A security interest held by a securities SB1231 Enrolled -135- LRB9106284WHdv 1 intermediary in a security entitlement or a securities 2 account maintained with the securities intermediary has 3 priority over a conflicting security interest held by another 4 secured party. 5 (4) A security interest held by a commodity intermediary 6 in a commodity contract or a commodity account maintained 7 with the commodity intermediary has priority over a 8 conflicting security interest held by another secured party. 9 (5) A security interest in a certificated security in 10 registered form which is perfected by taking delivery under 11 Section 9-313(a) and not by control under Section 9-314 has 12 priority over a conflicting security interest perfected by a 13 method other than control. 14 (6) Conflicting security interests created by a broker, 15 securities intermediary, or commodity intermediary which are 16 perfected without control under Section 9-106 rank equally. 17 (7) In all other cases, priority among conflicting 18 security interests in investment property is governed by 19 Sections 9-322 and 9-323. 20 (810 ILCS 5/9-329 new) 21 Sec. 9-329. Priority of security interests in 22 letter-of-credit right. The following rules govern priority 23 among conflicting security interests in the same 24 letter-of-credit right: 25 (1) A security interest held by a secured party 26 having control of the letter-of-credit right under 27 Section 9-107 has priority to the extent of its control 28 over a conflicting security interest held by a secured 29 party that does not have control. 30 (2) Security interests perfected by control under 31 Section 9-314 rank according to priority in time of 32 obtaining control. SB1231 Enrolled -136- LRB9106284WHdv 1 (810 ILCS 5/9-330 new) 2 Sec. 9-330. Priority of purchaser of chattel paper or 3 instrument. 4 (a) Purchaser's priority: security interest claimed 5 merely as proceeds. A purchaser of chattel paper has 6 priority over a security interest in the chattel paper which 7 is claimed merely as proceeds of inventory subject to a 8 security interest if: 9 (1) in good faith and in the ordinary course of the 10 purchaser's business, the purchaser gives new value and 11 takes possession of the chattel paper or obtains control 12 of the chattel paper under Section 9-105; and 13 (2) the chattel paper does not indicate that it has 14 been assigned to an identified assignee other than the 15 purchaser. 16 (b) Purchaser's priority: other security interests. A 17 purchaser of chattel paper has priority over a security 18 interest in the chattel paper which is claimed other than 19 merely as proceeds of inventory subject to a security 20 interest if the purchaser gives new value and takes 21 possession of the chattel paper or obtains control of the 22 chattel paper under Section 9-105 in good faith, in the 23 ordinary course of the purchaser's business, and without 24 knowledge that the purchase violates the rights of the 25 secured party. 26 (c) Chattel paper purchaser's priority in proceeds. 27 Except as otherwise provided in Section 9-327, a purchaser 28 having priority in chattel paper under subsection (a) or (b) 29 also has priority in proceeds of the chattel paper to the 30 extent that: 31 (1) Section 9-322 provides for priority in the 32 proceeds; or 33 (2) the proceeds consist of the specific goods 34 covered by the chattel paper or cash proceeds of the SB1231 Enrolled -137- LRB9106284WHdv 1 specific goods, even if the purchaser's security interest 2 in the proceeds is unperfected. 3 (d) Instrument purchaser's priority. Except as 4 otherwise provided in Section 9-331(a), a purchaser of an 5 instrument has priority over a security interest in the 6 instrument perfected by a method other than possession if the 7 purchaser gives value and takes possession of the instrument 8 in good faith and without knowledge that the purchase 9 violates the rights of the secured party. 10 (e) Holder of purchase-money security interest gives new 11 value. For purposes of subsections (a) and (b), the holder of 12 a purchase-money security interest in inventory gives new 13 value for chattel paper constituting proceeds of the 14 inventory. 15 (f) Indication of assignment gives knowledge. For 16 purposes of subsections (b) and (d), if chattel paper or an 17 instrument indicates that it has been assigned to an 18 identified secured party other than the purchaser, a 19 purchaser of the chattel paper or instrument has knowledge 20 that the purchase violates the rights of the secured party. 21 (810 ILCS 5/9-331 new) 22 Sec. 9-331. Priority of rights of purchasers of 23 instruments, documents, and securities under other Articles; 24 priority of interests in financial assets and security 25 entitlements under Article 8. 26 (a) Rights under Articles 3, 7, and 8 not limited. This 27 Article does not limit the rights of a holder in due course 28 of a negotiable instrument, a holder to which a negotiable 29 document of title has been duly negotiated, or a protected 30 purchaser of a security. These holders or purchasers take 31 priority over an earlier security interest, even if 32 perfected, to the extent provided in Articles 3, 7, and 8. 33 (b) Protection under Article 8. This Article does not SB1231 Enrolled -138- LRB9106284WHdv 1 limit the rights of or impose liability on a person to the 2 extent that the person is protected against the assertion of 3 a claim under Article 8. 4 (c) Filing not notice. Filing under this Article does 5 not constitute notice of a claim or defense to the holders, 6 or purchasers, or persons described in subsections (a) and 7 (b). 8 (810 ILCS 5/9-332 new) 9 Sec. 9-332. Transfer of money; transfer of funds from 10 deposit account. 11 (a) Transferee of money. A transferee of money takes 12 the money free of a security interest unless the transferee 13 acts in collusion with the debtor in violating the rights of 14 the secured party. 15 (b) Transferee of funds from deposit account. A 16 transferee of funds from a deposit account takes the funds 17 free of a security interest in the deposit account unless the 18 transferee acts in collusion with the debtor in violating the 19 rights of the secured party. 20 (810 ILCS 5/9-333 new) 21 Sec. 9-333. Priority of certain liens arising by 22 operation of law. 23 (a) "Possessory lien." In this Section, "possessory 24 lien" means an interest, other than a security interest or an 25 agricultural lien: 26 (1) which secures payment or performance of an 27 obligation for services or materials furnished with 28 respect to goods by a person in the ordinary course of 29 the person's business; 30 (2) which is created by statute or rule of law in 31 favor of the person; and 32 (3) whose effectiveness depends on the person's SB1231 Enrolled -139- LRB9106284WHdv 1 possession of the goods. 2 (b) Priority of possessory lien. A possessory lien on 3 goods has priority over a security interest in the goods 4 unless the lien is created by a statute that expressly 5 provides otherwise. 6 (810 ILCS 5/9-334 new) 7 Sec. 9-334. Priority of security interests in fixtures 8 and crops. 9 (a) Security interest in fixtures under this Article. A 10 security interest under this Article may be created in goods 11 that are fixtures or may continue in goods that become 12 fixtures. A security interest does not exist under this 13 Article in ordinary building materials incorporated into an 14 improvement on land. 15 (b) Security interest in fixtures under real-property 16 law. This Article does not prevent creation of an 17 encumbrance upon fixtures under real property law. 18 (c) General rule: subordination of security interest in 19 fixtures. In cases not governed by subsections (d) through 20 (h), a security interest in fixtures is subordinate to a 21 conflicting interest of an encumbrancer or owner of the 22 related real property other than the debtor. 23 (d) Fixtures purchase-money priority. Except as 24 otherwise provided in subsection (h), a perfected security 25 interest in fixtures has priority over a conflicting interest 26 of an encumbrancer or owner of the real property if the 27 debtor has an interest of record in or is in possession of 28 the real property and: 29 (1) the security interest is a purchase-money 30 security interest; 31 (2) the interest of the encumbrancer or owner 32 arises before the goods become fixtures; and 33 (3) the security interest is perfected by a fixture SB1231 Enrolled -140- LRB9106284WHdv 1 filing before the goods become fixtures or within 20 days 2 thereafter. 3 (e) Priority of security interest in fixtures over 4 interests in real property. A perfected security interest in 5 fixtures has priority over a conflicting interest of an 6 encumbrancer or owner of the real property if: 7 (1) the debtor has an interest of record in the 8 real property or is in possession of the real property 9 and the security interest: 10 (A) is perfected by a fixture filing before 11 the interest of the encumbrancer or owner is of 12 record; and 13 (B) has priority over any conflicting interest 14 of a predecessor in title of the encumbrancer or 15 owner; 16 (2) before the goods become fixtures, the security 17 interest is perfected by any method permitted by this 18 Article and the fixtures are readily removable: 19 (A) factory or office machines; 20 (B) equipment that is not primarily used or 21 leased for use in the operation of the real 22 property; or 23 (C) replacements of domestic appliances that 24 are consumer goods; 25 (3) the conflicting interest is a lien on the real 26 property obtained by legal or equitable proceedings after 27 the security interest was perfected by any method 28 permitted by this Article; or 29 (4) the security interest is: 30 (A) created in a manufactured home in a 31 manufactured-home transaction; and 32 (B) perfected pursuant to a statute described 33 in Section 9-311(a)(2). 34 (f) Priority based on consent, disclaimer, or right to SB1231 Enrolled -141- LRB9106284WHdv 1 remove. A security interest in fixtures, whether or not 2 perfected, has priority over a conflicting interest of an 3 encumbrancer or owner of the real property if: 4 (1) the encumbrancer or owner has, in an 5 authenticated record, consented to the security interest 6 or disclaimed an interest in the goods as fixtures; or 7 (2) the debtor has a right to remove the goods as 8 against the encumbrancer or owner. 9 (g) Continuation of subsection (f)(2) priority. The 10 priority of the security interest under subsection (f)(2) 11 continues for a reasonable time if the debtor's right to 12 remove the goods as against the encumbrancer or owner 13 terminates. 14 (h) Priority of construction mortgage. A mortgage is a 15 construction mortgage to the extent that it secures an 16 obligation incurred for the construction of an improvement on 17 land, including the acquisition cost of the land, if a 18 recorded record of the mortgage so indicates. Except as 19 otherwise provided in subsections (e) and (f), a security 20 interest in fixtures is subordinate to a construction 21 mortgage if a record of the mortgage is recorded before the 22 goods become fixtures and the goods become fixtures before 23 the completion of the construction. A mortgage has this 24 priority to the same extent as a construction mortgage to the 25 extent that it is given to refinance a construction mortgage. 26 (i) Priority of security interest in crops. 27 (1) Subject to Section 9-322(g), a perfected 28 security interest in crops growing on real property has 29 priority over: 30 (A) a conflicting interest of an encumbrancer 31 or owner of the real property; and 32 (B) the rights of a holder of an obligation 33 secured by a collateral assignment of beneficial 34 interest in a land trust, including rights by virtue SB1231 Enrolled -142- LRB9106284WHdv 1 of an equitable lien. 2 (2) For purposes of this subsection: 3 (A) "Collateral assignment of beneficial 4 interest" means any pledge or assignment of the 5 beneficial interest in a land trust to a person to 6 secure a debt to other obligation. 7 (B) "Land trust" means any trust arrangement 8 under which the legal and equitable title to real 9 estate is held by a trustee, the interest of the 10 beneficiary of the trust is personal property, and 11 the beneficiary or any person designated in writing 12 by the beneficiary has (i) the exclusive power to 13 direct or control the trustee in dealing with the 14 title to the trust property, (ii) the exclusive 15 control of the management, operation, renting, and 16 selling of the trust property, and (iii) the 17 exclusive right to the earnings, avails, and 18 proceeds of trust property. 19 (810 ILCS 5/9-335 new) 20 Sec. 9-335. Accessions. 21 (a) Creation of security interest in accession. A 22 security interest may be created in an accession and 23 continues in collateral that becomes an accession. 24 (b) Perfection of security interest. If a security 25 interest is perfected when the collateral becomes an 26 accession, the security interest remains perfected in the 27 collateral. 28 (c) Priority of security interest. Except as otherwise 29 provided in subsection (d), the other provisions of this Part 30 determine the priority of a security interest in an 31 accession. 32 (d) Compliance with certificate-of-title statute. A 33 security interest in an accession is subordinate to a SB1231 Enrolled -143- LRB9106284WHdv 1 security interest in the whole which is perfected by 2 compliance with the requirements of a certificate-of-title 3 statute under Section 9-311(b). 4 (e) Removal of accession after default. After default, 5 subject to Part 6, a secured party may remove an accession 6 from other goods if the security interest in the accession 7 has priority over the claims of every person having an 8 interest in the whole. 9 (f) Reimbursement following removal. A secured party 10 that removes an accession from other goods under subsection 11 (e) shall promptly reimburse any holder of a security 12 interest or other lien on, or owner of, the whole or of the 13 other goods, other than the debtor, for the cost of repair of 14 any physical injury to the whole or the other goods. The 15 secured party need not reimburse the holder or owner for any 16 diminution in value of the whole or the other goods caused by 17 the absence of the accession removed or by any necessity for 18 replacing it. A person entitled to reimbursement may refuse 19 permission to remove until the secured party gives adequate 20 assurance for the performance of the obligation to reimburse. 21 (810 ILCS 5/9-336 new) 22 Sec. 9-336. Commingled goods. 23 (a) "Commingled goods." In this Section, "commingled 24 goods" means goods that are physically united with other 25 goods in such a manner that their identity is lost in a 26 product or mass. 27 (b) No security interest in commingled goods as such. A 28 security interest does not exist in commingled goods as such. 29 However, a security interest may attach to a product or mass 30 that results when goods become commingled goods. 31 (c) Attachment of security interest to product or mass. 32 If collateral becomes commingled goods, a security interest 33 attaches to the product or mass. SB1231 Enrolled -144- LRB9106284WHdv 1 (d) Perfection of security interest. If a security 2 interest in collateral is perfected before the collateral 3 becomes commingled goods, the security interest that attaches 4 to the product or mass under subsection (c) is perfected. 5 (e) Priority of security interest. Except as otherwise 6 provided in subsection (f), the other provisions of this Part 7 determine the priority of a security interest that attaches 8 to the product or mass under subsection (c). 9 (f) Conflicting security interests in product or mass 10 If more than one security interest attaches to the product or 11 mass under subsection (c), the following rules determine 12 priority: 13 (1) A security interest that is perfected under 14 subsection (d) has priority over a security interest that 15 is unperfected at the time the collateral becomes 16 commingled goods. 17 (2) If more than one security interest is perfected 18 under subsection (d), the security interests rank equally 19 in proportion to the value of the collateral at the time 20 it became commingled goods. 21 (810 ILCS 5/9-337 new) 22 Sec. 9-337. Priority of security interests in goods 23 covered by certificate of title. If, while a security 24 interest in goods is perfected by any method under the law of 25 another jurisdiction, this State issues a certificate of 26 title that does not show that the goods are subject to the 27 security interest or contain a statement that they may be 28 subject to security interests not shown on the certificate: 29 (1) a buyer of the goods, other than a person in 30 the business of selling goods of that kind, takes free of 31 the security interest if the buyer gives value and 32 receives delivery of the goods after issuance of the 33 certificate and without knowledge of the security SB1231 Enrolled -145- LRB9106284WHdv 1 interest; and 2 (2) the security interest is subordinate to a 3 conflicting security interest in the goods that attaches, 4 and is perfected under Section 9-311(b), after issuance 5 of the certificate and without the conflicting secured 6 party's knowledge of the security interest. 7 (810 ILCS 5/9-338 new) 8 Sec. 9-338. Priority of security interest or 9 agricultural lien perfected by filed financing statement 10 providing certain incorrect information. If a security 11 interest or agricultural lien is perfected by a filed 12 financing statement providing information described in 13 Section 9-516(b)(5) which is incorrect at the time the 14 financing statement is filed: 15 (1) the security interest or agricultural lien is 16 subordinate to a conflicting perfected security interest 17 in the collateral to the extent that the holder of the 18 conflicting security interest gives value in reasonable 19 reliance upon the incorrect information; and 20 (2) a purchaser, other than a secured party, of the 21 collateral takes free of the security interest or 22 agricultural lien to the extent that, in reasonable 23 reliance upon the incorrect information, the purchaser 24 gives value and, in the case of chattel paper, documents, 25 goods, instruments, or a security certificate, receives 26 delivery of the collateral. 27 (810 ILCS 5/9-339 new) 28 Sec. 9-339. Priority subject to subordination. This 29 Article does not preclude subordination by agreement by a 30 person entitled to priority. 31 (810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new) SB1231 Enrolled -146- LRB9106284WHdv 1 SUBPART 4. RIGHTS OF BANK 2 (810 ILCS 5/9-340 new) 3 Sec. 9-340. Effectiveness of right of recoupment or 4 set-off against deposit account. 5 (a) Exercise of recoupment or set-off. Except as 6 otherwise provided in subsection (c), a bank with which a 7 deposit account is maintained may exercise any right of 8 recoupment or set-off against a secured party that holds a 9 security interest in the deposit account. 10 (b) Recoupment or set-off not affected by security 11 interest. Except as otherwise provided in subsection (c), the 12 application of this Article to a security interest in a 13 deposit account does not affect a right of recoupment or 14 set-off of the secured party as to a deposit account 15 maintained with the secured party. 16 (c) When set-off ineffective. The exercise by a bank of 17 a set-off against a deposit account is ineffective against a 18 secured party that holds a security interest in the deposit 19 account which is perfected by control under Section 20 9-104(a)(3), if the set-off is based on a claim against the 21 debtor. 22 (810 ILCS 5/9-341 new) 23 Sec. 9-341. Bank's rights and duties with respect to 24 deposit account. Except as otherwise provided in Section 25 9-340(c), and unless the bank otherwise agrees in an 26 authenticated record, a bank's rights and duties with respect 27 to a deposit account maintained with the bank are not 28 terminated, suspended, or modified by: 29 (1) the creation, attachment, or perfection of a 30 security interest in the deposit account; 31 (2) the bank's knowledge of the security interest; 32 or SB1231 Enrolled -147- LRB9106284WHdv 1 (3) the bank's receipt of instructions from the 2 secured party. 3 (810 ILCS 5/9-342 new) 4 Sec. 9-342. Bank's right to refuse to enter into or 5 disclose existence of control agreement. This Article does 6 not require a bank to enter into an agreement of the kind 7 described in Section 9-104(a)(2), even if its customer so 8 requests or directs. A bank that has entered into such an 9 agreement is not required to confirm the existence of the 10 agreement to another person unless requested to do so by its 11 customer. 12 (810 ILCS 5/Art. 9, Part 4 heading) 13 PART 4. RIGHTS OF THIRD PARTIESFILING14 (810 ILCS 5/9-401) (from Ch. 26, par. 9-401) 15 Sec. 9-401. Alienability of debtor's rights. 16 (a) Other law governs alienability; exceptions. Except 17 as otherwise provided in subsection (b) and Sections 9-406, 18 9-407, 9-408, and 9-409, whether a debtor's rights in 19 collateral may be voluntarily or involuntarily transferred is 20 governed by law other than this Article. 21 (b) Agreement does not prevent transfer. An agreement 22 between the debtor and secured party which prohibits a 23 transfer of the debtor's rights in collateral or makes the 24 transfer a default does not prevent the transfer from taking 25 effect.Place of Filing; Erroneous Filing; Removal of26Collateral.27(1) The proper place to file in order to perfect a28security interest is as follows:29(a) when the collateral is consumer goods, then in30the office of the recorder in the county of the debtor's31residence or if the debtor is not a resident of thisSB1231 Enrolled -148- LRB9106284WHdv 1State then in the office of the Recorder of Deeds in the2county where the goods are kept;3(b) when the collateral is timber to be cut or is4minerals or the like (including oil and gas) or accounts5subject to subsection (5) of Section 9-103, or when the6financing statement is filed as a fixture filing (Section79-313) and the collateral is goods which are or are to8become fixtures, then in the office where a mortgage on9the real estate would be filed or recorded;10(c) in all other cases, in the office of the11Secretary of State.12(2) A filing which is made in good faith in an improper13place or not in all of the places required by this section is14nevertheless effective with regard to any collateral as to15which the filing complied with the requirements of this16Article and is also effective with regard to collateral17covered by the financing statement against any person who has18knowledge of the contents of such financing statement.19(3) A filing which is made in the proper place in this20State continues effective even though the debtor's residence21or place of business or the location of the collateral or its22use, whichever controlled the original filing, is thereafter23changed.24(4) The rules stated in Section 9-103 determine whether25filing is necessary in this State.26(5) Notwithstanding the preceding subsections, and27subject to subsection (3) of Section 9-302, the proper place28to file in order to perfect a security interest in29collateral, including fixtures, of a transmitting utility is30the office of the Secretary of State. This filing constitutes31a fixture filing (Section 9-313) as to the collateral32described therein which is or is to become fixtures.33(6) For the purposes of this Section, the residence of34an organization is its place of business if it has one or itsSB1231 Enrolled -149- LRB9106284WHdv 1chief executive office if it has more than one place of2business.3 (Source: P.A. 90-300, eff. 1-1-98.) 4 (810 ILCS 5/9-401A) 5 Sec. 9-401A. (Blank).Continuation of certain financing6statements filed before January 1, 1998. The following rules7apply to a financing statement or continuation statement that8was properly filed before January 1, 1998 in the office of a9county recorder, but which, if filed on or after January 1,101998, is required by Section 9-401 to be filed in the office11of the Secretary of State:12(1) The financing statement shall remain effective until13it lapses as provided in Section 9-403.14(2) The effectiveness of the financing statement may be15continued only by filing a continuation statement in the16office of the Secretary of State that provides the name and17address of the debtor and secured party, indicates the county18where the financing statement is filed, complies with the19requirements of Section 9-403, and either:20(A) indicates the types or describes the items of21collateral included in the original financing statement22as modified by any releases or amendments; or23(B) has attached a copy of the originally filed24financing statement together with amendments,25assignments, and releases affecting it.26A continuation statement filed as provided in this item27(2) may be further continued by a continuation statement that28complies with the requirements of Section 9-403.29(3) The financing statement may be terminated, assigned,30released, or amended only by an appropriate filing in the31office of the county recorder where it is filed, except that32if the financing statement has been continued as provided in33item (2) of this Section, it may thereafter be terminated,SB1231 Enrolled -150- LRB9106284WHdv 1assigned, released, or amended only by an appropriate filing2in the office of the Secretary of State.3 (Source: P.A. 90-300, eff. 1-1-98.) 4 (810 ILCS 5/9-402) (from Ch. 26, par. 9-402) 5 Sec. 9-402. Secured party not obligated on contract of 6 debtor or in tort. The existence of a security interest, 7 agricultural lien, or authority given to a debtor to dispose 8 of or use collateral, without more, does not subject a 9 secured party to liability in contract or tort for the 10 debtor's acts or omissions.Formal requisites of financing11statement; amendments; mortgage as financing statement.12(1) A financing statement is sufficient if it gives the13names of the debtor and the secured party, is signed by the14debtor, gives an address of the secured party from which15information concerning the security interest may be obtained,16gives a mailing address of the debtor and contains a17statement indicating the types, or describing the items, of18collateral. A financing statement may be filed before a19security agreement is made or a security interest otherwise20attaches. When a financing statement filed prior to January211, 1996, covers crops growing or to be grown, the statement22must also contain a legal description of the real estate23concerned. If a financing statement covers crops growing or24to be grown and includes a description of the real estate25concerned, the description is sufficient if it includes the26quarter section, section, township and range, and the name of27a record owner if other than the debtor, of the real estate28concerned. When the financing statement covers timber to be29cut or covers minerals or the like (including oil and gas) or30accounts subject to subsection (5) of Section 9-103, or when31the financing statement is filed as a fixture filing (Section329-313) and the collateral is goods which are or are to become33fixtures, the statement must also comply with subsection (5).SB1231 Enrolled -151- LRB9106284WHdv 1A copy of the security agreement is sufficient as a financing2statement if it contains the above information and is signed3by the debtor. A carbon, photographic or other reproduction4of a security agreement or a financing statement is5sufficient as a financing statement if the security agreement6so provides or if the original has been filed in this State.7(2) A financing statement which otherwise complies with8subsection (1) is sufficient when it is signed by the secured9party instead of the debtor if it is filed to perfect a10security interest in11(a) collateral already subject to a security12interest in another jurisdiction when it is brought into13this State, or when the debtor's location is changed to14this State. Such a financing statement must state that15the collateral was brought into this State or that the16debtor's location was changed to this State under such17circumstances; or18(b) proceeds under Section 9-306 if the security19interest in the original collateral was perfected. Such a20financing statement must describe the original21collateral; or22(c) collateral as to which the filing has lapsed;23or24(d) collateral acquired after a change of name,25identity or corporate structure of the debtor (subsection26(7).27(3) A form substantially as follows is sufficient to28comply with subsection (1):29Name of debtor (or assignor) .......................30Address .......................................31Name of secured party (or assignee) ...........32Address .......................................331. This financing statement covers the following34types (or items) of property:SB1231 Enrolled -152- LRB9106284WHdv 1(Describe) .........................................22. (Blank).33. (If applicable) The above goods are to become4fixtures on *5*Where appropriate substitute either "The above6timber is standing on ...." or "The above minerals or the7like (including oil and gas) or accounts will be financed8at the wellhead or minehead of the well or mine located9on ...."10(Describe Real Estate) .............................11and this financing statement is to be filed in the real12estate records. (If the debtor does not have an interest13of record) The name of a record owner is ................144. (If products of collateral are claimed) Products15of the collateral are also covered.16Signature of Debtor (or Assignor) ..................17Signature of Secured Party (or Assignee) ...........18(use whichever is applicable)19(4) A financing statement may be amended by filing a20writing signed by both the debtor and the secured party. An21amendment does not extend the period of effectiveness of a22financing statement. If any amendment adds collateral, it is23effective as to the added collateral only from the filing24date of the amendment. In this Article, unless the context25otherwise requires, the term "financing statement" means the26original financing statement and any amendments.27(5) A financing statement covering timber to be cut or28covering minerals or the like (including oil and gas) or29accounts subject to subsection (5) of Section 9-103, or a30financing statement filed as a fixture filing (Section 9-313)31where the debtor is not a transmitting utility, must show32that it covers this type of collateral, must recite that it33is to be filed in the real estate records, and the financing34statement must contain a description of the real estate. IfSB1231 Enrolled -153- LRB9106284WHdv 1the debtor does not have an interest of record in the real2estate, the financing statement must show the name of a3record owner.4(6) A mortgage is effective as a financing statement5filed as a fixture filing from the date of its recording if6(a) the goods are described in the mortgage by item7or type,8(b) the goods are or are to become fixtures related9to the real estate described in the mortgage,10(c) the mortgage complies with the requirements for11a financing statement in this Section other than a12recital that it is to be filed in the real estate13records, and14(d) the mortgage is duly recorded.15No fee with reference to the financing statement is16required other than the regular recording and satisfaction17fees with respect to the mortgage.18(7) A financing statement sufficiently shows the name of19the debtor if it gives the individual, partnership or20corporate name of the debtor, whether or not it adds other21trade names or names of partners. Where the debtor so changes22his name or in the case of an organization its name, identity23or corporate structure that a filed financing statement24becomes seriously misleading, the filing is not effective to25perfect a security interest in collateral acquired by the26debtor more than 4 months after the change, unless a new27appropriate financing statement is filed before the28expiration of that time. A filed financing statement remains29effective with respect to collateral transferred by the30debtor even though the secured party knows of or consents to31the transfer.32(8) A financing statement substantially complying with33the requirements of this Section is effective even though it34contains minor errors which are not seriously misleading.SB1231 Enrolled -154- LRB9106284WHdv 1 (Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.) 2 (810 ILCS 5/9-403) (from Ch. 26, par. 9-403) 3 Sec. 9-403. Agreement not to assert defenses against 4 assignee. 5 (a) "Value." In this Section, "value" has the meaning 6 provided in Section 3-303(a). 7 (b) Agreement not to assert claim or defense. Except as 8 otherwise provided in this Section, an agreement between an 9 account debtor and an assignor not to assert against an 10 assignee any claim or defense that the account debtor may 11 have against the assignor is enforceable by an assignee that 12 takes an assignment: 13 (1) for value; 14 (2) in good faith; 15 (3) without notice of a claim of a property or 16 possessory right to the property assigned; and 17 (4) without notice of a defense or claim in 18 recoupment of the type that may be asserted against a 19 person entitled to enforce a negotiable instrument under 20 Section 3-305(a). 21 (c) When subsection (b) not applicable. Subsection (b) 22 does not apply to defenses of a type that may be asserted 23 against a holder in due course of a negotiable instrument 24 under Section 3-305(b). 25 (d) Omission of required statement in consumer 26 transaction. In a consumer transaction, if a record 27 evidences the account debtor's obligation, law other than 28 this Article requires that the record include a statement to 29 the effect that the rights of an assignee are subject to 30 claims or defenses that the account debtor could assert 31 against the original obligee, and the record does not include 32 such a statement: 33 (1) the record has the same effect as if the record SB1231 Enrolled -155- LRB9106284WHdv 1 included such a statement; and 2 (2) the account debtor may assert against an 3 assignee those claims and defenses that would have been 4 available if the record included such a statement. 5 (e) Rule for individual under other law. This Section 6 is subject to law other than this Article which establishes a 7 different rule for an account debtor who is an individual and 8 who incurred the obligation primarily for personal, family, 9 or household purposes. 10 (f) Other law not displaced. Except as otherwise 11 provided in subsection (d), this Section does not displace 12 law other than this Article which gives effect to an 13 agreement by an account debtor not to assert a claim or 14 defense against an assignee.What constitutes filing;15duration of filing; effect of lapsed filing; duties of filing16officer; fees.17(1) Presentation for filing of a financing statement and18tender of the filing fee or acceptance of the statement by19the filing officer constitutes filing under this Article.20(2) Except as provided in subsection (6) a filed21financing statement is effective for a period of 5 years from22the date of filing. The effectiveness of a filed financing23statement lapses on the expiration of the 5 year period24unless a continuation statement is filed prior to the lapse.25If a security interest perfected by filing exists at the time26insolvency proceedings are commenced by or against the27debtor, the security interest remains perfected until28termination of the insolvency proceedings and thereafter for29a period of 60 days or until expiration of the 5 year period,30whichever occurs later. Upon lapse the security interest31becomes unperfected, unless it is perfected without filing.32If the security interest becomes unperfected upon lapse, it33is deemed to have been unperfected as against a person who34became a purchaser or lien creditor before lapse.SB1231 Enrolled -156- LRB9106284WHdv 1(3) A continuation statement may be filed by the secured2party within 6 months prior to the expiration of the 5 year3period specified in subsection (2). Any such continuation4statement must be signed by the secured party, identify the5original statement by file number and state that the original6statement is still effective. A continuation statement signed7by a person other than the secured party of record must be8accompanied by a separate written statement of assignment9signed by the secured party of record and complying with10subsection (2) of Section 9-405, including payment of the11required fee. Upon timely filing of the continuation12statement, the effectiveness of the original statement is13continued for 5 years after the last date to which the filing14was effective whereupon it lapses in the same manner as15provided in subsection (2) unless another continuation16statement is filed prior to such lapse. Succeeding17continuation statements may be filed in the same manner to18continue the effectiveness of the original statement. Unless19a statute on disposition of public records provides20otherwise, the filing officer may remove a lapsed statement21from the files and destroy it immediately if he has retained22a microfilm or other photographic record, or in other cases23after one year after the lapse. The filing officer shall so24arrange matters by physical annexation of financing25statements to continuation statements or other related26filings, or by other means, that if he physically destroys27the financing statements of a period more than 5 years past,28those which have been continued by a continuation statement29or which are still effective under subsection (6) shall be30retained.31(4) Except as provided in subsection (7) a filing32officer shall mark each statement with a file number and with33the date and hour of filing and shall hold the statement or a34microfilm or other photographic copy thereof for publicSB1231 Enrolled -157- LRB9106284WHdv 1inspection. In addition the filing officer shall index the2statement according to the name of the debtor and shall note3in the index the file number and the address of the debtor4given in the statement.5(5) The uniform fee for filing and indexing and for6stamping a copy furnished by the secured party to show the7date and place of filing for an original financing statement,8amended statement, or for a continuation statement shall be9$20.10(6) If the debtor is a transmitting utility (subsection11(5) of Section 9-401 and a filed financing statement so12states, it is effective until a termination statement is13filed. A real estate mortgage which is effective as a fixture14filing under subsection (6) of Section 9-402 remains15effective as a fixture filing until the mortgage is released16or satisfied of record or its effectiveness otherwise17terminates as to the real estate.18(7) When a financing statement covers timber to be cut19or covers minerals or the like (including oil and gas) or20accounts subject to subsection (5) of Section 9-103, or is21filed as a fixture filing, the filing officer shall index it22under the names of the debtor and any owner of record shown23on the financing statement in the same fashion as if they24were the mortgagors in a mortgage of the real estate25described, and, to the extent that the law of this State26provides for indexing of mortgages under the name of the27mortgagee, under the name of the secured party as if he were28the mortgagee thereunder, or where indexing is by description29in the same fashion as if the financing statement were a30mortgage of the real estate described.31(8) For financing statements filed on or after January321, 1998 as to a debtor who is a resident of the State of33Illinois, if the collateral is equipment used in farming34operations, farm products, or accounts or general intangiblesSB1231 Enrolled -158- LRB9106284WHdv 1arising from the sale of farm products by a farmer, the2secured party shall, within 30 days after filing with the3office of the Secretary of State, remit to the office of the4recorder in the county of the debtor's residence a fee of $105together with a copy of the financing statement filed in the6office of the Secretary of State. This fee is in addition to7payment of the fee provided in subsection (5) of this Section8and is imposed to defray the cost of converting the county9recorder's document storage system to computers or10micrographics. The copy of the financing statement provided11to the office of the recorder shall be for informational12purposes only and shall not be for filing with the office of13the recorder nor shall the provision of the informational14copy be subject to imposition of any filing fee under Section153-5018 of the Counties Code or otherwise. The provisions of16this subsection (8) other than this sentence, are inoperative17after the earlier of (i) July 1, 1999 or (ii) the effective18date of a change to the Illinois Uniform Commercial Code19which adopts a recommendation by the National Conference of20Commissioners on Uniform State Laws to amend Section 9-401 of21this Code to make the office of the Secretary of State the22proper place to file a financing statement described in this23subsection (8).24(9) The failure to send an informational copy of a25financing statement to the appropriate office of the recorder26or to pay the fee as set forth in subsection (8) shall not in27any manner affect the existence, validity, perfection,28priority, or enforceability of the security interest of the29secured party.30 (Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98; 31 revised 10-31-98.) 32 (810 ILCS 5/9-404) (from Ch. 26, par. 9-404) 33 Sec. 9-404. Rights acquired by assignee; claims and SB1231 Enrolled -159- LRB9106284WHdv 1 defenses against assignee. 2 (a) Assignee's rights subject to terms, claims, and 3 defenses; exceptions. Unless an account debtor has made an 4 enforceable agreement not to assert defenses or claims, and 5 subject to subsections (b) through (e), the rights of an 6 assignee are subject to: 7 (1) all terms of the agreement between the account 8 debtor and assignor and any defense or claim in 9 recoupment arising from the transaction that gave rise to 10 the contract; and 11 (2) any other defense or claim of the account 12 debtor against the assignor which accrues before the 13 account debtor receives a notification of the assignment 14 authenticated by the assignor or the assignee. 15 (b) Account debtor's claim reduces amount owed to 16 assignee. Subject to subsection (c) and except as otherwise 17 provided in subsection (d), the claim of an account debtor 18 against an assignor may be asserted against an assignee under 19 subsection (a) only to reduce the amount the account debtor 20 owes. 21 (c) Rule for individual under other law. This Section 22 is subject to law other than this Article which establishes a 23 different rule for an account debtor who is an individual and 24 who incurred the obligation primarily for personal, family, 25 or household purposes. 26 (d) Omission of required statement in consumer 27 transaction. In a consumer transaction, if a record 28 evidences the account debtor's obligation, law other than 29 this Article requires that the record include a statement to 30 the effect that the account debtor's recovery against an 31 assignee with respect to claims and defenses against the 32 assignor may not exceed amounts paid by the account debtor 33 under the record, and the record does not include such a 34 statement, the extent to which a claim of an account debtor SB1231 Enrolled -160- LRB9106284WHdv 1 against the assignor may be asserted against an assignee is 2 determined as if the record included such a statement. 3 (e) Inapplicability to health-care-insurance receivable. 4 This Section does not apply to an assignment of a 5 health-care-insurance receivable.Termination Statement;6Duties of Filing Officer.7(1) If a financing statement covering consumer goods is8filed on or after the effective date of this amendatory Act9of 1972, then within one month or within 10 days following10written demand by the debtor after there is no outstanding11secured obligation and no commitment to make advances, incur12obligations or otherwise give value, the secured party must13file with each filing officer with whom the financing14statement was filed, a termination statement to the effect15that he no longer claims a security interest under the16financing statement, which shall be identified by file17number. In other cases whenever there is no outstanding18secured obligation and no commitment to make advances, incur19obligations or otherwise give value, the secured party must20on written demand by the debtor send the debtor, for each21filing officer with whom the financing statement was filed, a22termination statement to the effect that he no longer claims23a security interest under the financing statement, which24shall be identified by file number. A termination statement25signed by a person other than the secured party of record26must be accompanied by a separate written statement of27assignment signed by the secured party of record and28complying with subsection (2) of Section 9-405, including29payment of the required fee. If the affected secured party30fails to file such a termination statement as required by31this subsection, or to send such a termination statement32within 10 days after proper demand therefor, he shall be33liable to the debtor for $100 and in addition for any loss34caused to the debtor by such failure.SB1231 Enrolled -161- LRB9106284WHdv 1(2) On presentation to the filing officer of such a2termination statement he must note it in the index. If he has3received the termination statement in duplicate, he shall4return one copy of the termination statement to the secured5party stamped to show the time of receipt thereof. If the6filing officer has a microfilm or other photographic record7of the financing statement, and of any related continuation8statement, statement of assignment and statement of release,9he may remove the originals from the files at any time after10receipt of the termination statement, or if he has no such11record, he may remove them from the files at any time after12one year after receipt of the termination statement.13 (Source: P.A. 89-503, eff. 1-1-97.) 14 (810 ILCS 5/9-405) (from Ch. 26, par. 9-405) 15 Sec. 9-405. Modification of assigned contract. 16 (a) Effect of modification on assignee. A modification 17 of or substitution for an assigned contract is effective 18 against an assignee if made in good faith. The assignee 19 acquires corresponding rights under the modified or 20 substituted contract. The assignment may provide that the 21 modification or substitution is a breach of contract by the 22 assignor. This subsection is subject to subsections (b) 23 through (d). 24 (b) Applicability of subsection (a). Subsection (a) 25 applies to the extent that: 26 (1) the right to payment or a part thereof under an 27 assigned contract has not been fully earned by 28 performance; or 29 (2) the right to payment or a part thereof has been 30 fully earned by performance and the account debtor has 31 not received notification of the assignment under Section 32 9-406(a). 33 (c) Rule for individual under other law. This Section SB1231 Enrolled -162- LRB9106284WHdv 1 is subject to law other than this Article which establishes a 2 different rule for an account debtor who is an individual and 3 who incurred the obligation primarily for personal, family, 4 or household purposes. 5 (d) Inapplicability to health-care-insurance receivable. 6 This Section does not apply to an assignment of a 7 health-care-insurance receivable.Assignment of Security8Interest; Duties of Filing Officer; Fees.9(1) A financing statement may disclose an assignment of10a security interest in the collateral described in the11financing statement by indication in the financing statement12of the name and address of the assignee or by an assignment13itself or a copy thereof on the face or back of the14statement. On presentation to the filing officer of such a15financing statement the filing officer shall mark the same as16provided in Section 9-403 (4). The uniform fee for filing,17indexing and furnishing filing data for a financing statement18so indicating an assignment shall be $20.19(2) A secured party may assign of record all or a part20of his rights under a financing statement by the filing in21the place where the original financing statement was filed of22a separate written statement of assignment signed by the23secured party of record and setting forth the name of the24secured party of record and the debtor, the file number and25the date of filing of the financing statement and the name26and address of the assignee and containing a description of27the collateral assigned. A copy of the assignment is28sufficient as a separate statement if it complies with the29preceding sentence. On presentation to the filing officer of30such a separate statement, the filing officer shall mark such31separate statement with the date and hour of the filing. He32shall note the assignment on the index of the financing33statement, or in the case of a fixture filing, or a filing34covering timber to be cut, or covering minerals or the likeSB1231 Enrolled -163- LRB9106284WHdv 1(including oil and gas) or accounts subject to subsection (5)2of Section 9-103, he shall index the assignment under the3name of the assignor as grantor and, to the extent that the4law of this State provides for indexing the assignment of a5mortgage under the name of the assignee, he shall index the6assignment of the financing statement under the name of the7assignee. The uniform fee for filing, indexing and furnishing8filing data about such a separate statement of assignment9shall be $20. Notwithstanding the provisions of this10subsection, an assignment of record of a security interest in11a fixture contained in a mortgage effective as a fixture12filing (subsection (6) of Section 9-402 may be made only by13an assignment of the mortgage in the manner provided by the14law of this State other than this Act.15(3) After the disclosure or filing of an assignment16under this Section, the assignee is the secured party of17record.18 (Source: P.A. 89-503, eff. 1-1-97.) 19 (810 ILCS 5/9-406) (from Ch. 26, par. 9-406) 20 Sec. 9-406. Discharge of account debtor; notification of 21 assignment; identification and proof of assignment; 22 restrictions on assignment of accounts, chattel paper, 23 payment intangibles, and promissory notes ineffective. 24 (a) Discharge of account debtor; effect of notification. 25 Subject to subsections (b) through (i), an account debtor on 26 an account, chattel paper, or a payment intangible may 27 discharge its obligation by paying the assignor until, but 28 not after, the account debtor receives a notification, 29 authenticated by the assignor or the assignee, that the 30 amount due or to become due has been assigned and that 31 payment is to be made to the assignee. After receipt of the 32 notification, the account debtor may discharge its obligation 33 by paying the assignee and may not discharge the obligation SB1231 Enrolled -164- LRB9106284WHdv 1 by paying the assignor. 2 (b) When notification ineffective. Subject to 3 subsection (h), notification is ineffective under subsection 4 (a): 5 (1) if it does not reasonably identify the rights 6 assigned; 7 (2) to the extent that an agreement between an 8 account debtor and a seller of a payment intangible 9 limits the account debtor's duty to pay a person other 10 than the seller and the limitation is effective under law 11 other than this Article; or 12 (3) at the option of an account debtor, if the 13 notification notifies the account debtor to make less 14 than the full amount of any installment or other periodic 15 payment to the assignee, even if: 16 (A) only a portion of the account, chattel 17 paper, or payment intangible has been assigned to 18 that assignee; 19 (B) a portion has been assigned to another 20 assignee; or 21 (C) the account debtor knows that the 22 assignment to that assignee is limited. 23 (c) Proof of assignment. Subject to subsection (h), if 24 requested by the account debtor, an assignee shall seasonably 25 furnish reasonable proof that the assignment has been made. 26 Unless the assignee complies, the account debtor may 27 discharge its obligation by paying the assignor, even if the 28 account debtor has received a notification under subsection 29 (a). 30 (d) Term restricting assignment generally ineffective. 31 Except as otherwise provided in subsection (e) and Sections 32 2A-303 and 9-407, and subject to subsection (h), a term in an 33 agreement between an account debtor and an assignor or in a 34 promissory note is ineffective to the extent that it: SB1231 Enrolled -165- LRB9106284WHdv 1 (1) prohibits, restricts, or requires the consent 2 of the account debtor or person obligated on the 3 promissory note to the assignment or transfer of, or the 4 creation, attachment, perfection, or enforcement of a 5 security interest in, the account, chattel paper, payment 6 intangible, or promissory note; or 7 (2) provides that the assignment or transfer or the 8 creation, attachment, perfection, or enforcement of the 9 security interest may give rise to a default, breach, 10 right of recoupment, claim, defense, termination, right 11 of termination, or remedy under the account, chattel 12 paper, payment intangible, or promissory note. 13 (e) Inapplicability of subsection (d) to certain sales. 14 Subsection (d) does not apply to the sale of a payment 15 intangible or promissory note. 16 (f) Legal restrictions on assignment generally 17 ineffective. Except as otherwise provided in Sections 2A-303 18 and 9-407 and subject to subsections (h) and (i), a rule of 19 law, statute, or regulation that prohibits, restricts, or 20 requires the consent of a government, governmental body or 21 official, or account debtor to the assignment or transfer of, 22 or creation of a security interest in, an account or chattel 23 paper is ineffective to the extent that the rule of law, 24 statute, or regulation: 25 (1) prohibits, restricts, or requires the consent 26 of the government, governmental body or official, or 27 account debtor to the assignment or transfer of, or the 28 creation, attachment, perfection, or enforcement of a 29 security interest in the account or chattel paper; or 30 (2) provides that the assignment or transfer or the 31 creation, attachment, perfection, or enforcement of the 32 security interest may give rise to a default, breach, 33 right of recoupment, claim, defense, termination, right 34 of termination, or remedy under the account or chattel SB1231 Enrolled -166- LRB9106284WHdv 1 paper. 2 (g) Subsection (b)(3) not waivable. Subject to 3 subsection (h), an account debtor may not waive or vary its 4 option under subsection (b)(3). 5 (h) Rule for individual under other law. This Section 6 is subject to law other than this Article which establishes a 7 different rule for an account debtor who is an individual and 8 who incurred the obligation primarily for personal, family, 9 or household purposes. 10 (i) Inapplicability to health-care-insurance receivable. 11 This Section does not apply to an assignment of a 12 health-care-insurance receivable. 13Release of Collateral; Duties of Filing Officer; Fees. A14secured party of record may by his signed statement release15all or a part of any collateral described in a filed16financing statement. The statement of release is sufficient17if it contains a description of the collateral being18released, the name and address of the debtor, the name and19address of the secured party, and the file number of the20financing statement. A statement of release signed by a21person other than the secured party of record must be22accompanied by a separate written statement of assignment23signed by the secured party of record and complying with24subsection (2) of Section 9-405, including payment of the25required fee. Upon presentation of such a statement of26release to the filing officer he shall mark the statement27with the hour and date of filing and shall note the same upon28the margin of the index of the filing of the financing29statement. The uniform fee for filing and noting such a30statement of release shall be $20.31 (Source: P.A. 89-503, eff. 1-1-97.) 32 (810 ILCS 5/9-407) (from Ch. 26, par. 9-407) 33 Sec. 9-407. Restrictions on creation or enforcement of SB1231 Enrolled -167- LRB9106284WHdv 1 security interest in leasehold interest or in lessor's 2 residual interest. 3 (a) Term restricting assignment generally ineffective. 4 Except as otherwise provided in subsection (b), a term in a 5 lease agreement is ineffective to the extent that it: 6 (1) prohibits, restricts, or requires the consent 7 of a party to the lease to the assignment or transfer or 8 the creation, attachment, perfection, or enforcement of a 9 security interest in an interest of a party under the 10 lease contract or in the lessor's residual interest in 11 the goods; or 12 (2) provides that the assignment or transfer or the 13 creation, attachment, perfection, or enforcement of the 14 security interest may give rise to a default, breach, 15 right of recoupment, claim, defense, termination, right 16 of termination, or remedy under the lease. 17 (b) Effectiveness of certain terms. Except as otherwise 18 provided in Section 2A-303(7), a term described in subsection 19 (a)(2) is effective to the extent that there is: 20 (1) a transfer by the lessee of the lessee's right 21 of possession or use of the goods in violation of the 22 term; or 23 (2) a delegation of a material performance of 24 either party to the lease contract in violation of the 25 term. 26 (c) Security interest not material impairment. The 27 creation, attachment, perfection, or enforcement of a 28 security interest in the lessor's interest under the lease 29 contract or the lessor's residual interest in the goods is 30 not a transfer that materially impairs the lessee's prospect 31 of obtaining return performance or materially changes the 32 duty of or materially increases the burden or risk imposed on 33 the lessee within the purview of Section 2A-303(4) unless, 34 and then only to the extent that, enforcement actually SB1231 Enrolled -168- LRB9106284WHdv 1 results in a delegation of material performance of the 2 lessor.Information from Filing Officer; Fees.3(1) If the person filing any financing statement,4termination statement, statement of assignment, or statement5of release, furnishes the filing officer a copy thereof, the6filing officer shall upon request note upon the copy the file7number and date and hour of the filing of the original and8deliver or send the copy to such person.9(2) Upon request of any person, the filing officer shall10issue his certificate showing whether there is on file on the11date and hour stated therein, any presently effective12financing statement naming a particular debtor and any13statement of assignment thereof and if there is, giving the14date and hour of filing of each such statement and the names15and addresses of each secured party therein. The uniform fee16for such a certificate shall be $10 per name searched. Upon17request the filing officer shall furnish a copy of any filed18financing statement or statement of assignment for a uniform19fee of $1.00 per page.20 (Source: P.A. 86-343.) 21 (810 ILCS 5/9-408) (from Ch. 26, par. 9-408) 22 Sec. 9-408. Restrictions on assignment of promissory 23 notes, health-care-insurance receivables, and certain general 24 intangibles ineffective. 25 (a) Term restricting assignment generally ineffective. 26 Except as otherwise provided in subsection (b), a term in a 27 promissory note or in an agreement between an account debtor 28 and a debtor which relates to a health-care-insurance 29 receivable or a general intangible, including a contract, 30 permit, license, or franchise, and which term prohibits, 31 restricts, or requires the consent of the person obligated on 32 the promissory note or the account debtor to, the assignment 33 or transfer of, or creation, attachment, or perfection of a SB1231 Enrolled -169- LRB9106284WHdv 1 security interest in, the promissory note, 2 health-care-insurance receivable, or general intangible, is 3 ineffective to the extent that the term: 4 (1) would impair the creation, attachment, or 5 perfection of a security interest; or 6 (2) provides that the assignment or transfer or the 7 creation, attachment, or perfection of the security 8 interest may give rise to a default, breach, right of 9 recoupment, claim, defense, termination, right of 10 termination, or remedy under the promissory note, 11 health-care-insurance receivable, or general intangible. 12 (b) Applicability of subsection (a) to sales of certain 13 rights to payment. Subsection (a) applies to a security 14 interest in a payment intangible or promissory note only if 15 the security interest arises out of a sale of the payment 16 intangible or promissory note. 17 (c) Legal restrictions on assignment generally 18 ineffective. A rule of law, statute, or regulation that 19 prohibits, restricts, or requires the consent of a 20 government, governmental body or official, person obligated 21 on a promissory note, or account debtor to the assignment or 22 transfer of, or creation of a security interest in, a 23 promissory note, health-care-insurance receivable, or general 24 intangible, including a contract, permit, license, or 25 franchise between an account debtor and a debtor, is 26 ineffective to the extent that the rule of law, statute, or 27 regulation: 28 (1) would impair the creation, attachment, or 29 perfection of a security interest; or 30 (2) provides that the assignment or transfer or the 31 creation, attachment, or perfection of the security 32 interest may give rise to a default, breach, right of 33 recoupment, claim, defense, termination, right of 34 termination, or remedy under the promissory note, SB1231 Enrolled -170- LRB9106284WHdv 1 health-care-insurance receivable, or general intangible. 2 (d) Limitation on ineffectiveness under subsections (a) 3 and (c). To the extent that a term in a promissory note or in 4 an agreement between an account debtor and a debtor which 5 relates to a health-care-insurance receivable or general 6 intangible or a rule of law, statute, or regulation described 7 in subsection (c) would be effective under law other than 8 this Article but is ineffective under subsection (a) or (c), 9 the creation, attachment, or perfection of a security 10 interest in the promissory note, health-care-insurance 11 receivable, or general intangible: 12 (1) is not enforceable against the person obligated 13 on the promissory note or the account debtor; 14 (2) does not impose a duty or obligation on the 15 person obligated on the promissory note or the account 16 debtor; 17 (3) does not require the person obligated on the 18 promissory note or the account debtor to recognize the 19 security interest, pay or render performance to the 20 secured party, or accept payment or performance from the 21 secured party; 22 (4) does not entitle the secured party to use or 23 assign the debtor's rights under the promissory note, 24 health-care-insurance receivable, or general intangible, 25 including any related information or materials furnished 26 to the debtor in the transaction giving rise to the 27 promissory note, health-care-insurance receivable, or 28 general intangible; 29 (5) does not entitle the secured party to use, 30 assign, possess, or have access to any trade secrets or 31 confidential information of the person obligated on the 32 promissory note or the account debtor; and 33 (6) does not entitle the secured party to enforce 34 the security interest in the promissory note, SB1231 Enrolled -171- LRB9106284WHdv 1 health-care-insurance receivable, or general intangible. 2Financing Statements Covering Consigned or Leased Goods.3A consignor or lessor of goods may file a financing4statement using the terms "consignor," "consignee," "lessor,"5"lessee" or the like instead of the terms specified in6Section 9-402. The provisions of this part shall apply as7appropriate to such a financing statement but its filing8shall not of itself be a factor in determining whether or not9the consignment or lease is intended as security (Section101-201 (37). However, if it is determined for other reasons11that the consignment or lease is so intended, a security12interest of the consignor or lessor which attaches to the13consigned or leased goods is perfected by such filing.14 (Source: P. A. 78-238.) 15 (810 ILCS 5/9-409 new) 16 Sec. 9-409. Restrictions on assignment of 17 letter-of-credit rights ineffective. 18 (a) Term or law restricting assignment generally 19 ineffective. A term in a letter of credit or a rule of law, 20 statute, regulation, custom, or practice applicable to the 21 letter of credit which prohibits, restricts, or requires the 22 consent of an applicant, issuer, or nominated person to a 23 beneficiary's assignment of or creation of a security 24 interest in a letter-of-credit right is ineffective to the 25 extent that the term or rule of law, statute, regulation, 26 custom, or practice: 27 (1) would impair the creation, attachment, or 28 perfection of a security interest in the letter-of-credit 29 right; or 30 (2) provides that the assignment or the creation, 31 attachment, or perfection of the security interest may 32 give rise to a default, breach, right of recoupment, 33 claim, defense, termination, right of termination, or SB1231 Enrolled -172- LRB9106284WHdv 1 remedy under the letter-of-credit right. 2 (b) Limitation on ineffectiveness under subsection (a). 3 To the extent that a term in a letter of credit is 4 ineffective under subsection (a) but would be effective under 5 law other than this Article or a custom or practice 6 applicable to the letter of credit, to the transfer of a 7 right to draw or otherwise demand performance under the 8 letter of credit, or to the assignment of a right to proceeds 9 of the letter of credit, the creation, attachment, or 10 perfection of a security interest in the letter-of-credit 11 right: 12 (1) is not enforceable against the applicant, 13 issuer, nominated person, or transferee beneficiary; 14 (2) imposes no duties or obligations on the 15 applicant, issuer, nominated person, or transferee 16 beneficiary; and 17 (3) does not require the applicant, issuer, 18 nominated person, or transferee beneficiary to recognize 19 the security interest, pay or render performance to the 20 secured party, or accept payment or other performance 21 from the secured party. 22 (810 ILCS 5/9-410) 23 Sec. 9-410. (Blank).Disposition of fees. Of the total24money collected for each filing with the Secretary of State25of an original financing statement, amended statement,26continuation, assignment, or for a release of collateral, $1227of the filing fee shall be paid into the Secretary of State28Special Services Fund. The remaining $8 shall be deposited29into the General Revenue Fund in the State Treasury.30 (Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.) 31 (810 ILCS 5/Art. 9, Part 5 heading) 32 PART 5. FILINGDEFAULTSB1231 Enrolled -173- LRB9106284WHdv 1 (810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new) 2 SUBPART 1. FILING OFFICE; CONTENTS AND 3 EFFECTIVENESS OF FINANCING STATEMENT 4 (810 ILCS 5/9-501) (from Ch. 26, par. 9-501) 5 Sec. 9-501. Filing office. 6 (a) Filing offices. Except as otherwise provided in 7 subsection (b), if the local law of this State governs 8 perfection of a security interest or agricultural lien, the 9 office in which to file a financing statement to perfect the 10 security interest or agricultural lien is: 11 (1) the office designated for the filing or 12 recording of a record of a mortgage on the related real 13 property, if: 14 (A) the collateral is as-extracted collateral 15 or timber to be cut; or 16 (B) the financing statement is filed as a 17 fixture filing and the collateral is goods that are 18 or are to become fixtures; or 19 (2) the office of the Secretary of State in all 20 other cases, including a case in which the collateral is 21 goods that are or are to become fixtures and the 22 financing statement is not filed as a fixture filing. 23 (b) Filing office for transmitting utilities. The 24 office in which to file a financing statement to perfect a 25 security interest in collateral, including fixtures, of a 26 transmitting utility is the office of the Secretary of State. 27 The financing statement also constitutes a fixture filing as 28 to the collateral indicated in the financing statement which 29 is or is to become fixtures.Default; procedure when security30agreement covers both real and personal property.31(1) When a debtor is in default under a security32agreement, a secured party has the rights and remedies33provided in this Part and except as limited by subsection (3)SB1231 Enrolled -174- LRB9106284WHdv 1those provided in the security agreement. He may reduce his2claim to judgment, foreclose or otherwise enforce the3security interest by any available judicial procedure. If the4collateral is documents the secured party may proceed either5as to the documents or as to the goods covered thereby. A6secured party in possession has the rights, remedies and7duties provided in Section 9-207. The rights and remedies8referred to in this subsection are cumulative.9(2) After default, the debtor has the rights and10remedies provided in this Part, those provided in the11security agreement and those provided in Section 9-207.12(3) To the extent that they give rights to the debtor13and impose duties on the secured party, the rules stated in14the subsections referred to below may not be waived or varied15except as provided with respect to compulsory disposition of16collateral (subsection (3) of Section 9-504 and Section 9-50517and with respect to redemption of collateral (Section 9-506)18but the parties may by agreement determine the standards by19which the fulfillment of these rights and duties is to be20measured if such standards are not manifestly unreasonable:21(a) subsection (2) of Section 9-502 and subsection22(2) of Section 9-504 insofar as they require accounting23for surplus proceeds of collateral;24(b) subsection (3) of Section 9-504 and subsection25(1) of Section 9-505 which deal with disposition of26collateral;27(c) subsection (2) of Section 9-505 which deals28with acceptance of collateral as discharge of obligation;29(d) Section 9-506 which deals with redemption of30collateral; and31(e) subsection (1) of Section 9-507 which deals32with the secured party's liability for failure to comply33with this Part.34(4) If the security agreement covers both real andSB1231 Enrolled -175- LRB9106284WHdv 1personal property, the secured party may proceed under this2Part as to the personal property or he may proceed as to both3the real and the personal property in accordance with his4rights and remedies in respect to the real property in which5case the provisions of this Part do not apply.6(5) When a secured party has reduced his claim to7judgment the lien of any levy which may be made upon his8collateral by virtue of such judgment shall relate back to9the date of the perfection of the security interest in such10collateral. A judicial sale, pursuant to such judgment, is a11foreclosure of the security interest by judicial procedure12within the meaning of this Section, and the secured party may13purchase at the sale and thereafter hold the collateral free14of any other requirements of this Article.15 (Source: P.A. 84-546; revised 10-31-98.) 16 (810 ILCS 5/9-502) (from Ch. 26, par. 9-502) 17 Sec. 9-502. Contents of financing statement; record of 18 mortgage as financing statement; time of filing financing 19 statement. 20 (a) Sufficiency of financing statement. Subject to 21 subsection (b), a financing statement is sufficient only if 22 it: 23 (1) provides the name of the debtor; 24 (2) provides the name of the secured party or a 25 representative of the secured party; and 26 (3) indicates the collateral covered by the 27 financing statement. 28 (b) Real-property-related financing statements. Except 29 as otherwise provided in Section 9-501(b), to be sufficient, 30 a financing statement that covers as-extracted collateral or 31 timber to be cut, or which is filed as a fixture filing and 32 covers goods that are or are to become fixtures, must satisfy 33 subsection (a) and also: SB1231 Enrolled -176- LRB9106284WHdv 1 (1) indicate that it covers this type of 2 collateral; 3 (2) indicate that it is to be filed in the real 4 property records; 5 (3) provide a description of the real property to 6 which the collateral is related sufficient to give 7 constructive notice of a mortgage under the law of this 8 State if the description were contained in a record of 9 the mortgage of the real property; and 10 (4) if the debtor does not have an interest of 11 record in the real property, provide the name of a record 12 owner. 13 (c) Record of mortgage as financing statement. A record 14 of a mortgage is effective, from the date of recording, as a 15 financing statement filed as a fixture filing or as a 16 financing statement covering as-extracted collateral or 17 timber to be cut only if: 18 (1) the record indicates the goods or accounts that 19 it covers; 20 (2) the goods are or are to become fixtures related 21 to the real property described in the record or the 22 collateral is related to the real property described in 23 the record and is as-extracted collateral or timber to be 24 cut; 25 (3) the record satisfies the requirements for a 26 financing statement in this Section other than an 27 indication that it is to be filed in the real property 28 records; and 29 (4) the record is recorded. 30 (d) Filing before security agreement or attachment. A 31 financing statement may be filed before a security agreement 32 is made or a security interest otherwise attaches.Collection33Rights of Secured Party.34(1) When so agreed and in any event on default theSB1231 Enrolled -177- LRB9106284WHdv 1secured party is entitled to notify an account debtor or the2obligor on an instrument to make payment to him whether or3not the assignor was theretofore making collections on the4collateral, and also to take control of any proceeds to which5he is entitled under Section 9-306.6(2) A secured party who by agreement is entitled to7charge back uncollected collateral or otherwise to full or8limited recourse against the debtor and who undertakes to9collect from the account debtors or obligors must proceed in10a commercially reasonable manner and may deduct his11reasonable expenses of realization from the collections. If12the security agreement secures an indebtedness, the secured13party must account to the debtor for any surplus, and unless14otherwise agreed, the debtor is liable for any deficiency.15But, if the underlying transaction was a sale of accounts or16chattel paper, the debtor is entitled to any surplus or is17liable for any deficiency only if the security agreement so18provides.19 (Source: P.A. 77-2810.) 20 (810 ILCS 5/9-503) (from Ch. 26, par. 9-503) 21 Sec. 9-503. Name of debtor and secured party. 22 (a) Sufficiency of debtor's name. A financing statement 23 sufficiently provides the name of the debtor: 24 (1) if the debtor is a registered organization, 25 only if the financing statement provides the name of the 26 debtor indicated on the public record of the debtor's 27 jurisdiction of organization which shows the debtor to 28 have been organized; 29 (2) if the debtor is a decedent's estate, only if 30 the financing statement provides the name of the decedent 31 and indicates that the debtor is an estate; 32 (3) if the debtor is a trust or a trustee acting 33 with respect to property held in trust, only if the SB1231 Enrolled -178- LRB9106284WHdv 1 financing statement: 2 (A) provides the name specified for the trust 3 in its organic documents or, if no name is 4 specified, provides the name of the settlor and 5 additional information sufficient to distinguish the 6 debtor from other trusts having one or more of the 7 same settlors; and 8 (B) indicates, in the debtor's name or 9 otherwise, that the debtor is a trust or is a 10 trustee acting with respect to property held in 11 trust; and 12 (4) in other cases: 13 (A) if the debtor has a name, only if it 14 provides the individual or organizational name of 15 the debtor; and 16 (B) if the debtor does not have a name, only 17 if it provides the names of the partners, members, 18 associates, or other persons comprising the debtor. 19 (b) Additional debtor-related information. A financing 20 statement that provides the name of the debtor in accordance 21 with subsection (a) is not rendered ineffective by the 22 absence of: 23 (1) a trade name or other name of the debtor; or 24 (2) unless required under subsection (a)(4)(B), 25 names of partners, members, associates, or other persons 26 comprising the debtor. 27 (c) Debtor's trade name insufficient. A financing 28 statement that provides only the debtor's trade name does not 29 sufficiently provide the name of the debtor. 30 (d) Representative capacity. Failure to indicate the 31 representative capacity of a secured party or representative 32 of a secured party does not affect the sufficiency of a 33 financing statement. 34 (e) Multiple debtors and secured parties. A financing SB1231 Enrolled -179- LRB9106284WHdv 1 statement may provide the name of more than one debtor and 2 the name of more than one secured party.Secured party's3right to take possession after default.4Unless otherwise agreed a secured party has on default5the right to take possession of the collateral. In taking6possession a secured party may proceed without judicial7process if this can be done without breach of the peace or8may proceed by action.9If the security agreement so provides the secured party10may require the debtor to assemble the collateral and make it11available to the secured party at a place to be designated by12the secured party which is reasonably convenient to both13parties. Without removal a secured party may render equipment14unusable, and may dispose of collateral on the debtor's15premises under Section 9--504.16 (Source: Laws 1961, p. 2101.) 17 (810 ILCS 5/9-504) (from Ch. 26, par. 9-504) 18 Sec. 9-504. Indication of collateral. A financing 19 statement sufficiently indicates the collateral that it 20 covers if the financing statement provides: 21 (1) a description of the collateral pursuant to 22 Section 9-108; or 23 (2) an indication that the financing statement 24 covers all assets or all personal property. 25Secured Party's Right to Dispose of Collateral After26Default; Effect of Disposition.27(1) A secured party after default may sell, lease or28otherwise dispose of any or all of the collateral in its then29condition or following any commercially reasonable30preparation or processing. Any sale of goods is subject to31the Article on Sales (Article 2). The proceeds of disposition32shall be applied in the order following to33(a) the reasonable expenses of retaking, holding,SB1231 Enrolled -180- LRB9106284WHdv 1preparing for sale or lease, selling, leasing and the like2and, to the extent provided for in the agreement and not3prohibited by law, the reasonable attorneys' fees and legal4expenses incurred by the secured party;5(b) the satisfaction of indebtedness secured by the6security interest under which the disposition is made;7(c) the satisfaction of indebtedness secured by any8subordinate security interest in the collateral if written9notification of demand therefor is received before10distribution of the proceeds is completed. If requested by11the secured party, the holder of a subordinate security12interest must seasonably furnish reasonable proof of his13interest, and unless he does so, the secured party need not14comply with his demand.15(2) If the security interest secures an indebtedness,16the secured party must account to the debtor for any surplus,17and, unless otherwise agreed, the debtor is liable for any18deficiency. But if the underlying transaction was a sale of19accounts or chattel paper, the debtor is entitled to any20surplus or is liable for any deficiency only if the security21agreement so provides.22(3) Disposition of the collateral may be by public or23private proceedings and may be made by way of one or more24contracts. Sale or other disposition may be as a unit or in25parcels and at any time and place and on any terms but every26aspect of the disposition including the method, manner, time,27place and terms must be commercially reasonable. Unless28collateral is perishable or threatens to decline speedily in29value or is of a type customarily sold on a recognized30market, reasonable notification of the time and place of any31public sale or reasonable notification of the time after32which any private sale or other intended disposition is to be33made shall be sent by the secured party to the debtor, if he34has not signed after default a statement renouncing orSB1231 Enrolled -181- LRB9106284WHdv 1modifying his right to notification of sale. In the case of2consumer goods no other notification need be sent. In other3cases notification shall be sent to any other secured party4from whom the secured party has received (before sending his5notification to the debtor or before the debtor's6renunciation of his rights) written notice of a claim of an7interest in the collateral. The secured party may buy at any8public sale and if the collateral is of a type customarily9sold in a recognized market or is of a type which is the10subject of widely distributed standard price quotations he11may buy at private sale.12(4) When collateral is disposed of by a secured party13after default, the disposition transfers to a purchaser for14value all of the debtor's rights therein, discharges the15security interest under which it is made and any security16interest or lien subordinate thereto. The purchaser takes17free of all such rights and interests even though the secured18party fails to comply with the requirements of this Part or19of any judicial proceedings20(a) in the case of a public sale, if the purchaser21has no knowledge of any defects in the sale and if he does22not buy in collusion with the secured party, other bidders or23the person conducting the sale; or24(b) in any other case, if the purchaser acts in25good faith.26(5) A person who is liable to a secured party under a27guaranty, indorsement, repurchase agreement or the like and28who receives a transfer of collateral from the secured party29or is subrogated to his rights has thereafter the rights and30duties of the secured party. Such a transfer of collateral is31not a sale or disposition of the collateral under this32Article.33 (Source: P. A. 78-238.) SB1231 Enrolled -182- LRB9106284WHdv 1 (810 ILCS 5/9-505) (from Ch. 26, par. 9-505) 2 Sec. 9-505. Filing and compliance with other statutes and 3 treaties for consignments, leases, other bailments, and other 4 transactions. 5 (a) Use of terms other than "debtor" and "secured 6 party." A consignor, lessor, or other bailor of goods, a 7 licensor, or a buyer of a payment intangible or promissory 8 note may file a financing statement, or may comply with a 9 statute or treaty described in Section 9-311(a), using the 10 terms "consignor", "consignee", "lessor", "lessee", "bailor", 11 "bailee", "licensor", "licensee", "owner", "registered 12 owner", "buyer", "seller", or words of similar import, 13 instead of the terms "secured party" and "debtor". 14 (b) Effect of financing statement under subsection (a). 15 This part applies to the filing of a financing statement 16 under subsection (a) and, as appropriate, to compliance that 17 is equivalent to filing a financing statement under Section 18 9-311(b), but the filing or compliance is not of itself a 19 factor in determining whether the collateral secures an 20 obligation. If it is determined for another reason that the 21 collateral secures an obligation, a security interest held by 22 the consignor, lessor, bailor, licensor, owner, or buyer 23 which attaches to the collateral is perfected by the filing 24 or compliance.Compulsory Disposition of Collateral;25Acceptance of the Collateral as Discharge of Obligation.26(1) If the debtor has paid 60% of the cash price in the27case of a purchase money security interest in consumer goods28or 60% of the loan in the case of another security interest29in consumer goods, and has not signed after default a30statement renouncing or modifying his rights under this Part31a secured party who has taken possession of collateral must32dispose of it under Section 9--504 and if he fails to do so33within 90 days after he takes possession the debtor at his34option may recover in conversion or under Section 9--507(1)SB1231 Enrolled -183- LRB9106284WHdv 1on secured party's liability.2(2) In any other case involving consumer goods or any3other collateral a secured party in possession may, after4default, propose to retain the collateral in satisfaction of5the obligation. Written notice of such proposal shall be sent6to the debtor if he has not signed after default a statement7renouncing or modifying his rights under this subsection. In8the case of consumer goods no other notice need be given. In9other cases notice shall be sent to any other secured party10from whom the secured party has received (before sending his11notice to the debtor or before the debtor's renunciation of12his rights) written notice of a claim of an interest in the13collateral. If the secured party receives objection in14writing from a person entitled to receive notification within15twenty-one days after the notice was sent, the secured party16must dispose of the collateral under Section 9-504. In the17absence of such written objection the secured party may18retain the collateral in satisfaction of the debtor's19obligation.20 (Source: P.A. 77-2810.) 21 (810 ILCS 5/9-506) (from Ch. 26, par. 9-506) 22 Sec. 9-506. Effect of errors or omissions. 23 (a) Minor errors and omissions. A financing statement 24 substantially satisfying the requirements of this Part is 25 effective, even if it has minor errors or omissions, unless 26 the errors or omissions make the financing statement 27 seriously misleading. 28 (b) Financing statement seriously misleading. Except as 29 otherwise provided in subsection (c), a financing statement 30 that fails sufficiently to provide the name of the debtor in 31 accordance with Section 9-503(a) is seriously misleading. 32 (c) Financing statement not seriously misleading. If a 33 search of the records of the filing office under the debtor's SB1231 Enrolled -184- LRB9106284WHdv 1 correct name, using the filing office's standard search 2 logic, if any, would disclose a financing statement that 3 fails sufficiently to provide the name of the debtor in 4 accordance with Section 9-503(a), the name provided does not 5 make the financing statement seriously misleading. 6 (d) "Debtor's correct name." For purposes of Section 7 9-508(b), the "debtor's correct name" in subsection (c) means 8 the correct name of the new debtor.Debtor's right to redeem9collateral.10At any time before the secured party has disposed of11collateral or entered into a contract for its disposition12under Section 9--504 or before the obligation has been13discharged under Section 9--505(2) the debtor or any other14secured party may unless otherwise agreed in writing after15default redeem the collateral by tendering fulfillment of all16obligations secured by the collateral as well as the expenses17reasonably incurred by the secured party in retaking, holding18and preparing the collateral for disposition, in arranging19for the sale, and to the extent provided in the agreement and20not prohibited by law, his reasonable attorneys' fees and21legal expenses.22 (Source: Laws 1961, p. 2101.) 23 (810 ILCS 5/9-507) (from Ch. 26, par. 9-507) 24 Sec. 9-507. Effect of certain events on effectiveness of 25 financing statement. 26 (a) Disposition. A filed financing statement remains 27 effective with respect to collateral that is sold, exchanged, 28 leased, licensed, or otherwise disposed of and in which a 29 security interest or agricultural lien continues, even if the 30 secured party knows of or consents to the disposition. 31 (b) Information becoming seriously misleading. Except 32 as otherwise provided in subsection (c) and Section 9-508, a 33 financing statement is not rendered ineffective if, after the SB1231 Enrolled -185- LRB9106284WHdv 1 financing statement is filed, the information provided in the 2 financing statement becomes seriously misleading under 3 Section 9-506. 4 (c) Change in debtor's name. If a debtor so changes its 5 name that a filed financing statement becomes seriously 6 misleading under Section 9-506: 7 (1) the financing statement is effective to perfect 8 a security interest in collateral acquired by the debtor 9 before, or within four months after, the change; and 10 (2) the financing statement is not effective to 11 perfect a security interest in collateral acquired by the 12 debtor more than four months after the change, unless an 13 amendment to the financing statement which renders the 14 financing statement not seriously misleading is filed 15 within four months after the change.Secured party's16liability for failure to comply with this part.17(1) If it is established that the secured party is not18proceeding in accordance with the provisions of this Part19disposition may be ordered or restrained on appropriate terms20and conditions. If the disposition has occurred the debtor or21any person entitled to notification or whose security22interest has been made known to the secured party prior to23the disposition has a right to recover from the secured party24any loss caused by a failure to comply with the provisions of25this Part. If the collateral is consumer goods, the debtor in26an individual action has a right to recover in any event an27amount not less than the credit service charge plus 10% of28the principal amount of the debt or the time price29differential plus 10% of the cash price.30(2) The fact that a better price could have been31obtained by a sale at a different time or in a different32method from that selected by the secured party is not of33itself sufficient to establish that the sale was not made in34a commercially reasonable manner. If the secured party eitherSB1231 Enrolled -186- LRB9106284WHdv 1sells the collateral in the usual manner in any recognized2market therefor or if he sells at the price current in such3market at the time of his sale or if he has otherwise sold in4conformity with reasonable commercial practices among dealers5in the type of property sold he has sold in a commercially6reasonable manner. The principles stated in the two preceding7sentences with respect to sales also apply as may be8appropriate to other types of disposition. A disposition9which has been approved in any judicial proceeding or by any10bona fide creditors' committee or representative of creditors11shall conclusively be deemed to be commercially reasonable,12but this sentence does not indicate that any such approval13must be obtained in any case nor does it indicate that any14disposition not so approved is not commercially reasonable.15 (Source: P.A. 90-214, eff. 7-25-97.) 16 (810 ILCS 5/9-508 new) 17 Sec. 9-508. Effectiveness of financing statement if new 18 debtor becomes bound by security agreement. 19 (a) Financing statement naming original debtor. Except 20 as otherwise provided in this Section, a filed financing 21 statement naming an original debtor is effective to perfect a 22 security interest in collateral in which a new debtor has or 23 acquires rights to the extent that the financing statement 24 would have been effective had the original debtor acquired 25 rights in the collateral. 26 (b) Financing statement becoming seriously misleading. 27 If the difference between the name of the original debtor and 28 that of the new debtor causes a filed financing statement 29 that is effective under subsection (a) to be seriously 30 misleading under Section 9-506: 31 (1) the financing statement is effective to perfect 32 a security interest in collateral acquired by the new 33 debtor before, and within four months after, the new SB1231 Enrolled -187- LRB9106284WHdv 1 debtor becomes bound under Section 9-203(d); and 2 (2) the financing statement is not effective to 3 perfect a security interest in collateral acquired by the 4 new debtor more than four months after the new debtor 5 becomes bound under Section 9-203(d) unless an initial 6 financing statement providing the name of the new debtor 7 is filed before the expiration of that time. 8 (c) When Section not applicable. This Section does not 9 apply to collateral as to which a filed financing statement 10 remains effective against the new debtor under Section 11 9-507(a). 12 (810 ILCS 5/9-509 new) 13 Sec. 9-509. Persons entitled to file a record. 14 (a) Person entitled to file record. A person may file 15 an initial financing statement, amendment that adds 16 collateral covered by a financing statement, or amendment 17 that adds a debtor to a financing statement only if: 18 (1) the debtor authorizes the filing in an 19 authenticated record or pursuant to subsection (b) or 20 (c); or 21 (2) the person holds an agricultural lien that has 22 become effective at the time of filing and the financing 23 statement covers only collateral in which the person 24 holds an agricultural lien. 25 (b) Security agreement as authorization. By 26 authenticating or becoming bound as debtor by a security 27 agreement, a debtor or new debtor authorizes the filing of an 28 initial financing statement, and an amendment, covering: 29 (1) the collateral described in the security 30 agreement; and 31 (2) property that becomes collateral under Section 32 9-315(a)(2), whether or not the security agreement 33 expressly covers proceeds. SB1231 Enrolled -188- LRB9106284WHdv 1 (c) Acquisition of collateral as authorization. By 2 acquiring collateral in which a security interest or 3 agricultural lien continues under Section 9-315(a)(1), a 4 debtor authorizes the filing of an initial financing 5 statement, and an amendment, covering the collateral and 6 property that becomes collateral under Section 9-315(a)(2). 7 (d) Person entitled to file certain amendments. A 8 person may file an amendment other than an amendment that 9 adds collateral covered by a financing statement or an 10 amendment that adds a debtor to a financing statement only 11 if: 12 (1) the secured party of record authorizes the 13 filing; or 14 (2) the amendment is a termination statement for a 15 financing statement as to which the secured party of 16 record has failed to file or send a termination statement 17 as required by Section 9-513(a) or (c), the debtor 18 authorizes the filing, and the termination statement 19 indicates that the debtor authorized it to be filed. 20 (e) Multiple secured parties of record. If there is 21 more than one secured party of record for a financing 22 statement, each secured party of record may authorize the 23 filing of an amendment under subsection (d). 24 (810 ILCS 5/9-510 new) 25 Sec. 9-510. Effectiveness of filed record. 26 (a) Filed record effective if authorized. A filed 27 record is effective only to the extent that it was filed by a 28 person that may file it under Section 9-509. 29 (b) Authorization by one secured party of record. A 30 record authorized by one secured party of record does not 31 affect the financing statement with respect to another 32 secured party of record. 33 (c) Continuation statement not timely filed. A SB1231 Enrolled -189- LRB9106284WHdv 1 continuation statement that is not filed within the six-month 2 period prescribed by Section 9-515(d) is ineffective. 3 (810 ILCS 5/9-511 new) 4 Sec. 9-511. Secured party of record. 5 (a) Secured party of record. A secured party of record 6 with respect to a financing statement is a person whose name 7 is provided as the name of the secured party or a 8 representative of the secured party in an initial financing 9 statement that has been filed. If an initial financing 10 statement is filed under Section 9-514(a), the assignee named 11 in the initial financing statement is the secured party of 12 record with respect to the financing statement. 13 (b) Amendment naming secured party of record. If an 14 amendment of a financing statement which provides the name of 15 a person as a secured party or a representative of a secured 16 party is filed, the person named in the amendment is a 17 secured party of record. If an amendment is filed under 18 Section 9-514(b), the assignee named in the amendment is a 19 secured party of record. 20 (c) Amendment deleting secured party of record. A 21 person remains a secured party of record until the filing of 22 an amendment of the financing statement which deletes the 23 person. 24 (810 ILCS 5/9-512 new) 25 Sec. 9-512. Amendment of financing statement. 26 (a) Amendment of information in financing statement. 27 Subject to Section 9-509, a person may add or delete 28 collateral covered by, continue or terminate the 29 effectiveness of, or, subject to subsection (e), otherwise 30 amend the information provided in, a financing statement by 31 filing an amendment that: 32 (1) identifies, by its file number, the initial SB1231 Enrolled -190- LRB9106284WHdv 1 financing statement to which the amendment relates; and 2 (2) if the amendment relates to an initial 3 financing statement filed or recorded in a filing office 4 described in Section 9-501(a)(1), provides the date and 5 time that the initial financing statement was filed and 6 the information specified in Section 9-502(b). 7 (b) Period of effectiveness not affected. Except as 8 otherwise provided in Section 9-515, the filing of an 9 amendment does not extend the period of effectiveness of the 10 financing statement. 11 (c) Effectiveness of amendment adding collateral. A 12 financing statement that is amended by an amendment that adds 13 collateral is effective as to the added collateral only from 14 the date of the filing of the amendment. 15 (d) Effectiveness of amendment adding debtor. A 16 financing statement that is amended by an amendment that adds 17 a debtor is effective as to the added debtor only from the 18 date of the filing of the amendment. 19 (e) Certain amendments ineffective. An amendment is 20 ineffective to the extent it: 21 (1) purports to delete all debtors and fails to 22 provide the name of a debtor to be covered by the 23 financing statement; or 24 (2) purports to delete all secured parties of 25 record and fails to provide the name of a new secured 26 party of record. 27 (810 ILCS 5/9-513 new) 28 Sec. 9-513. Termination statement. 29 (a) Consumer goods. A secured party shall cause the 30 secured party of record for a financing statement to file a 31 termination statement for the financing statement if the 32 financing statement covers consumer goods and: 33 (1) there is no obligation secured by the SB1231 Enrolled -191- LRB9106284WHdv 1 collateral covered by the financing statement and no 2 commitment to make an advance, incur an obligation, or 3 otherwise give value; or 4 (2) the debtor did not authorize the filing of the 5 initial financing statement. 6 (b) Time for compliance with subsection (a). To comply 7 with subsection (a), a secured party shall cause the secured 8 party of record to file the termination statement: 9 (1) within one month after there is no obligation 10 secured by the collateral covered by the financing 11 statement and no commitment to make an advance, incur an 12 obligation, or otherwise give value; or 13 (2) if earlier, within 20 days after the secured 14 party receives an authenticated demand from a debtor. 15 (c) Other collateral. In cases not governed by 16 subsection (a), within 20 days after a secured party receives 17 an authenticated demand from a debtor, the secured party 18 shall cause the secured party of record for a financing 19 statement to send to the debtor a termination statement for 20 the financing statement or file the termination statement in 21 the filing office if: 22 (1) except in the case of a financing statement 23 covering accounts or chattel paper that has been sold or 24 goods that are the subject of a consignment, there is no 25 obligation secured by the collateral covered by the 26 financing statement and no commitment to make an advance, 27 incur an obligation, or otherwise give value; 28 (2) the financing statement covers accounts or 29 chattel paper that has been sold but as to which the 30 account debtor or other person obligated has discharged 31 its obligation; 32 (3) the financing statement covers goods that were 33 the subject of a consignment to the debtor but are not in 34 the debtor's possession; or SB1231 Enrolled -192- LRB9106284WHdv 1 (4) the debtor did not authorize the filing of the 2 initial financing statement. 3 (d) Effect of filing termination statement. Except as 4 otherwise provided in Section 9-510, upon the filing of a 5 termination statement with the filing office, the financing 6 statement to which the termination statement relates ceases 7 to be effective. Except as otherwise provided in Section 8 9-510, for purposes of Sections 9-519(g), 9-522(a), and 9 9-523(c) the filing with the filing office of a termination 10 statement relating to a financing statement that indicates 11 that the debtor is a transmitting utility also causes the 12 effectiveness of the financing statement to lapse. 13 (810 ILCS 5/9-514 new) 14 Sec. 9-514. Assignment of powers of secured party of 15 record. 16 (a) Assignment reflected on initial financing statement. 17 Except as otherwise provided in subsection (c), an initial 18 financing statement may reflect an assignment of all of the 19 secured party's power to authorize an amendment to the 20 financing statement by providing the name and mailing address 21 of the assignee as the name and address of the secured party. 22 (b) Assignment of filed financing statement. Except as 23 otherwise provided in subsection (c), a secured party of 24 record may assign of record all or part of its power to 25 authorize an amendment to a financing statement by filing in 26 the filing office an amendment of the financing statement 27 which: 28 (1) identifies, by its file number, the initial 29 financing statement to which it relates; 30 (2) provides the name of the assignor; and 31 (3) provides the name and mailing address of the 32 assignee. 33 (c) Assignment of record of mortgage. An assignment of SB1231 Enrolled -193- LRB9106284WHdv 1 record of a security interest in a fixture covered by a 2 record of a mortgage which is effective as a financing 3 statement filed as a fixture filing under Section 9-502(c) 4 may be made only by an assignment of record of the mortgage 5 in the manner provided by law of this State other than the 6 Uniform Commercial Code. 7 (810 ILCS 5/9-515 new) 8 Sec. 9-515. Duration and effectiveness of financing 9 statement; effect of lapsed financing statement. 10 (a) Five-year effectiveness. Except as otherwise 11 provided in subsections (b), (e), (f), and (g), a filed 12 financing statement is effective for a period of five years 13 after the date of filing. 14 (b) Public-finance or manufactured-home transaction. 15 Except as otherwise provided in subsections (e), (f), and 16 (g), an initial financing statement filed in connection with 17 a public-finance transaction or manufactured-home transaction 18 is effective for a period of 30 years after the date of 19 filing if it indicates that it is filed in connection with a 20 public-finance transaction or manufactured-home transaction. 21 (c) Lapse and continuation of financing statement. The 22 effectiveness of a filed financing statement lapses on the 23 expiration of the period of its effectiveness unless before 24 the lapse a continuation statement is filed pursuant to 25 subsection (d). Upon lapse, a financing statement ceases to 26 be effective and any security interest or agricultural lien 27 that was perfected by the financing statement becomes 28 unperfected, unless the security interest is perfected 29 otherwise. If the security interest or agricultural lien 30 becomes unperfected upon lapse, it is deemed never to have 31 been perfected as against a purchaser of the collateral for 32 value. 33 (d) When continuation statement may be filed. A SB1231 Enrolled -194- LRB9106284WHdv 1 continuation statement may be filed only within six months 2 before the expiration of the five-year period specified in 3 subsection (a) or the 30-year period specified in subsection 4 (b), whichever is applicable. 5 (e) Effect of filing continuation statement. Except as 6 otherwise provided in Section 9-510, upon timely filing of a 7 continuation statement, the effectiveness of the initial 8 financing statement continues for a period of five years 9 commencing on the day on which the financing statement would 10 have become ineffective in the absence of the filing. Upon 11 the expiration of the five-year period, the financing 12 statement lapses in the same manner as provided in subsection 13 (c), unless, before the lapse, another continuation statement 14 is filed pursuant to subsection (d). Succeeding continuation 15 statements may be filed in the same manner to continue the 16 effectiveness of the initial financing statement. 17 (f) Transmitting utility financing statement. If a 18 debtor is a transmitting utility and a filed financing 19 statement so indicates, the financing statement is effective 20 until a termination statement is filed. 21 (g) Record of mortgage as financing statement. A record 22 of a mortgage that is effective as a financing statement 23 filed as a fixture filing under Section 9-502(c) remains 24 effective as a financing statement filed as a fixture filing 25 until the mortgage is released or satisfied of record or its 26 effectiveness otherwise terminates as to the real property. 27 (810 ILCS 5/9-516 new) 28 Sec. 9-516. What constitutes filing; effectiveness of 29 filing. 30 (a) What constitutes filing. Except as otherwise 31 provided in subsection (b), communication of a record to a 32 filing office and tender of the filing fee or acceptance of 33 the record by the filing office constitutes filing. SB1231 Enrolled -195- LRB9106284WHdv 1 (b) Refusal to accept record; filing does not occur. 2 Filing does not occur with respect to a record that a filing 3 office refuses to accept because: 4 (1) the record is not communicated by a method or 5 medium of communication authorized by the filing office; 6 (2) an amount equal to or greater than the 7 applicable filing fee is not tendered; 8 (3) the filing office is unable to index the record 9 because: 10 (A) in the case of an initial financing 11 statement, the record does not provide a name for 12 the debtor; 13 (B) in the case of an amendment or correction 14 statement, the record: 15 (i) does not identify the initial 16 financing statement as required by Section 17 9-512 or 9-518, as applicable; or 18 (ii) identifies an initial financing 19 statement whose effectiveness has lapsed under 20 Section 9-515; 21 (C) in the case of an initial financing 22 statement that provides the name of a debtor 23 identified as an individual or an amendment that 24 provides a name of a debtor identified as an 25 individual which was not previously provided in the 26 financing statement to which the record relates, the 27 record does not identify the debtor's last name; or 28 (D) in the case of a record filed or recorded 29 in the filing office described in Section 30 9-501(a)(1), the record does not provide a 31 sufficient description of the real property to which 32 it relates; 33 (4) in the case of an initial financing statement 34 or an amendment that adds a secured party of record, the SB1231 Enrolled -196- LRB9106284WHdv 1 record does not provide a name and mailing address for 2 the secured party of record; 3 (5) in the case of an initial financing statement 4 or an amendment that provides a name of a debtor which 5 was not previously provided in the financing statement to 6 which the amendment relates, the record does not: 7 (A) provide a mailing address for the debtor; 8 (B) indicate whether the debtor is an 9 individual or an organization; or 10 (C) if the financing statement indicates that 11 the debtor is an organization, provide: 12 (i) a type of organization for the 13 debtor; 14 (ii) a jurisdiction of organization for 15 the debtor; or 16 (iii) an organizational identification 17 number for the debtor or indicate that the 18 debtor has none; 19 (6) in the case of an assignment reflected in an 20 initial financing statement under Section 9-514(a) or an 21 amendment filed under Section 9-514(b), the record does 22 not provide a name and mailing address for the assignee; 23 or 24 (7) in the case of a continuation statement, the 25 record is not filed within the six-month period 26 prescribed by Section 9-515(d). 27 (c) Rules applicable to subsection (b). For purposes of 28 subsection (b): 29 (1) a record does not provide information if the 30 filing office is unable to read or decipher the 31 information; and 32 (2) a record that does not indicate that it is an 33 amendment or identify an initial financing statement to 34 which it relates, as required by Section 9-512, 9-514, or SB1231 Enrolled -197- LRB9106284WHdv 1 9-518, is an initial financing statement. 2 (d) Refusal to accept record; record effective as filed 3 record. A record that is communicated to the filing office 4 with tender of the filing fee, but which the filing office 5 refuses to accept for a reason other than one set forth in 6 subsection (b), is effective as a filed record except as 7 against a purchaser of the collateral which gives value in 8 reasonable reliance upon the absence of the record from the 9 files. 10 (810 ILCS 5/9-517 new) 11 Sec. 9-517. Effect of indexing errors. The failure of 12 the filing office to index a record correctly does not affect 13 the effectiveness of the filed record. 14 (810 ILCS 5/9-518 new) 15 Sec. 9-518. Claim concerning inaccurate or wrongfully 16 filed record. 17 (a) Correction statement. A person may file in the 18 filing office a correction statement with respect to a record 19 indexed there under the person's name if the person believes 20 that the record is inaccurate or was wrongfully filed. 21 (b) Sufficiency of correction statement. A correction 22 statement must: 23 (1) identify the record to which it relates by: 24 (A) the file number assigned to the initial 25 financing statement to which the record relates; and 26 (B) if the correction statement relates to a 27 record filed or recorded in a filing office 28 described in Section 9-501(a)(1), the date and time 29 that the initial financing statement was filed and 30 the information specified in Section 9-502(b); 31 (2) indicate that it is a correction statement; and 32 (3) provide the basis for the person's belief that SB1231 Enrolled -198- LRB9106284WHdv 1 the record is inaccurate and indicate the manner in which 2 the person believes the record should be amended to cure 3 any inaccuracy or provide the basis for the person's 4 belief that the record was wrongfully filed. 5 (c) Record not affected by correction statement. The 6 filing of a correction statement does not affect the 7 effectiveness of an initial financing statement or other 8 filed record. 9 (810 ILCS 5/Art. 9, Part 5, Subpart 2 heading new) 10 SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE 11 (810 ILCS 5/9-519 new) 12 Sec. 9-519. Numbering, maintaining, and indexing 13 records; communicating information provided in records. 14 (a) Filing office duties. For each record filed in a 15 filing office, the filing office shall: 16 (1) assign a unique number to the filed record; 17 (2) create a record that bears the number assigned 18 to the filed record and the date and time of filing; 19 (3) maintain the filed record for public 20 inspection; and 21 (4) index the filed record in accordance with 22 subsections (c), (d), and (e). 23 (b) File number. A file number assigned after January 24 1, 2002, must include a digit that: 25 (1) is mathematically derived from or related to 26 the other digits of the file number; and 27 (2) aids the filing office in determining whether a 28 number communicated as the file number includes a 29 single-digit or transpositional error. 30 (c) Indexing: general. Except as otherwise provided in 31 subsections (d) and (e), the filing office shall: 32 (1) index an initial financing statement according SB1231 Enrolled -199- LRB9106284WHdv 1 to the name of the debtor and index all filed records 2 relating to the initial financing statement in a manner 3 that associates with one another an initial financing 4 statement and all filed records relating to the initial 5 financing statement; and 6 (2) index a record that provides a name of a debtor 7 which was not previously provided in the financing 8 statement to which the record relates also according to 9 the name that was not previously provided. 10 (d) Indexing: real-property-related financing 11 statement. If a financing statement is filed as a fixture 12 filing or covers as-extracted collateral or timber to be cut, 13 it must be filed for record and the filing office shall index 14 it: 15 (1) under the names of the debtor and of each owner 16 of record shown on the financing statement as if they 17 were the mortgagors under a mortgage of the real property 18 described; and 19 (2) to the extent that the law of this State 20 provides for indexing of records of mortgages under the 21 name of the mortgagee, under the name of the secured 22 party as if the secured party were the mortgagee 23 thereunder, or, if indexing is by description, as if the 24 financing statement were a record of a mortgage of the 25 real property described. 26 (e) Indexing: real-property-related assignment. If a 27 financing statement is filed as a fixture filing or covers 28 as-extracted collateral or timber to be cut, the filing 29 office shall index an assignment filed under Section 9-514(a) 30 or an amendment filed under Section 9-514(b): 31 (1) under the name of the assignor as grantor; and 32 (2) to the extent that the law of this State 33 provides for indexing a record of the assignment of a 34 mortgage under the name of the assignee, under the name SB1231 Enrolled -200- LRB9106284WHdv 1 of the assignee. 2 (f) Retrieval and association capability. The filing 3 office shall maintain a capability: 4 (1) to retrieve a record by the name of the debtor 5 and by the file number assigned to the initial financing 6 statement to which the record relates; and 7 (2) to associate and retrieve with one another an 8 initial financing statement and each filed record 9 relating to the initial financing statement. 10 (g) Removal of debtor's name. The filing office may not 11 remove a debtor's name from the index until one year after 12 the effectiveness of a financing statement naming the debtor 13 lapses under Section 9-515 with respect to all secured 14 parties of record. 15 (h) Timeliness of filing office performance. The filing 16 office shall perform the acts required by subsections (a) 17 through (e) at the time and in the manner prescribed by 18 filing-office rule, but not later than two business days 19 after the filing office receives the record in question. 20 (i) Inapplicability to real-property-related filing 21 office. Subsections (b) and (h) do not apply to a filing 22 office described in Section 9-501(a)(1). 23 (810 ILCS 5/9-520 new) 24 Sec. 9-520. Acceptance and refusal to accept record. 25 (a) Mandatory refusal to accept record. A filing office 26 shall refuse to accept a record for filing for a reason set 27 forth in Section 9-516(b) and may refuse to accept a record 28 for filing only for a reason set forth in Section 9-516(b). 29 (b) Communication concerning refusal. If a filing 30 office refuses to accept a record for filing, it shall 31 communicate to the person that presented the record the fact 32 of and reason for the refusal and the date and time the 33 record would have been filed had the filing office accepted SB1231 Enrolled -201- LRB9106284WHdv 1 it. The communication must be made at the time and in the 2 manner prescribed by filing-office rule, but in the case of a 3 filing office described in Section 9-501(a)(2), in no event 4 more than two business days after the filing office receives 5 the record. 6 (c) When filed financing statement effective. A filed 7 financing statement satisfying Section 9-502(a) and (b) is 8 effective, even if the filing office is required to refuse to 9 accept it for filing under subsection (a). However, Section 10 9-338 applies to a filed financing statement providing 11 information described in Section 9-516(b)(5) which is 12 incorrect at the time the financing statement is filed. 13 (d) Separate application to multiple debtors. If a 14 record communicated to a filing office provides information 15 that relates to more than one debtor, this Part applies as to 16 each debtor separately. 17 (810 ILCS 5/9-521 new) 18 Sec. 9-521. Uniform form of written financing statement 19 and amendment. 20 (a) Initial financing statement form. A filing office 21 that accepts written records may not refuse to accept a 22 written initial financing statement in the form and format 23 set forth in the final official text of the 1999 revisions to 24 Article 9 of the Uniform Commercial Code promulgated by the 25 American Law Institute and the National Conference of 26 Commissioners on Uniform State Laws, except for a reason set 27 forth in Section 9-516(b). 28 (b) Amendment form. A filing office that accepts 29 written records may not refuse to accept a written record in 30 the form and format set forth in the final official text of 31 the 1999 revisions to Article 9 of the Uniform Commercial 32 Code promulgated by the American Law Institute and the 33 National Conference of Commissioners on Uniform State Laws, SB1231 Enrolled -202- LRB9106284WHdv 1 except for a reason set forth in Section 9-516(b). 2 (810 ILCS 5/9-522 new) 3 Sec. 9-522. Maintenance and destruction of records. 4 (a) Post-lapse maintenance and retrieval of information. 5 The filing office shall maintain a record of the information 6 provided in a filed financing statement for at least one year 7 after the effectiveness of the financing statement has lapsed 8 under Section 9-515 with respect to all secured parties of 9 record. The record must be retrievable by using the name of 10 the debtor and: 11 (1) if the record was filed in the filing office 12 described in Section 9-501(a)(1), by using the file 13 number assigned to the initial financing statement to 14 which the record relates and the date and time that the 15 record was filed or recorded; or 16 (2) if the record was filed in the filing office 17 described in Section 9-501(a)(2), by using the file 18 number assigned to the initial financing statement to 19 which the record relates. 20 (b) Destruction of written records. Except to the 21 extent that a statute governing disposition of public records 22 provides otherwise, the filing office immediately may destroy 23 any written record evidencing a financing statement. However, 24 if the filing office destroys a written record, it shall 25 maintain another record of the financing statement which 26 complies with subsection (a). 27 (810 ILCS 5/9-523 new) 28 Sec. 9-523. Information from filing office; sale or 29 license of records. 30 (a) Acknowledgment of filing written record. If a 31 person that files a written record requests an acknowledgment 32 of the filing, the filing office shall send to the person an SB1231 Enrolled -203- LRB9106284WHdv 1 image of the record showing the number assigned to the record 2 pursuant to Section 9-519(a)(1) and the date and time of the 3 filing of the record. However, if the person furnishes a 4 copy of the record to the filing office, the filing office 5 may instead: 6 (1) note upon the copy the number assigned to the 7 record pursuant to Section 9-519(a)(1) and the date and 8 time of the filing of the record; and 9 (2) send the copy to the person. 10 (b) Acknowledgment of filing other record. If a person 11 files a record other than a written record, the filing office 12 shall communicate to the person an acknowledgment that 13 provides: 14 (1) the information in the record; 15 (2) the number assigned to the record pursuant to 16 Section 9-519(a)(1); and 17 (3) the date and time of the filing of the record. 18 (c) Communication of requested information. The filing 19 office shall communicate or otherwise make available in a 20 record the following information to any person that requests 21 it: 22 (1) whether there is on file on a date and time 23 specified by the filing office, but not a date earlier 24 than three business days before the filing office 25 receives the request, any financing statement that: 26 (A) designates a particular debtor or, if the 27 request so states, designates a particular debtor at 28 the address specified in the request; 29 (B) has not lapsed under Section 9-515 with 30 respect to all secured parties of record; and 31 (C) if the request so states, has lapsed under 32 Section 9-515 and a record of which is maintained by 33 the filing office under Section 9-522(a); 34 (2) the date and time of filing of each financing SB1231 Enrolled -204- LRB9106284WHdv 1 statement; and 2 (3) the information provided in each financing 3 statement. 4 (d) Medium for communicating information. In complying 5 with its duty under subsection (c), the filing office may 6 communicate information in any medium. However, if 7 requested, the filing office shall communicate information by 8 issuing a record that can be admitted into evidence in the 9 courts of this State without extrinsic evidence of its 10 authenticity. 11 (e) Timeliness of filing office performance. The filing 12 office shall perform the acts required by subsections (a) 13 through (d) at the time and in the manner prescribed by 14 filing-office rule, but in the case of a filing office 15 described in Section 9-501(a)(2), not later than two business 16 days after the filing office receives the request. 17 (f) Public availability of records. At least weekly, 18 the Secretary of State shall offer to sell or license to the 19 public on a nonexclusive basis, in bulk, copies of all 20 records filed in it under this Part, in every medium from 21 time to time available to the filing office. 22 (810 ILCS 5/9-524 new) 23 Sec. 9-524. Delay by filing office. Delay by the filing 24 office beyond a time limit prescribed by this Part is excused 25 if: 26 (1) the delay is caused by interruption of 27 communication or computer facilities, war, emergency 28 conditions, failure of equipment, or other circumstances 29 beyond control of the filing office; and 30 (2) the filing office exercises reasonable 31 diligence under the circumstances. 32 (810 ILCS 5/9-525 new) SB1231 Enrolled -205- LRB9106284WHdv 1 Sec. 9-525. Fees. 2 (a) Initial financing statement or other record: general 3 rule. Except as otherwise provided in subsection (e), the fee 4 for filing and indexing a record under this Part, other than 5 an initial financing statement of the kind described in 6 subsection (b), is: 7 (1) $20 if the record is communicated in writing 8 and consists of one or two pages; 9 (2) $20 if the record is communicated in writing 10 and consists of more than two pages; and 11 (3) $20 if the record is communicated by another 12 medium authorized by filing-office rule. 13 (b) Initial financing statement: public-finance and 14 manufactured-housing transactions. Except as otherwise 15 provided in subsection (e), the fee for filing and indexing 16 an initial financing statement of the following kind is: 17 (1) $20 if the financing statement indicates that 18 it is filed in connection with a public-finance 19 transaction; 20 (2) $20 if the financing statement indicates that 21 it is filed in connection with a manufactured-home 22 transaction. 23 (c) Number of names. The number of names required to be 24 indexed does not affect the amount of the fee in subsections 25 (a) and (b). 26 (d) Response to information request. The fee for 27 responding to a request for information from the filing 28 office, including for issuing a certificate showing 29 communicating whether there is on file any financing 30 statement naming a particular debtor, is: 31 (1) $10 if the request is communicated in writing; 32 and 33 (2) $10 if the request is communicated by another 34 medium authorized by filing-office rule. SB1231 Enrolled -206- LRB9106284WHdv 1 (e) Record of mortgage. This Section does not require a 2 fee with respect to a record of a mortgage which is effective 3 as a financing statement filed as a fixture filing or as a 4 financing statement covering as-extracted collateral or 5 timber to be cut under Section 9-502(c). However, the 6 recording and satisfaction fees that otherwise would be 7 applicable to the record of the mortgage apply. 8 (810 ILCS 5/9-526 new) 9 Sec. 9-526. Filing-office rules. 10 (a) Adoption of filing-office rules. The Secretary of 11 State shall adopt and publish rules to implement this 12 Article. The filing-office rules must be: 13 (1) consistent with this Article; and 14 (2) adopted and published in accordance with the 15 Illinois Administrative Procedure Act. 16 (b) Harmonization of rules. To keep the filing-office 17 rules and practices of the filing office in harmony with the 18 rules and practices of filing offices in other jurisdictions 19 that enact substantially this Part, and to keep the 20 technology used by the filing office compatible with the 21 technology used by filing offices in other jurisdictions that 22 enact substantially this Part, the Secretary of State, so far 23 as is consistent with the purposes, policies, and provisions 24 of this Article, in adopting, amending, and repealing 25 filing-office rules, shall: 26 (1) consult with filing offices in other 27 jurisdictions that enact substantially this Part; and 28 (2) consult the most recent version of the Model 29 Rules promulgated by the International Association of 30 Corporate Administrators or any successor organization; 31 and 32 (3) take into consideration the rules and practices 33 of, and the technology used by, filing offices in other SB1231 Enrolled -207- LRB9106284WHdv 1 jurisdictions that enact substantially this Part. 2 (810 ILCS 5/9-527 new) 3 Sec. 9-527. Duty to report. The Secretary of State 4 shall report annually to the Governor and Legislature on the 5 operation of the filing office. The report must contain a 6 statement of the extent to which: 7 (1) the filing-office rules are not in harmony with 8 the rules of filing offices in other jurisdictions that 9 enact substantially this Part and the reasons for these 10 variations; and 11 (2) the filing-office rules are not in harmony with 12 the most recent version of the Model Rules promulgated by 13 the International Association of Corporate 14 Administrators, or any successor organization, and the 15 reasons for these variations. 16 (810 ILCS 5/Art. 9, Part 6 heading new) 17 PART 6. DEFAULT 18 (810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new) 19 SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST 20 (810 ILCS 5/9-601 new) 21 Sec. 9-601. Rights after default; judicial enforcement; 22 consignor or buyer of accounts, chattel paper, payment 23 intangibles, or promissory notes. 24 (a) Rights of secured party after default. After 25 default, a secured party has the rights provided in this Part 26 and, except as otherwise provided in Section 9-602, those 27 provided by agreement of the parties. A secured party: 28 (1) may reduce a claim to judgment, foreclose, or 29 otherwise enforce the claim, security interest, or 30 agricultural lien by any available judicial procedure; SB1231 Enrolled -208- LRB9106284WHdv 1 and 2 (2) if the collateral is documents, may proceed 3 either as to the documents or as to the goods they cover. 4 (b) Rights and duties of secured party in possession or 5 control. A secured party in possession of collateral or 6 control of collateral under Section 9-104, 9-105, 9-106, or 7 9-107 has the rights and duties provided in Section 9-207. 8 (c) Rights cumulative; simultaneous exercise. The 9 rights under subsections (a) and (b) are cumulative and may 10 be exercised simultaneously. 11 (d) Rights of debtor and obligor. Except as otherwise 12 provided in subsection (g) and Section 9-605, after default, 13 a debtor and an obligor have the rights provided in this Part 14 and by agreement of the parties. 15 (e) Lien of levy after judgment. If a secured party has 16 reduced its claim to judgment, the lien of any levy that may 17 be made upon the collateral by virtue of a judgment relates 18 back to the earliest of: 19 (1) the date of perfection of the security interest 20 or agricultural lien in the collateral; 21 (2) the date of filing a financing statement 22 covering the collateral; or 23 (3) any date specified in a statute under which the 24 agricultural lien was created. 25 (f) Execution sale. A sale pursuant to a judgment is a 26 foreclosure of the security interest or agricultural lien by 27 judicial procedure within the meaning of this Section. A 28 secured party may purchase at the sale and thereafter hold 29 the collateral free of any other requirements of this 30 Article. 31 (g) Consignor or buyer of certain rights to payment. 32 Except as otherwise provided in Section 9-607(c), this Part 33 imposes no duties upon a secured party that is a consignor or 34 is a buyer of accounts, chattel paper, payment intangibles, SB1231 Enrolled -209- LRB9106284WHdv 1 or promissory notes. 2 (810 ILCS 5/9-602 new) 3 Sec. 9-602. Waiver and variance of rights and duties. 4 Except as otherwise provided in Section 9-624, to the extent 5 that they give rights to a debtor or obligor and impose 6 duties on a secured party, the debtor or obligor may not 7 waive or vary the rules stated in the following listed 8 Sections: 9 (1) Section 9-207(b)(4)(C), which deals with use 10 and operation of the collateral by the secured party; 11 (2) Section 9-210, which deals with requests for an 12 accounting and requests concerning a list of collateral 13 and statement of account; 14 (3) Section 9-607(c), which deals with collection 15 and enforcement of collateral; 16 (4) Sections 9-608(a) and 9-615(c) to the extent 17 that they deal with application or payment of noncash 18 proceeds of collection, enforcement, or disposition; 19 (5) Sections 9-608(a) and 9-615(d) to the extent 20 that they require accounting for or payment of surplus 21 proceeds of collateral; 22 (6) Section 9-609 to the extent that it imposes 23 upon a secured party that takes possession of collateral 24 without judicial process the duty to do so without breach 25 of the peace; 26 (7) Sections 9-610(b), 9-611, 9-613, and 9-614, 27 which deal with disposition of collateral; 28 (8) Section 9-615(f), which deals with calculation 29 of a deficiency or surplus when a disposition is made to 30 the secured party, a person related to the secured party, 31 or a secondary obligor; 32 (9) Section 9-616, which deals with explanation of 33 the calculation of a surplus or deficiency; SB1231 Enrolled -210- LRB9106284WHdv 1 (10) Sections 9-620, 9-621, and 9-622, which deal 2 with acceptance of collateral in satisfaction of 3 obligation; 4 (11) Section 9-623, which deals with redemption of 5 collateral; 6 (12) Section 9-624, which deals with permissible 7 waivers; and 8 (13) Sections 9-625 and 9-626, which deal with the 9 secured party's liability for failure to comply with this 10 Article. 11 (810 ILCS 5/9-603 new) 12 Sec. 9-603. Agreement on standards concerning rights and 13 duties. 14 (a) Agreed standards. The parties may determine by 15 agreement the standards measuring the fulfillment of the 16 rights of a debtor or obligor and the duties of a secured 17 party under a rule stated in Section 9-602 if the standards 18 are not manifestly unreasonable. 19 (b) Agreed standards inapplicable to breach of peace. 20 Subsection (a) does not apply to the duty under Section 9-609 21 to refrain from breaching the peace. 22 (810 ILCS 5/9-604 new) 23 Sec. 9-604. Procedure if security agreement covers real 24 property or fixtures. 25 (a) Enforcement: personal and real property. If a 26 security agreement covers both personal and real property, a 27 secured party may proceed: 28 (1) under this Part as to the personal property 29 without prejudicing any rights with respect to the real 30 property; or 31 (2) as to both the personal property and the real 32 property in accordance with the rights with respect to SB1231 Enrolled -211- LRB9106284WHdv 1 the real property, in which case the other provisions of 2 this Part do not apply. 3 (b) Enforcement: fixtures. Subject to subsection (c), 4 if a security agreement covers goods that are or become 5 fixtures, a secured party may proceed: 6 (1) under this Part; or 7 (2) in accordance with the rights with respect to 8 real property, in which case the other provisions of this 9 Part do not apply. 10 (c) Removal of fixtures. Subject to the other 11 provisions of this Part, if a secured party holding a 12 security interest in fixtures has priority over all owners 13 and encumbrancers of the real property, the secured party, 14 after default, may remove the collateral from the real 15 property. 16 (d) Injury caused by removal. A secured party that 17 removes collateral shall promptly reimburse any encumbrancer 18 or owner of the real property, other than the debtor, for the 19 cost of repair of any physical injury caused by the removal. 20 The secured party need not reimburse the encumbrancer or 21 owner for any diminution in value of the real property caused 22 by the absence of the goods removed or by any necessity of 23 replacing them. A person entitled to reimbursement may 24 refuse permission to remove until the secured party gives 25 adequate assurance for the performance of the obligation to 26 reimburse. 27 (810 ILCS 5/9-605 new) 28 Sec. 9-605. Unknown debtor or secondary obligor. A 29 secured party does not owe a duty based on its status as 30 secured party: 31 (1) to a person that is a debtor or obligor, unless 32 the secured party knows: 33 (A) that the person is a debtor or obligor; SB1231 Enrolled -212- LRB9106284WHdv 1 (B) the identity of the person; and 2 (C) how to communicate with the person; or 3 (2) to a secured party or lienholder that has filed 4 a financing statement against a person, unless the 5 secured party knows: 6 (A) that the person is a debtor; and 7 (B) the identity of the person. 8 (810 ILCS 5/9-606 new) 9 Sec. 9-606. Time of default for agricultural lien. For 10 purposes of this Part, a default occurs in connection with an 11 agricultural lien at the time the secured party becomes 12 entitled to enforce the lien in accordance with the statute 13 under which it was created. 14 (810 ILCS 5/9-607 new) 15 Sec. 9-607. Collection and enforcement by secured party. 16 (a) Collection and enforcement generally. If so agreed, 17 and in any event after default, a secured party: 18 (1) may notify an account debtor or other person 19 obligated on collateral to make payment or otherwise 20 render performance to or for the benefit of the secured 21 party; 22 (2) may take any proceeds to which the secured 23 party is entitled under Section 9-315; 24 (3) may enforce the obligations of an account 25 debtor or other person obligated on collateral and 26 exercise the rights of the debtor with respect to the 27 obligation of the account debtor or other person 28 obligated on collateral to make payment or otherwise 29 render performance to the debtor, and with respect to any 30 property that secures the obligations of the account 31 debtor or other person obligated on the collateral; 32 (4) if it holds a security interest in a deposit SB1231 Enrolled -213- LRB9106284WHdv 1 account perfected by control under Section 9-104(a)(1), 2 may apply the balance of the deposit account to the 3 obligation secured by the deposit account; and 4 (5) if it holds a security interest in a deposit 5 account perfected by control under Section 9-104(a)(2) or 6 (3), may instruct the bank to pay the balance of the 7 deposit account to or for the benefit of the secured 8 party. 9 (b) Nonjudicial enforcement of mortgage. If necessary 10 to enable a secured party to exercise under subsection (a)(3) 11 the right of a debtor to enforce a mortgage nonjudicially, 12 the secured party may record in the office in which a record 13 of the mortgage is recorded: 14 (1) a copy of the security agreement that creates 15 or provides for a security interest in the obligation 16 secured by the mortgage; and 17 (2) the secured party's sworn affidavit in 18 recordable form stating that: 19 (A) a default has occurred; and 20 (B) the secured party is entitled to enforce 21 the mortgage nonjudicially. 22 (c) Commercially reasonable collection and enforcement. 23 A secured party shall proceed in a commercially reasonable 24 manner if the secured party: 25 (1) undertakes to collect from or enforce an 26 obligation of an account debtor or other person obligated 27 on collateral; and 28 (2) is entitled to charge back uncollected 29 collateral or otherwise to full or limited recourse 30 against the debtor or a secondary obligor. 31 (d) Expenses of collection and enforcement. A secured 32 party may deduct from the collections made pursuant to 33 subsection (c) reasonable expenses of collection and 34 enforcement, including reasonable attorney's fees and legal SB1231 Enrolled -214- LRB9106284WHdv 1 expenses incurred by the secured party. 2 (e) Duties to secured party not affected. This Section 3 does not determine whether an account debtor, bank, or other 4 person obligated on collateral owes a duty to a secured 5 party. 6 (810 ILCS 5/9-608 new) 7 Sec. 9-608. Application of proceeds of collection or 8 enforcement; liability for deficiency and right to surplus. 9 (a) Application of proceeds, surplus, and deficiency if 10 obligation secured. If a security interest or agricultural 11 lien secures payment or performance of an obligation, the 12 following rules apply: 13 (1) A secured party shall apply or pay over for 14 application the cash proceeds of collection or 15 enforcement under Section 9-607 in the following order 16 to: 17 (A) the reasonable expenses of collection and 18 enforcement and, to the extent provided for by 19 agreement and not prohibited by law, reasonable 20 attorney's fees and legal expenses incurred by the 21 secured party; 22 (B) the satisfaction of obligations secured by 23 the security interest or agricultural lien under 24 which the collection or enforcement is made; and 25 (C) the satisfaction of obligations secured by 26 any subordinate security interest in or other lien 27 on the collateral subject to the security interest 28 or agricultural lien under which the collection or 29 enforcement is made if the secured party receives an 30 authenticated demand for proceeds before 31 distribution of the proceeds is completed. 32 (2) If requested by a secured party, a holder of a 33 subordinate security interest or other lien shall furnish SB1231 Enrolled -215- LRB9106284WHdv 1 reasonable proof of the interest or lien within a 2 reasonable time. Unless the holder complies, the secured 3 party need not comply with the holder's demand under 4 paragraph (1)(C). 5 (3) A secured party need not apply or pay over for 6 application noncash proceeds of collection and 7 enforcement under Section 9-607 unless the failure to do 8 so would be commercially unreasonable. A secured party 9 that applies or pays over for application noncash 10 proceeds shall do so in a commercially reasonable manner. 11 (4) A secured party shall account to and pay a 12 debtor for any surplus, and the obligor is liable for any 13 deficiency. 14 (b) No surplus or deficiency in sales of certain rights 15 to payment. If the underlying transaction is a sale of 16 accounts, chattel paper, payment intangibles, or promissory 17 notes, the debtor is not entitled to any surplus, and the 18 obligor is not liable for any deficiency. 19 (810 ILCS 5/9-609 new) 20 Sec. 9-609. Secured party's right to take possession 21 after default. 22 (a) Possession; rendering equipment unusable; 23 disposition on debtor's premises. After default, a secured 24 party: 25 (1) may take possession of the collateral; and 26 (2) without removal, may render equipment unusable 27 and dispose of collateral on a debtor's premises under 28 Section 9-610. 29 (b) Judicial and nonjudicial process. A secured party 30 may proceed under subsection (a): 31 (1) pursuant to judicial process; or 32 (2) without judicial process, if it proceeds 33 without breach of the peace. SB1231 Enrolled -216- LRB9106284WHdv 1 (c) Assembly of collateral. If so agreed, and in any 2 event after default, a secured party may require the debtor 3 to assemble the collateral and make it available to the 4 secured party at a place to be designated by the secured 5 party which is reasonably convenient to both parties. 6 (810 ILCS 5/9-610 new) 7 Sec. 9-610. Disposition of collateral after default. 8 (a) Disposition after default. After default, a secured 9 party may sell, lease, license, or otherwise dispose of any 10 or all of the collateral in its present condition or 11 following any commercially reasonable preparation or 12 processing. 13 (b) Commercially reasonable disposition. Every aspect 14 of a disposition of collateral, including the method, manner, 15 time, place, and other terms, must be commercially 16 reasonable. If commercially reasonable, a secured party may 17 dispose of collateral by public or private proceedings, by 18 one or more contracts, as a unit or in parcels, and at any 19 time and place and on any terms. 20 (c) Purchase by secured party. A secured party may 21 purchase collateral: 22 (1) at a public disposition; or 23 (2) at a private disposition only if the collateral 24 is of a kind that is customarily sold on a recognized 25 market or the subject of widely distributed standard 26 price quotations. 27 (d) Warranties on disposition. A contract for sale, 28 lease, license, or other disposition includes the warranties 29 relating to title, possession, quiet enjoyment, and the like 30 which by operation of law accompany a voluntary disposition 31 of property of the kind subject to the contract. 32 (e) Disclaimer of warranties. A secured party may 33 disclaim or modify warranties under subsection (d): SB1231 Enrolled -217- LRB9106284WHdv 1 (1) in a manner that would be effective to disclaim 2 or modify the warranties in a voluntary disposition of 3 property of the kind subject to the contract of 4 disposition; or 5 (2) by communicating to the purchaser a record 6 evidencing the contract for disposition and including an 7 express disclaimer or modification of the warranties. 8 (f) Record sufficient to disclaim warranties. A record 9 is sufficient to disclaim warranties under subsection (e) if 10 it indicates "There is no warranty relating to title, 11 possession, quiet enjoyment, or the like in this disposition" 12 or uses words of similar import. 13 (810 ILCS 5/9-611 new) 14 Sec. 9-611. Notification before disposition of 15 collateral. 16 (a) "Notification date." In this Section, "notification 17 date" means the earlier of the date on which: 18 (1) a secured party sends to the debtor and any 19 secondary obligor an authenticated notification of 20 disposition; or 21 (2) the debtor and any secondary obligor waive the 22 right to notification. 23 (b) Notification of disposition required. Except as 24 otherwise provided in subsection (d), a secured party that 25 disposes of collateral under Section 9-610 shall send to the 26 persons specified in subsection (c) a reasonable 27 authenticated notification of disposition. 28 (c) Persons to be notified. To comply with subsection 29 (b), the secured party shall send an authenticated 30 notification of disposition to: 31 (1) the debtor; 32 (2) any secondary obligor; and 33 (3) if the collateral is other than consumer goods: SB1231 Enrolled -218- LRB9106284WHdv 1 (A) any other person from which the secured 2 party has received, before the notification date, an 3 authenticated notification of a claim of an interest 4 in the collateral; 5 (B) any other secured party or lienholder 6 that, 10 days before the notification date, held a 7 security interest in or other lien on the collateral 8 perfected by the filing of a financing statement 9 that: 10 (i) identified the collateral; 11 (ii) was indexed under the debtor's name 12 as of that date; and 13 (iii) was filed in the office in which to 14 file a financing statement against the debtor 15 covering the collateral as of that date; and 16 (C) any other secured party that, 10 days 17 before the notification date, held a security 18 interest in the collateral perfected by compliance 19 with a statute, regulation, or treaty described in 20 Section 9-311(a). 21 (d) Subsection (b) inapplicable: perishable collateral; 22 recognized market. Subsection (b) does not apply if the 23 collateral is perishable or threatens to decline speedily in 24 value or is of a type customarily sold on a recognized 25 market. 26 (e) Compliance with subsection (c)(3)(B). A secured 27 party complies with the requirement for notification 28 prescribed by subsection (c)(3)(B) if: 29 (1) not later than 20 days or earlier than 30 days 30 before the notification date, the secured party requests, 31 in a commercially reasonable manner, information 32 concerning financing statements indexed under the 33 debtor's name in the office indicated in subsection 34 (c)(3)(B); and SB1231 Enrolled -219- LRB9106284WHdv 1 (2) before the notification date, the secured 2 party: 3 (A) did not receive a response to the request 4 for information; or 5 (B) received a response to the request for 6 information and sent an authenticated notification 7 of disposition to each secured party or other 8 lienholder named in that response whose financing 9 statement covered the collateral. 10 (810 ILCS 5/9-612 new) 11 Sec. 9-612. Timeliness of notification before 12 disposition of collateral. 13 (a) Reasonable time is question of fact. Except as 14 otherwise provided in subsection (b), whether a notification 15 is sent within a reasonable time is a question of fact. The 16 limitation of the rule in subsection (b) to transactions 17 other than consumer-goods transactions is intended to leave 18 to the court the determination of the proper rules in 19 consumer-goods transactions. The court may not infer from 20 that limitation the nature of the proper rule in 21 consumer-goods transactions and may continue to apply 22 established approaches. 23 (b) 10-day period sufficient in non-consumer 24 transaction. In a transaction other than a consumer 25 transaction, a notification of disposition sent after default 26 and 10 days or more before the earliest time of disposition 27 set forth in the notification is sent within a reasonable 28 time before the disposition. 29 (810 ILCS 5/9-613 new) 30 Sec. 9-613. Contents and form of notification before 31 disposition of collateral: general. Except in a 32 consumer-goods transaction, the following rules apply: SB1231 Enrolled -220- LRB9106284WHdv 1 (1) The contents of a notification of disposition 2 are sufficient if the notification: 3 (A) describes the debtor and the secured 4 party; 5 (B) describes the collateral that is the 6 subject of the intended disposition; 7 (C) states the method of intended disposition; 8 (D) states that the debtor is entitled to an 9 accounting of the unpaid indebtedness and states the 10 charge, if any, for an accounting; and 11 (E) states the time and place of a public 12 disposition or the time after which any other 13 disposition is to be made. 14 (2) Whether the contents of a notification that 15 lacks any of the information specified in paragraph (1) 16 are nevertheless sufficient is a question of fact. 17 (3) The contents of a notification providing 18 substantially the information specified in paragraph (1) 19 are sufficient, even if the notification is accompanied 20 by or combined other notification or includes: 21 (A) information not specified by that 22 paragraph; or 23 (B) minor errors that are not seriously 24 misleading. 25 (4) A particular phrasing of the notification is 26 not required. 27 (5) The following form of notification and the form 28 appearing in Section 9-614(4), when completed, each 29 provides sufficient information: 30 NOTIFICATION OF DISPOSITION OF COLLATERAL 31 To: ..................................... (Name of 32 debtor, obligor, or other person to which the 33 notification is sent) 34 From: ................................... (Name, SB1231 Enrolled -221- LRB9106284WHdv 1 address, and telephone number of secured party) 2 Name of Debtor(s): ..................... (Include 3 only if debtor(s) are not an addressee) 4 For a public disposition: 5 We will sell or lease or license, as applicable, the 6 ............................ (describe collateral) to the 7 highest qualified bidder in public as follows: 8 Day and Date: ................................... 9 Time: ........................................... 10 Place: .......................................... 11 For a private disposition: 12 We will sell (or lease or license, as applicable) 13 the ........................... (describe collateral) 14 privately sometime after ................ (day and date). 15 You are entitled to an accounting of the unpaid 16 indebtedness secured by the property that we intend to 17 sell or lease or license, as applicable for a charge of 18 $................. You may request an accounting by 19 calling us at .................. (telephone number). 20 (810 ILCS 5/9-614 new) 21 Sec. 9-614. Contents and form of notification before 22 disposition of collateral: consumer-goods transaction. In a 23 consumer-goods transaction, the following rules apply: 24 (1) A notification of disposition must provide the 25 following information: 26 (A) the information specified in Section 27 9-613(1); 28 (B) a description of any liability for a 29 deficiency of the person to which the notification 30 is sent; 31 (C) a telephone number from which the amount 32 that must be paid to the secured party to redeem the SB1231 Enrolled -222- LRB9106284WHdv 1 collateral under Section 9-623 is available; and 2 (D) a telephone number or mailing address from 3 which additional information concerning the 4 disposition and the obligation secured is available. 5 (2) A particular phrasing of the notification is 6 not required. 7 (3) The contents of a notification providing 8 substantially the information specified in paragraph (1) 9 are sufficient, even if the notification: 10 (A) is accompanied by or combined with other 11 notifications; 12 (B) includes information not specified by that 13 paragraph; or 14 (C) includes minor errors that are not 15 seriously misleading. 16 (4) The following form of notification, when 17 completed, provides sufficient information: 18 ............. (Name and address of secured party) 19 ............. (Date) 20 NOTICE OF OUR PLAN TO SELL PROPERTY 21 ...................................................... 22 (Name and address of any obligor who is also a debtor) 23 Subject: .................................. 24 (Identification of Transaction) 25 We have your ..................... (describe 26 collateral), because you broke promises in our agreement. 27 For a public disposition: 28 We will sell ....................... (describe 29 collateral) at public sale. A sale could include a lease 30 or license. The sale will be held as follows: 31 Date: ................................ 32 Time: ................................ 33 Place: ................................ 34 You may attend the sale and bring bidders if you SB1231 Enrolled -223- LRB9106284WHdv 1 want. 2 For a private disposition: 3 We will sell ........................... (describe 4 collateral) at private sale sometime after 5 .................... (date). A sale could include a 6 lease or license. 7 The money that we get from the sale (after paying 8 our costs) will reduce the amount you owe. If we get 9 less money than you owe, you ............ (will or will 10 not, as applicable) still owe us the difference. If we 11 get more money than you owe, you will get the extra 12 money, unless we must pay it to someone else. 13 You can get the property back at any time before we 14 sell it by paying us the full amount you owe (not just 15 the past due payments), including our expenses. To learn 16 the exact amount you must pay, call us at 17 ................ (telephone number). 18 If you want us to explain to you in writing how we 19 have figured the amount that you owe us, you may call us 20 at .................. (telephone number) or write us at 21 .................................... (secured party's 22 address) and request a written explanation. We will 23 charge you $ ........... for the explanation if we sent 24 you another written explanation of the amount you owe us 25 within the last six months. 26 If you need more information about the sale call us 27 at .................. (telephone number) or write us at 28 ......................... (secured party's address). 29 We are sending this notice to the following other 30 people who have an interest ...................... 31 (describe collateral) or who owe money under your 32 agreement: 33 ................................................. 34 (Names of all other debtors and obligors, if any) SB1231 Enrolled -224- LRB9106284WHdv 1 (5) A notification in the form of paragraph (4) is 2 sufficient, even if it includes errors in information not 3 required by paragraph (1). 4 (6) If a notification under this Section is not in 5 the form of paragraph (4), law other than this Article 6 determines the effect of including information not 7 required by paragraph (1). 8 (810 ILCS 5/9-615 new) 9 Sec. 9-615. Application of proceeds of disposition; 10 liability for deficiency and right to surplus. 11 (a) Application of proceeds. A secured party shall 12 apply or pay over for application the cash proceeds of 13 disposition in the following order to: 14 (1) the reasonable expenses of retaking, holding, 15 preparing for disposition, processing, and disposing, 16 and, to the extent provided for by agreement and not 17 prohibited by law, reasonable attorney's fees and legal 18 expenses incurred by the secured party; 19 (2) the satisfaction of obligations secured by the 20 security interest or agricultural lien under which the 21 disposition is made; 22 (3) the satisfaction of obligations secured by any 23 subordinate security interest in or other subordinate 24 lien on the collateral if: 25 (A) the secured party receives from the holder 26 of the subordinate security interest or other lien 27 an authenticated demand for proceeds before 28 distribution of the proceeds is completed; and 29 (B) in a case in which a consignor has an 30 interest in the collateral, the subordinate security 31 interest or other lien is senior to the interest of 32 the consignor; and 33 (4) a secured party that is a consignor of the SB1231 Enrolled -225- LRB9106284WHdv 1 collateral if the secured party receives from the 2 consignor an authenticated demand for proceeds before 3 distribution of the proceeds is completed. 4 (b) Proof of subordinate interest. If requested by a 5 secured party, a holder of a subordinate security interest or 6 other lien shall furnish reasonable proof of the interest or 7 lien within a reasonable time. Unless the holder does so, 8 the secured party need not comply with the holder's demand 9 under subsection (a)(3). 10 (c) Application of noncash proceeds. A secured party 11 need not apply or pay over for application noncash proceeds 12 of disposition under this Section unless the failure to do so 13 would be commercially unreasonable. A secured party that 14 applies or pays over for application noncash proceeds shall 15 do so in a commercially reasonable manner. 16 (d) Surplus or deficiency if obligation secured. If the 17 security interest under which a disposition is made secures 18 payment or performance of an obligation, after making the 19 payments and applications required by subsection (a) and 20 permitted by subsection (c): 21 (1) unless subsection (a)(4) requires the secured 22 party to apply or pay over cash proceeds to a consignor, 23 the secured party shall account to and pay a debtor for 24 any surplus; and 25 (2) the obligor is liable for any deficiency. 26 (e) No surplus or deficiency in sales of certain rights 27 to payment. If the underlying transaction is a sale of 28 accounts, chattel paper, payment intangibles, or promissory 29 notes: 30 (1) the debtor is not entitled to any surplus; and 31 (2) the obligor is not liable for any deficiency. 32 (f) Calculation of surplus or deficiency in disposition 33 to person related to secured party. The surplus or 34 deficiency following a disposition is calculated based on the SB1231 Enrolled -226- LRB9106284WHdv 1 amount of proceeds that would have been realized in a 2 disposition complying with this Part and described in 3 subsection (f)(2) of this Section to a transferee other than 4 the secured party, a person related to the secured party, or 5 a secondary obligor if: 6 (1) the transferee in the disposition is the 7 secured party, a person related to the secured party, or 8 a secondary obligor; and 9 (2) the amount of proceeds of the disposition is 10 significantly below the range of proceeds that would have 11 been received from a complying disposition by a forced 12 sale without reserve to a willing buyer other than the 13 secured party, a person related to the secured party, or 14 a secondary obligor. 15 (g) Cash proceeds received by junior secured party. A 16 secured party that receives cash proceeds of a disposition in 17 good faith and without knowledge that the receipt violates 18 the rights of the holder of a security interest or other lien 19 that is not subordinate to the security interest or 20 agricultural lien under which the disposition is made: 21 (1) takes the cash proceeds free of the security 22 interest or other lien; 23 (2) is not obligated to apply the proceeds of the 24 disposition to the satisfaction of obligations secured by 25 the security interest or other lien; and 26 (3) is not obligated to account to or pay the 27 holder of the security interest or other lien for any 28 surplus. 29 (810 ILCS 5/9-616 new) 30 Sec. 9-616. Explanation of calculation of surplus or 31 deficiency. 32 (a) Definitions. In this Section: 33 (1) "Explanation" means a writing that: SB1231 Enrolled -227- LRB9106284WHdv 1 (A) states whether a surplus or deficiency is 2 owed and the amount of the surplus, if applicable; 3 (B) states, if applicable, that future debits, 4 credits, charges, including additional credit 5 service charges or interest, rebates, and expenses 6 may affect the amount of the surplus or deficiency; 7 (C) provides a telephone number or mailing 8 address from which the debtor or consumer obligor 9 may obtain additional information concerning the 10 transaction and from which such person may request 11 the amount of the deficiency and further information 12 regarding how the secured party calculated the 13 surplus or deficiency; and 14 (D) at the sender's option, the information 15 set forth in subsection (c). 16 (2) "Request" means a record: 17 (A) authenticated by a debtor or consumer 18 obligor; 19 (B) requesting that the recipient provide 20 information of how it calculated the surplus or 21 deficiency; and 22 (C) sent after disposition of the collateral 23 under Section 9-610. 24 (b) Explanation of calculation. In a consumer-goods 25 transaction in which the debtor is entitled to a surplus or a 26 consumer obligor is liable for a deficiency under Section 27 9-615, the secured party shall: 28 (1) send an explanation to the debtor or consumer 29 obligor, as applicable, after the disposition and: 30 (A) before or when the secured party accounts 31 to the debtor and pays any surplus or first makes 32 written demand on the consumer obligor after the 33 disposition for payment of the deficiency, other 34 than in instances in which such demand is made by a SB1231 Enrolled -228- LRB9106284WHdv 1 third-party debt collector covered by the Fair Debt 2 Collection Practices Act; and 3 (B) within 14 days after receipt of a request 4 made by the debtor or consumer obligor within one 5 year after the secured party has given an 6 explanation under this Section or notice to such 7 debtor or consumer obligor under Section 9-614 of 8 this Article; or 9 (2) in the case of a consumer obligor who is liable 10 for a deficiency, within 14 days after receipt of a 11 request, send to the consumer obligor a record waiving 12 the secured party's right to a deficiency. 13 (c) Required information for response to request. To 14 comply with a request, the secured party must provide a 15 response in writing which includes the following information: 16 (1) the aggregate amount of obligations secured by 17 the security interest under which the disposition was 18 made, and, if the amount reflects a rebate of unearned 19 interest or credit service charge, an indication of that 20 fact, calculated as of a specified date: 21 (A) if the secured party takes or receives 22 possession of the collateral after default, not more 23 than 35 days before the secured party takes or 24 receives possession; or 25 (B) if the secured party takes or receives 26 possession of the collateral before default or does 27 not take possession of the collateral, not more than 28 35 days before the disposition; 29 (2) the amount of proceeds of the disposition; 30 (3) the aggregate amount of the obligations after 31 deducting the amount of proceeds; 32 (4) the amount, in the aggregate or by type, and 33 types of expenses, including expenses of retaking, 34 holding, preparing for disposition, processing, and SB1231 Enrolled -229- LRB9106284WHdv 1 disposing of the collateral, and attorney's fees secured 2 by the collateral which are known to the secured party 3 and relate to the current disposition; 4 (5) the amount, in the aggregate or by type, and 5 types of credits, including rebates of interest or credit 6 service charges, to which the obligor is known to be 7 entitled and which are not reflected in the amount in 8 paragraph (1); and 9 (6) the amount of the surplus or deficiency. 10 (d) Substantial compliance. A particular phrasing of 11 the explanation or response to a request is not required. An 12 explanation or a response to a request complying 13 substantially with the requirements of this Section is 14 sufficient even if it is: 15 (1) accompanied by or combined with other 16 notifications; 17 (2) includes information not specified by this 18 Section; 19 (3) includes minor errors that are not seriously 20 misleading; or 21 (4) includes errors in information not required by 22 this Section. 23 (e) Charges for responses. A debtor or consumer obligor 24 is entitled without charge to one response to a request under 25 this Section during any six-month period in which the secured 26 party did not send to the debtor or consumer obligor an 27 explanation pursuant to subsection (b)(1). The secured party 28 may require payment of a charge not exceeding $25 for each 29 additional response. 30 (810 ILCS 5/9-617 new) 31 Sec. 9-617. Rights of transferee of collateral. 32 (a) Effects of disposition. A secured party's 33 disposition of collateral after default: SB1231 Enrolled -230- LRB9106284WHdv 1 (1) transfers to a transferee for value all of the 2 debtor's rights in the collateral; 3 (2) discharges the security interest under which 4 the disposition is made; and 5 (3) discharges any subordinate security interest or 6 other subordinate lien. 7 (b) Rights of good-faith transferee. A transferee that 8 acts in good faith takes free of the rights and interests 9 described in subsection (a), even if the secured party fails 10 to comply with this Article or the requirements of any 11 judicial proceeding. 12 (c) Rights of other transferee. If a transferee does 13 not take free of the rights and interests described in 14 subsection (a), the transferee takes the collateral subject 15 to: 16 (1) the debtor's rights in the collateral; 17 (2) the security interest or agricultural lien 18 under which the disposition is made; and 19 (3) any other security interest or other lien. 20 (810 ILCS 5/9-618 new) 21 Sec. 9-618. Rights and duties of certain secondary 22 obligors. 23 (a) Rights and duties of secondary obligor. A secondary 24 obligor acquires the rights and becomes obligated to perform 25 the duties of the secured party after the secondary obligor: 26 (1) receives an assignment of a secured obligation 27 from the secured party; 28 (2) receives a transfer of collateral from the 29 secured party and agrees to accept the rights and assume 30 the duties of the secured party; or 31 (3) is subrogated to the rights of a secured party 32 with respect to collateral. 33 (b) Effect of assignment, transfer, or subrogation. An SB1231 Enrolled -231- LRB9106284WHdv 1 assignment, transfer, or subrogation described in subsection 2 (a): 3 (1) is not a disposition of collateral under 4 Section 9-610; and 5 (2) relieves the secured party of further duties 6 under this Article. 7 (810 ILCS 5/9-619 new) 8 Sec. 9-619. Transfer of record or legal title. 9 (a) "Transfer statement." In this Section, "transfer 10 statement" means a record authenticated by a secured party 11 stating: 12 (1) that the debtor has defaulted in connection 13 with an obligation secured by specified collateral; 14 (2) that the secured party has exercised its 15 post-default remedies with respect to the collateral; 16 (3) that, by reason of the exercise, a transferee 17 has acquired the rights of the debtor in the collateral; 18 and 19 (4) the name and mailing address of the secured 20 party, debtor, and transferee. 21 (b) Effect of transfer statement. A transfer statement 22 entitles the transferee to the transfer of record of all 23 rights of the debtor in the collateral specified in the 24 statement in any official filing, recording, registration, or 25 certificate-of-title system covering the collateral. If a 26 transfer statement is presented with the applicable fee and 27 request form to the official or office responsible for 28 maintaining the system, the official or office shall: 29 (1) accept the transfer statement; 30 (2) promptly amend its records to reflect the 31 transfer; and 32 (3) if applicable, issue a new appropriate 33 certificate of title in the name of the transferee. SB1231 Enrolled -232- LRB9106284WHdv 1 (c) Transfer not a disposition; no relief of secured 2 party's duties. A transfer of the record or legal title to 3 collateral to a secured party under subsection (b) or 4 otherwise is not of itself a disposition of collateral under 5 this Article and does not of itself relieve the secured party 6 of its duties under this Article. 7 (810 ILCS 5/9-620 new) 8 Sec. 9-620. Acceptance of collateral in full or partial 9 satisfaction of obligation; compulsory disposition of 10 collateral. 11 (a) Conditions to acceptance in satisfaction. Except as 12 otherwise provided in subsection (g), a secured party may 13 accept collateral in full or partial satisfaction of the 14 obligation it secures only if: 15 (1) the debtor consents to the acceptance under 16 subsection (c); 17 (2) the secured party does not receive, within the 18 time set forth in subsection (d), a notification of 19 objection to the proposal authenticated by: 20 (A) a person to which the secured party was 21 required to send a proposal under Section 9-621; or 22 (B) any other person, other than the debtor, 23 holding an interest in the collateral subordinate to 24 the security interest that is the subject of the 25 proposal; 26 (3) if the collateral is consumer goods, the 27 collateral is not in the possession of the debtor when 28 the debtor consents to the acceptance; and 29 (4) subsection (e) does not require the secured 30 party to dispose of the collateral or the debtor waives 31 the requirement pursuant to Section 9-624. 32 (b) Purported acceptance ineffective. A purported or 33 apparent acceptance of collateral under this Section is SB1231 Enrolled -233- LRB9106284WHdv 1 ineffective unless: 2 (1) the secured party consents to the acceptance in 3 an authenticated record or sends a proposal to the 4 debtor; and 5 (2) the conditions of subsection (a) are met. 6 (c) Debtor's consent. For purposes of this Section: 7 (1) a debtor consents to an acceptance of 8 collateral in partial satisfaction of the obligation it 9 secures only if the debtor agrees to the terms of the 10 acceptance in a record authenticated after default; and 11 (2) a debtor consents to an acceptance of 12 collateral in full satisfaction of the obligation it 13 secures only if the debtor agrees to the terms of the 14 acceptance in a record authenticated after default or the 15 secured party: 16 (A) sends to the debtor after default a 17 proposal that is unconditional or subject only to a 18 condition that collateral not in the possession of 19 the secured party be preserved or maintained; 20 (B) in the proposal, proposes to accept 21 collateral in full satisfaction of the obligation it 22 secures; and 23 (C) does not receive a notification of 24 objection authenticated by the debtor within 20 days 25 after the proposal is sent. 26 (d) Effectiveness of notification. To be effective 27 under subsection (a)(2), a notification of objection must be 28 received by the secured party: 29 (1) in the case of a person to which the proposal 30 was sent pursuant to Section 9-621, within 20 days after 31 notification was sent to that person; and 32 (2) in other cases: 33 (A) within 20 days after the last notification 34 was sent pursuant to Section 9-621; or SB1231 Enrolled -234- LRB9106284WHdv 1 (B) if a notification was not sent, before the 2 debtor consents to the acceptance under subsection 3 (c). 4 (e) Mandatory disposition of consumer goods. A secured 5 party that has taken possession of collateral shall dispose 6 of the collateral pursuant to Section 9-610 within the time 7 specified in subsection (f) if: 8 (1) 60 percent of the cash price has been paid in 9 the case of a purchase-money security interest in 10 consumer goods; or 11 (2) 60 percent of the principal amount of the 12 obligation secured has been paid in the case of a 13 non-purchase-money security interest in consumer goods. 14 (f) Compliance with mandatory disposition requirement. 15 To comply with subsection (e), the secured party shall 16 dispose of the collateral: 17 (1) within 90 days after taking possession; or 18 (2) within any longer period to which the debtor 19 and all secondary obligors have agreed in an agreement to 20 that effect entered into and authenticated after default. 21 (g) No partial satisfaction in consumer transaction. In 22 a consumer transaction, a secured party may not accept 23 collateral in partial satisfaction of the obligation it 24 secures. 25 (810 ILCS 5/9-621 new) 26 Sec. 9-621. Notification of proposal to accept 27 collateral. 28 (a) Persons to which proposal to be sent. A secured 29 party that desires to accept collateral in full or partial 30 satisfaction of the obligation it secures shall send its 31 proposal to: 32 (1) any person from which the secured party has 33 received, before the debtor consented to the acceptance, SB1231 Enrolled -235- LRB9106284WHdv 1 an authenticated notification of a claim of an interest 2 in the collateral; 3 (2) any other secured party or lienholder that, 10 4 days before the debtor consented to the acceptance, held 5 a security interest in or other lien on the collateral 6 perfected by the filing of a financing statement that: 7 (A) identified the collateral; 8 (B) was indexed under the debtor's name as of 9 that date; and 10 (C) was filed in the office or offices in 11 which to file a financing statement against the 12 debtor covering the collateral as of that date; and 13 (3) any other secured party that, 10 days before 14 the debtor consented to the acceptance, held a security 15 interest in the collateral perfected by compliance with a 16 statute, regulation, or treaty described in Section 17 9-311(a). 18 (b) Proposal to be sent to secondary obligor in partial 19 satisfaction. A secured party that desires to accept 20 collateral in partial satisfaction of the obligation it 21 secures shall send its proposal to any secondary obligor in 22 addition to the persons described in subsection (a). 23 (810 ILCS 5/9-622 new) 24 Sec. 9-622. Effect of acceptance of collateral. 25 (a) Effect of acceptance. A secured party's acceptance 26 of collateral in full or partial satisfaction of the 27 obligation it secures: 28 (1) discharges the obligation to the extent 29 consented to by the debtor; 30 (2) transfers to the secured party all of a 31 debtor's rights in the collateral; 32 (3) discharges the security interest or 33 agricultural lien that is the subject of the debtor's SB1231 Enrolled -236- LRB9106284WHdv 1 consent and any subordinate security interest or other 2 subordinate lien; and 3 (4) terminates any other subordinate interest. 4 (b) Discharge of subordinate interest notwithstanding 5 noncompliance. A subordinate interest is discharged or 6 terminated under subsection (a), even if the secured party 7 fails to comply with this Article. 8 (810 ILCS 5/9-623 new) 9 Sec. 9-623. Right to redeem collateral. 10 (a) Persons that may redeem. A debtor, any secondary 11 obligor, or any other secured party or lienholder may redeem 12 collateral. 13 (b) Requirements for redemption. To redeem collateral, 14 a person shall tender: 15 (1) fulfillment of all obligations secured by the 16 collateral; and 17 (2) the reasonable expenses and attorney's fees 18 described in Section 9-615(a)(1). 19 (c) When redemption may occur. A redemption may occur 20 at any time before a secured party: 21 (1) has collected collateral under Section 9-607; 22 (2) has disposed of collateral or entered into a 23 contract for its disposition under Section 9-610; or 24 (3) has accepted collateral in full or partial 25 satisfaction of the obligation it secures under Section 26 9-622. 27 (810 ILCS 5/9-624 new) 28 Sec. 9-624. Waiver. 29 (a) Waiver of disposition notification. A debtor or 30 secondary obligor may waive the right to notification of 31 disposition of collateral under Section 9-611 only by an 32 agreement to that effect entered into and authenticated after SB1231 Enrolled -237- LRB9106284WHdv 1 default. 2 (b) Waiver of mandatory disposition. A debtor may waive 3 the right to require disposition of collateral under Section 4 9-620(e) only by an agreement to that effect entered into and 5 authenticated after default. 6 (c) Waiver of redemption right. A debtor or secondary 7 obligor may waive the right to redeem collateral under 8 Section 9-623 only by an agreement to that effect entered 9 into and authenticated after default. 10 (810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new) 11 SUBPART 2. NONCOMPLIANCE WITH ARTICLE 12 (810 ILCS 5/9-625 new) 13 Sec. 9-625. Remedies for secured party's failure to 14 comply with Article. 15 (a) Judicial orders concerning noncompliance. If it is 16 established that a secured party is not proceeding in 17 accordance with this Article, a court may order or restrain 18 collection, enforcement, or disposition of collateral on 19 appropriate terms and conditions. 20 (b) Damages for noncompliance. Subject to subsections 21 (c), (d), and (f), a person is liable for damages in the 22 amount of any loss caused by a failure to comply with this 23 Article. Loss caused by a failure to comply with a request 24 under Section 9-210 may include loss resulting from the 25 debtor's inability to obtain, or increased costs of, 26 alternative financing. 27 (c) Persons entitled to recover damages; statutory 28 damages in consumer-goods transaction. Except as otherwise 29 provided in Section 9-628: 30 (1) a person that, at the time of the failure, was 31 a debtor, was an obligor, or held a security interest in 32 or other lien on the collateral may recover in an SB1231 Enrolled -238- LRB9106284WHdv 1 individual action damages under subsection (b) for its 2 loss; and 3 (2) if the collateral is consumer goods, a person 4 that was a debtor or a secondary obligor at the time a 5 secured party failed to comply with this Part may recover 6 in an individual action for that failure in any event an 7 amount not less than the credit service charge plus 10 8 percent of the principal amount of the obligation or the 9 time-price differential plus 10 percent of the cash 10 price. 11 (d) Recovery when deficiency eliminated or reduced. A 12 debtor whose deficiency is eliminated under Section 9-626 may 13 recover damages for the loss of any surplus. However, a 14 debtor or secondary obligor whose deficiency is eliminated or 15 reduced under Section 9-626 may not otherwise recover under 16 subsection (b) for noncompliance with the provisions of this 17 Part relating to collection, enforcement, disposition, or 18 acceptance. 19 (e) Statutory damages: noncompliance with specified 20 provisions. In addition to any damages recoverable under 21 subsection (b), the debtor, consumer obligor, or person named 22 as a debtor in a filed record, as applicable, may recover in 23 an individual action $500 for each instance that a person: 24 (1) fails to comply with Section 9-208; 25 (2) fails to comply with Section 9-209; 26 (3) files a record that the person is not entitled 27 to file under Section 9-509(a); or 28 (4) fails to cause the secured party of record to 29 file or send a termination statement as required by 30 Section 9-513(a) or (c). 31 (f) Statutory damages: noncompliance with Section 32 9-210. A debtor or consumer obligor may recover damages 33 under subsection (b) and, in addition, may in an individual 34 action recover $500 in each case from a person that, without SB1231 Enrolled -239- LRB9106284WHdv 1 reasonable cause, fails to comply with a request under 2 Section 9-210. A recipient of a request under Section 9-210 3 which never claimed an interest in the collateral or 4 obligations that are the subject of a request under that 5 Section has a reasonable excuse for failure to comply with 6 the request within the meaning of this subsection. 7 (g) Limitation of security interest: noncompliance with 8 Section 9-210. If a secured party fails to comply with a 9 request regarding a list of collateral or a statement of 10 account under Section 9-210, the secured party may claim a 11 security interest only as shown in the statement included in 12 the request as against a person that is reasonably misled by 13 the failure. 14 (810 ILCS 5/9-626 new) 15 Sec. 9-626. Action in which deficiency or surplus is in 16 issue; applicable rules if amount of deficiency or surplus is 17 in issue. In an action in which the amount of a deficiency 18 or surplus is in issue, the following rules apply: 19 (1) A secured party need not prove compliance with 20 the provisions of this Part relating to collection, 21 enforcement, disposition, or acceptance unless the debtor 22 or a secondary obligor places the secured party's 23 compliance in issue. 24 (2) If the secured party's compliance is placed in 25 issue, the secured party has the burden of establishing 26 that the collection, enforcement, disposition, or 27 acceptance was conducted in accordance with this Part. 28 (3) Except as otherwise provided in Section 9-628, 29 if a secured party fails to prove that the collection, 30 enforcement, disposition, or acceptance was conducted in 31 accordance with the provisions of this Part relating to 32 collection, enforcement, disposition, or acceptance, the 33 liability of a debtor or a secondary obligor for a SB1231 Enrolled -240- LRB9106284WHdv 1 deficiency is limited to an amount by which the sum of 2 the secured obligation, expenses, and attorney's fees 3 exceeds the greater of: 4 (A) the proceeds of the collection, 5 enforcement, disposition, or acceptance; or 6 (B) the amount of proceeds that would have 7 been realized had the noncomplying secured party 8 proceeded in accordance with the provisions of this 9 Part relating to collection, enforcement, 10 disposition, or acceptance. 11 (4) For purposes of paragraph (3)(B), the amount of 12 proceeds that would have been realized is equal to the 13 sum of the secured obligation, expenses, and attorney's 14 fees unless the secured party proves that the amount is 15 less than that sum. 16 (5) If a deficiency or surplus is calculated under 17 Section 9-615(f), the debtor or obligor has the burden of 18 establishing that the amount of proceeds of the 19 disposition is significantly below the range of prices 20 that a complying disposition to a person other than the 21 secured party, a person related to the secured party, or 22 a secondary obligor would have brought. 23 (810 ILCS 5/9-627 new) 24 Sec. 9-627. Determination of whether conduct was 25 commercially reasonable. 26 (a) Greater amount obtainable under other circumstances; 27 no preclusion of commercial reasonableness. The fact that a 28 greater amount could have been obtained by a collection, 29 enforcement, disposition, or acceptance at a different time 30 or in a different method from that selected by the secured 31 party is not of itself sufficient to preclude the secured 32 party from establishing that the collection, enforcement, 33 disposition, or acceptance was made in a commercially SB1231 Enrolled -241- LRB9106284WHdv 1 reasonable manner. 2 (b) Dispositions that are commercially reasonable. A 3 disposition of collateral is made in a commercially 4 reasonable manner if the disposition is made: 5 (1) in the usual manner on any recognized market; 6 (2) at the price current in any recognized market 7 at the time of the disposition; or 8 (3) otherwise in conformity with reasonable 9 commercial practices among dealers in the type of 10 property that was the subject of the disposition. 11 (c) Approval by court or on behalf of creditors. A 12 collection, enforcement, disposition, or acceptance is 13 commercially reasonable if it has been approved: 14 (1) in a judicial proceeding; 15 (2) by a bona fide creditors' committee; 16 (3) by a representative of creditors; or 17 (4) by an assignee for the benefit of creditors. 18 (d) Approval under subsection (c) not necessary; absence 19 of approval has no effect. Approval under subsection (c) 20 need not be obtained, and lack of approval does not mean that 21 the collection, enforcement, disposition, or acceptance is 22 not commercially reasonable. 23 (810 ILCS 5/9-628 new) 24 Sec. 9-628. Nonliability and limitation on liability of 25 secured party; liability of secondary obligor. 26 (a) Limitation of liability to debtor or obligor. 27 Unless a secured party knows that a person is a debtor or 28 obligor, knows the identity of the person, and knows how to 29 communicate with the person: 30 (1) the secured party is not liable to the person, 31 or to a secured party or lienholder that has filed a 32 financing statement against the person, for failure to 33 comply with this Article; and SB1231 Enrolled -242- LRB9106284WHdv 1 (2) the secured party's failure to comply with this 2 Article does not affect the liability of the person for a 3 deficiency. 4 (b) Limitation of liability to debtor, obligor, another 5 secured party, or lienholder. A secured party is not liable 6 because of its status as secured party: 7 (1) to a person that is a debtor or obligor, unless 8 the secured party knows: 9 (A) that the person is a debtor or obligor; 10 (B) the identity of the person; and 11 (C) how to communicate with the person; or 12 (2) to a secured party or lienholder that has filed 13 a financing statement against a person, unless the 14 secured party knows: 15 (A) that the person is a debtor; and 16 (B) the identity of the person. 17 (c) Limitation of liability if reasonable belief that 18 transaction not a consumer-goods transaction or consumer 19 transaction. A secured party is not liable to any person, 20 and a person's liability for a deficiency is not affected, 21 because of any act or omission arising out of the secured 22 party's reasonable belief that a transaction is not a 23 consumer-goods transaction or a consumer transaction or that 24 goods are not consumer goods, if the secured party's belief 25 is based on its reasonable reliance on: 26 (1) a debtor's representation concerning the 27 purpose for which collateral was to be used, acquired, or 28 held; or 29 (2) an obligor's representation concerning the 30 purpose for which a secured obligation was incurred. 31 (d) Limitation of liability for statutory damages. A 32 secured party is not liable to any person under Section 33 9-625(c)(2) for its failure to comply with Section 9-616. 34 (e) Limitation of multiple liability for statutory SB1231 Enrolled -243- LRB9106284WHdv 1 damages. A secured party is not liable under Section 2 9-625(c)(2) more than once with respect to any one secured 3 obligation. 4 (810 ILCS 5/Art. 9, Part 7 heading new) 5 PART 7. TRANSITION 6 (810 ILCS 5/9-701 new) 7 Sec. 9-701. Effective date. (See Section 99 of the 8 Public Act adding this Section to this Act.) 9 (810 ILCS 5/9-702 new) 10 Sec. 9-702. Savings clause. 11 (a) Pre-effective-date transactions or liens. Except as 12 otherwise provided in this Part, this Act applies to a 13 transaction or lien within its scope, even if the transaction 14 or lien was entered into or created before the effective date 15 of this amendatory Act of the 91st General Assembly. 16 (b) Continuing validity. Except as otherwise provided 17 in subsection (c) and Sections 9-703 through 9-709: 18 (1) transactions and liens that were not governed 19 by Article 9 as it existed before the effective date of 20 this amendatory Act of the 91st General Assembly, were 21 validly entered into or created before the effective date 22 of this amendatory Act of the 91st General Assembly, and 23 would be subject to this Act if they had been entered 24 into or created after the effective date of this 25 amendatory Act of the 91st General Assembly, and the 26 rights, duties, and interests flowing from those 27 transactions and liens remain valid after the effective 28 date of this amendatory Act of the 91st General Assembly; 29 and 30 (2) the transactions and liens may be terminated, 31 completed, consummated, and enforced as required or SB1231 Enrolled -244- LRB9106284WHdv 1 permitted by this Act or by the law that otherwise would 2 apply if this Act had not taken effect. 3 (c) Pre-effective-date proceedings. This amendatory Act 4 of the 91st General Assembly does not affect an action, case, 5 or proceeding commenced before the effective date of this 6 amendatory Act of the 91st General Assembly. 7 (810 ILCS 5/9-703 new) 8 Sec. 9-703. Security interest perfected before effective 9 date. 10 (a) Continuing priority over lien creditor: perfection 11 requirements satisfied. A security interest that is 12 enforceable immediately before the effective date of this 13 amendatory Act of the 91st General Assembly and would have 14 priority over the rights of a person that becomes a lien 15 creditor at that time is a perfected security interest under 16 this Act if, on the effective date of this amendatory Act of 17 the 91st General Assembly, the applicable requirements for 18 enforceability and perfection under this Act are satisfied 19 without further action. 20 (b) Continuing priority over lien creditor: perfection 21 requirements not satisfied. Except as otherwise provided in 22 Section 9-705, if, immediately before the effective date of 23 this amendatory Act of the 91st General Assembly, a security 24 interest is enforceable and would have priority over the 25 rights of a person that becomes a lien creditor at that time, 26 but the applicable requirements for enforceability or 27 perfection under this Act are not satisfied on the effective 28 date of this amendatory Act of the 91st General Assembly, the 29 security interest: 30 (1) is a perfected security interest for one year 31 after the effective date of this amendatory Act of the 32 91st General Assembly; 33 (2) remains enforceable thereafter only if the SB1231 Enrolled -245- LRB9106284WHdv 1 security interest becomes enforceable under Section 9-203 2 before the year expires; and 3 (3) remains perfected thereafter only if the 4 applicable requirements for perfection under this Act are 5 satisfied before the year expires. 6 (810 ILCS 5/9-704 new) 7 Sec. 9-704. Security interest unperfected before 8 effective date. A security interest that is enforceable 9 immediately before the effective date of this amendatory Act 10 of the 91st General Assembly but which would be subordinate 11 to the rights of a person that becomes a lien creditor at 12 that time: 13 (1) remains an enforceable security interest for 14 one year after the effective date of this amendatory Act 15 of the 91st General Assembly; 16 (2) remains enforceable thereafter if the security 17 interest becomes enforceable under Section 9-203 on the 18 effective date of this amendatory Act of the 91st General 19 Assembly or within one year thereafter; and 20 (3) becomes perfected: 21 (A) without further action, on the effective date 22 of this amendatory Act of the 91st General Assembly if 23 the applicable requirements for perfection under this Act 24 are satisfied before or at that time; or 25 (B) when the applicable requirements for perfection 26 are satisfied if the requirements are satisfied after 27 that time. 28 (810 ILCS 5/9-705 new) 29 Sec. 9-705. Effectiveness of action taken before 30 effective date. 31 (a) Pre-effective-date action; one-year perfection 32 period unless reperfected. If action, other than the filing SB1231 Enrolled -246- LRB9106284WHdv 1 of a financing statement, is taken before the effective date 2 of this amendatory Act of the 91st General Assembly and the 3 action would have resulted in priority of a security interest 4 over the rights of a person that becomes a lien creditor had 5 the security interest become enforceable before the effective 6 date of this amendatory Act of the 91st General Assembly, the 7 action is effective to perfect a security interest that 8 attaches under this Act within one year after the effective 9 date of this amendatory Act of the 91st General Assembly. An 10 attached security interest becomes unperfected one year after 11 the effective date of this amendatory Act of the 91st General 12 Assembly unless the security interest becomes a perfected 13 security interest under this Act before the expiration of 14 that period. 15 (b) Pre-effective-date filing. The filing of a 16 financing statement before the effective date of this 17 amendatory Act of the 91st General Assembly is effective to 18 perfect a security interest to the extent the filing would 19 satisfy the applicable requirements for perfection under this 20 Act. 21 (c) Pre-effective-date filing in jurisdiction formerly 22 governing perfection. This Act does not render ineffective 23 an effective financing statement that, before the effective 24 date of this amendatory Act of the 91st General Assembly, is 25 filed and satisfies the applicable requirements for 26 perfection under the law of the jurisdiction governing 27 perfection as provided in Section 9-103 of the Uniform 28 Commercial Code as it existed before the effective date of 29 this amendatory Act of the 91st General Assembly. However, 30 except as otherwise provided in subsections (d) and (e) and 31 Section 9-706, the financing statement ceases to be effective 32 at the earlier of: 33 (1) the time the financing statement would have 34 ceased to be effective under the law of the jurisdiction SB1231 Enrolled -247- LRB9106284WHdv 1 in which it is filed; or 2 (2) June 30, 2006. 3 (d) Continuation statement. The filing of a 4 continuation statement after the effective date of this 5 amendatory Act of the 91st General Assembly does not continue 6 the effectiveness of the financing statement filed before the 7 effective date of this amendatory Act of the 91st General 8 Assembly. However, upon the timely filing of a continuation 9 statement after the effective date of this amendatory Act of 10 the 91st General Assembly and in accordance with the law of 11 the jurisdiction governing perfection as provided in Part 3, 12 the effectiveness of a financing statement filed in the same 13 office in that jurisdiction before the effective date of this 14 amendatory Act of the 91st General Assembly continues for the 15 period provided by the law of that jurisdiction. 16 (e) Application of subsection (c)(2) to transmitting 17 utility financing statement. Subsection (c)(2) applies to a 18 financing statement that, before the effective date of this 19 amendatory Act of the 91st General Assembly, is filed against 20 a transmitting utility and satisfies the applicable 21 requirements for perfection under the law of the jurisdiction 22 governing perfection as provided in Section 9-103, as that 23 Section existed before the effective date of this amendatory 24 Act of the 91st General Assembly, only to the extent that 25 Part 3 provides that the law of a jurisdiction other than 26 jurisdiction in which the financing statement is filed 27 governs perfection of a security interest in collateral 28 covered by the financing statement. 29 (f) Application of Part 5. A financing statement that 30 includes a financing statement filed before the effective 31 date of this amendatory Act of the 91st General Assembly and 32 a continuation statement filed after the effective date of 33 this amendatory Act of the 91st General Assembly is effective 34 only to the extent that it satisfies the requirements of Part SB1231 Enrolled -248- LRB9106284WHdv 1 5 for an initial financing statement. 2 (810 ILCS 5/9-706 new) 3 Sec. 9-706. When initial financing statement suffices to 4 continue effectiveness of financing statement. 5 (a) Initial financing statement in lieu of continuation 6 statement. The filing of an initial financing statement in 7 the office specified in Section 9-501 continues the 8 effectiveness of a financing statement filed before the 9 effective date of this amendatory Act of the 91st General 10 Assembly if: 11 (1) the filing of an initial financing statement in 12 that office would be effective to perfect a security 13 interest under this Act; 14 (2) the pre-effective-date financing statement was 15 filed in an office in another State or another office in 16 this State; and 17 (3) the initial financing statement satisfies 18 subsection (c). 19 (b) Period of continued effectiveness. The filing of an 20 initial financing statement under subsection (a) continues 21 the effectiveness of the pre-effective-date financing 22 statement: 23 (1) if the initial financing statement is filed 24 before the effective date of this amendatory Act of the 25 91st General Assembly, for the period provided in Section 26 9-403 of the Uniform Commercial Code as it existed before 27 the effective date of this amendatory Act of the 91st 28 General Assembly with respect to a financing statement; 29 and 30 (2) if the initial financing statement is filed 31 after the effective date of this amendatory Act of the 32 91st General Assembly, for the period provided in Section 33 9-515 with respect to an initial financing statement. SB1231 Enrolled -249- LRB9106284WHdv 1 (c) Requirements for initial financing statement under 2 subsection (a). To be effective for purposes of subsection 3 (a), an initial financing statement must: 4 (1) satisfy the requirements of Part 5 for an 5 initial financing statement; 6 (2) identify the pre-effective-date financing 7 statement by indicating the office in which the financing 8 statement was filed and providing the dates of filing and 9 file numbers, if any, of the financing statement and of 10 the most recent continuation statement filed with respect 11 to the financing statement; and 12 (3) indicate that the pre-effective-date financing 13 statement remains effective. 14 (810 ILCS 5/9-707 new) 15 Sec. 9-707. Amendment of pre-effective-date financing 16 statement. 17 (a) "Pre-effective-date financing statement". In this 18 Section, "pre-effective-date financing statement" means a 19 financing statement filed before the effective date of this 20 amendatory Act of the 91st General Assembly. 21 (b) Applicable law. After the effective date of this 22 amendatory Act of the 91st General Assembly, a person may add 23 or delete collateral covered by, continue or terminate the 24 effectiveness of, or otherwise amend the information provided 25 in, a pre-effective-date financing statement only in 26 accordance with the law of the jurisdiction governing 27 perfection as provided in Part 3. However, the effectiveness 28 of a pre-effective-date financing statement also may be 29 terminated in accordance with the law of the jurisdiction in 30 which the financing statement is filed. 31 (c) Method of amending: general rule. Except as 32 otherwise provided in subsection (d), if the law of this 33 State governs perfection of a security interest, the SB1231 Enrolled -250- LRB9106284WHdv 1 information in a pre-effective-date financing statement may 2 be amended after the effective date of this amendatory Act of 3 the 91st General Assembly only if: 4 (1) the pre-effective-date financing statement and 5 an amendment are filed in the office specified in Section 6 9-501; 7 (2) an amendment is filed in the office specified 8 in Section 9-501 concurrently with, or after the filing 9 in that office of, an initial financing statement that 10 satisfies Section 9-706(c); or 11 (3) an initial financing statement that provides 12 the information as amended and satisfies Section 9-706(c) 13 is filed in the office specified in Section 9-501. 14 (d) Method of amending: continuation. If the law of 15 this State governs perfection of a security interest, the 16 effectiveness of a pre-effective-date financing statement may 17 be continued only under Section 9-705(d) and (f) or Section 18 9-706. 19 (e) Method of amending: additional termination rule. 20 Whether or not the law of this State governs perfection of a 21 security interest, the effectiveness of a pre-effective-date 22 financing statement filed in this State may be terminated 23 after the effective date of this amendatory Act of the 91st 24 General Assembly by filing a termination statement in the 25 office in which the pre-effective-date financing statement is 26 filed, unless an initial financing statement that satisfies 27 Section 9-706(c) has been filed in the office specified by 28 the law of the jurisdiction governing perfection as provided 29 in Part 3 as the office in which to file a financing 30 statement. 31 (810 ILCS 5/9-708 new) 32 Sec. 9-708. Persons entitled to file initial financing 33 statement or continuation statement. A person may file an SB1231 Enrolled -251- LRB9106284WHdv 1 initial financing statement or a continuation statement under 2 this Part if: 3 (1) the secured party of record authorizes the 4 filing; and 5 (2) the filing is necessary under this Part: 6 (A) to continue the effectiveness of a 7 financing statement filed before the effective date 8 of this amendatory Act of the 91st General Assembly; 9 or 10 (B) to perfect or continue the perfection of a 11 security interest. 12 (810 ILCS 5/9-709 new) 13 Sec. 9-709. Priority. 14 (a) Law governing priority. This Act determines the 15 priority of conflicting claims to collateral. However, if 16 the relative priorities of the claims were established before 17 the effective date of this amendatory Act of the 91st General 18 Assembly, Article 9 as it existed before the effective date 19 of this amendatory Act of the 91st General Assembly 20 determines priority. 21 (b) Priority if security interest becomes enforceable 22 under Section 9-203. For purposes of Section 9-322(a), the 23 priority of a security interest that becomes enforceable 24 under Section 9-203 of this Act dates from the effective date 25 of this amendatory Act of the 91st General Assembly if the 26 security interest is perfected under this Act by the filing 27 of a financing statement before the effective date of this 28 amendatory Act of the 91st General Assembly which would not 29 have been effective to perfect the security interest under 30 Article 9 as it existed before the effective date of this 31 amendatory Act of the 91st General Assembly. This subsection 32 does not apply to conflicting security interests each of 33 which is perfected by the filing of such a financing SB1231 Enrolled -252- LRB9106284WHdv 1 statement. 2 (810 ILCS 5/9-710 new) 3 Sec. 9-710. Local-filing office responsibilities for 4 filings under the Uniform Commercial Code prior to this 5 amendatory Act of the 91st General Assembly. 6 (a) In this Section: 7 (1) "Local-filing office" means a filing office, 8 other than the office of the Secretary of State, that is 9 designated as the proper place to file a financing 10 statement under Section 9-401(1) of the Uniform 11 Commercial Code as in effect immediately before the 12 effective date of this amendatory Act of the 91st General 13 Assembly. The term applies only with respect to a record 14 that covers a type of collateral as to which the filing 15 office is designated in that Section as the proper place 16 to file. 17 (2) "Former-Article-9 records" means: 18 (A) financing statements and other records 19 that have been filed in a local-filing office before 20 July 1, 2001, and that are, or upon processing and 21 indexing will be, reflected in the index maintained, 22 as of June 30, 2001, by the local-filing office for 23 financing statements and other records filed in the 24 local filing office before July 1, 2001. 25 (B) the index as of June 30, 2001. 26 (b) Except for a record terminating a former-Article-9 27 record, a local-filing office must not accept for filing a 28 record presented after June 30, 2001, whether or not the 29 record relates to a financing statement filed in the 30 local-filing office before July 1, 2001. If the record 31 terminating such former-Article-9 record statement is in the 32 standard form prescribed by the Secretary of State, the 33 uniform fee for filing and indexing the termination statement SB1231 Enrolled -253- LRB9106284WHdv 1 in the office of a county recorder shall be $5 and otherwise 2 shall be $10, plus in each case an additional fee of $5 for 3 each name more than one at each address listed against which 4 the record is required to be indexed. 5 (c) Until July 1, 2001, each local-filing office must 6 maintain all former-Article-9 records in accordance with the 7 Uniform Commercial Code as in effect immediately before the 8 effective date of this amendatory Act of the 91st General 9 Assembly. A former-Article-9 record that is not reflected on 10 the index maintained on June 30, 2001, by the local-filing 11 office must be processed and indexed, and reflected on the 12 index as of June 30, 2001, as soon as practicable but in any 13 event no later than July 30, 2001. 14 (d) Until at least June 30, 2008, each local-filing 15 office must respond to requests for information with respect 16 to former-Article-9 records relating to a debtor and issue 17 certificates, in accordance with the Uniform Commercial Code 18 as in effect immediately before this amendatory Act of the 19 91st General Assembly. The fees charged for responding to 20 requests for information relating to the debtor issuing the 21 certificates with respect to former-Article-9 records must be 22 the fees in effect under the Uniform Commercial Code as in 23 effect immediately before the effective date of this 24 amendatory Act of the 91st General Assembly on June 30, 2001, 25 unless a different fee is later set by the local filing 26 office. However, the different fee must not exceed $10 for 27 responding to a request for information relating to a debtor 28 or $10 for issuing a certificate. 29 (e) After June 30, 2008, each local-filing office may 30 remove and destroy, in accordance with any then applicable 31 record retention law of this State, all former-Article-9 32 records, including the related index. 33 (f) This Section does not apply, with respect to 34 financing statements and other records, to a filing office in SB1231 Enrolled -254- LRB9106284WHdv 1 which mortgages or records of mortgages on real property are 2 required to be filed or recorded if: 3 (1) the collateral is timber to be cut or 4 as-extracted collateral, or 5 (2) the record is or relates to a financing 6 statement filed as a fixture filing and the collateral is 7 goods that are or are to become fixtures. 8 PART 99. (BLANK)MISCELLANEOUS ILLINOIS PROVISIONS9 (810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901) 10 Sec. 9-9901. (Blank).Liability of Secretary of State.11Neither the Secretary of State nor any of the Secretary of12State's employees or agents shall be subject to personal13liability by reason of any error or omission in the14performance of any duty under this Article except in case of15wilful negligence.16 (Source: P.A. 87-1047.) 17 (810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902) 18 Sec. 9-9902. (Blank).Security interests in crops.19(a) Legislative findings; purpose. The General Assembly20finds:21(1) it has been the accepted practice between22farmers and agricultural lenders for lenders to extend23credit with repayment secured by a security interest in24crops perfected in accordance with the provisions of this25Article;26(2) in making these loans, it has been the accepted27practice of agricultural lenders to rely upon a search of28financing statements properly filed in accordance with29the provisions of this Article to determine the presence30of claims in favor of other lenders;31(3) recently, this long standing practice and theSB1231 Enrolled -255- LRB9106284WHdv 1expectations of agricultural lenders have been negated by2court decisions that hold that a mortgagee of real estate3who takes possession, during foreclosure proceedings, of4mortgaged real estate with unsevered crops has priority5over a perfected security interest in crops;6(4) as a result of these court decisions, the7documentation and expenses in connection with prudent8agricultural lending practices will significantly9increase, creating an undue burden on agricultural10lenders;11(5) the application of these court decisions to the12holders of obligations secured by the collateral13assignment of beneficial interests in land trusts will14result in the creation of claims against crops that15agricultural lenders will be unable to discover by public16record search;17(6) these court decisions defeat the legitimate18expectations of agricultural lenders, unnecessarily19increase the cost of agricultural credit and impede the20free flow and availability of agricultural credit,21constituting an undue burden on the Illinois farm22economy;23(7) the application of these court decisions to the24holders of obligations secured by the collateral25assignment of beneficial interests in land trusts will26similarly defeat the expectations of agricultural27lenders, unnecessarily increase the cost of agricultural28credit and impede the free flow and availability of29agricultural credit, constituting an undue burden on the30Illinois farm economy;31(8) real estate lenders, frequently dealing with32farmers prior to the involvement of other agricultural33lenders, in the ordinary course of lending can perfect a34security interest in crops in accordance with theSB1231 Enrolled -256- LRB9106284WHdv 1provisions of this Article to the extent these lenders2are relying on that collateral;3(9) it is the purpose of this Section to restore an4efficient system of searching for the claims of lenders5and the protection afforded agricultural lenders by a6perfected security interest in crops under this Article,7and thereby to foster and encourage the availability of8agricultural credit.9(b) Definitions. In this Section the following meanings10apply:11(1) "Collateral assignment of beneficial interest"12means any pledge or assignment of the beneficial interest13in a land trust to a person to secure a debt or other14obligation.15(2) "Land trust" means any trust arrangement under16which the legal and equitable title to real estate is17held by a trustee, the interest of the beneficiary of the18trust is personal property and the beneficiary or any19person designated in writing by the beneficiary has (i)20the exclusive power to direct or control the trustee in21dealing with the title to the trust property, (ii) the22exclusive control of the management, operation, renting,23and selling of the trust property, and (iii) the24exclusive right to the earnings, avails, and proceeds of25the trust property.26(c) Rights to crops. With respect to any crops growing27or to be grown on real estate held in a land trust, the28rights of a holder of an obligation secured by a collateral29assignment of beneficial interest in the land trust,30including rights by virtue of an equitable lien, shall be31subject to a security interest properly perfected under this32Article.33(d) Application of Section. This Section applies to the34holder of an obligation secured by a collateral assignment ofSB1231 Enrolled -257- LRB9106284WHdv 1beneficial interest in a land trust who becomes entitled to2crops by obtaining possession on or after December 22, 1988.3 (Source: P.A. 87-1047.) 4 Section 10. The Uniform Commercial Code is amended by 5 changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502, 6 2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103, 7 8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section 8 5-118 as follows: 9 (810 ILCS 5/1-105) (from Ch. 26, par. 1-105) 10 Sec. 1-105. Territorial application of the Act; parties' 11 power to choose applicable law. 12 (1) Except as provided in this Section, when a 13 transaction bears a reasonable relation to this State and 14 also to another state or nation the parties may agree that 15 the law either of this State or of the other state or nation 16 shall govern their rights and duties. Failing an agreement, 17 this Act applies to transactions bearing an appropriate 18 relation to this State. 19 (2) Where one of the following provisions of this Act 20 specifies the applicable law, that provision governs and a 21 contrary agreement is effective only to the extent permitted 22 by the law (including the conflict of laws rules) so 23 specified: 24 Rights of creditors against sold goods. Section 2-402. 25 Applicability of the Article on Leases. Sections 2A-105 26 and 2A-106. 27 Applicability of the Article on Bank Deposits and 28 Collections. Section 4-102. 29 Governing law in the Article on Funds Transfers. Section 30 4A-507. 31 Letters of Credit. Section 5-116. 32 Applicability of the Article on Investment Securities. SB1231 Enrolled -258- LRB9106284WHdv 1 Section 8-110. 2 Law governing perfection, the effect of perfection or 3 nonperfection, and the priority of security 4 interests and agricultural liens. Sections 9-301 5 through 9-307. 6Perfection provisions of the Article on Secured7Transactions. Section 9-103.8 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.) 9 (810 ILCS 5/1-201) (from Ch. 26, par. 1-201) 10 Sec. 1-201. General Definitions. Subject to additional 11 definitions contained in the subsequent Articles of this Act 12 which are applicable to specific Articles or Parts thereof, 13 and unless the context otherwise requires, in this Act: 14 (1) "Action" in the sense of a judicial proceeding 15 includes recoupment, counterclaim, set-off, suit in equity 16 and any other proceedings in which rights are determined. 17 (2) "Aggrieved party" means a party entitled to resort 18 to a remedy. 19 (3) "Agreement" means the bargain of the parties in fact 20 as found in their language or by implication from other 21 circumstances including course of dealing or usage of trade 22 or course of performance as provided in this Act (Sections 23 1-205,and2-208, and 2A-207). Whether an agreement has legal 24 consequences is determined by the provisions of this Act, if 25 applicable; otherwise by the law of contracts (Section 26 1-103). (Compare "Contract".) 27 (4) "Bank" means any person engaged in the business of 28 banking. 29 (5) "Bearer" means the person in possession of an 30 instrument, document of title, or certificated security 31 payable to bearer or indorsed in blank. 32 (6) "Bill of lading" means a document evidencing the 33 receipt of goods for shipment issued by a person engaged in SB1231 Enrolled -259- LRB9106284WHdv 1 the business of transporting or forwarding goods, and 2 includes an airbill. "Airbill" means a document serving for 3 air transportation as a bill of lading does for marine or 4 rail transportation, and includes an air consignment note or 5 air waybill. 6 (7) "Branch" includes a separately incorporated foreign 7 branch of a bank. 8 (8) "Burden of establishing" a fact means the burden of 9 persuading the triers of fact that the existence of the fact 10 is more probable than its non-existence. 11 (9) "Buyer in ordinary course of business" means a 12 person that buys goodswhoin good faith,andwithout 13 knowledge that the sale violatesto him is in violation of14 theownershiprightsor security interestof another persona15third partyin the goods, andbuysin the ordinary course 16 from a person, other than a pawnbroker, in the business of 17 selling goods of that kindbut does not include a pawnbroker. 18 A person buys goods in the ordinary course if the sale to the 19 person comports with the usual or customary practices in the 20 kind of business in which the seller is engaged or with the 21 seller's own usual or customary practices. A person that 22 sells oil, gas, or other minerals at the wellhead or minehead 23 is a personAll persons who sell minerals or the like24(including oil and gas) at wellhead or minehead shall be25deemed to be personsin the business of selling goods of that 26 kind. A buyer in ordinary course of business"Buying"may 27 buybefor cash,orby exchange of other property, or on 28 secured or unsecured credit, and may acquireincludes29receivinggoods or documents of title under a pre-existing 30 contract for sale. Only a buyer that takes possession of the 31 goods or has a right to recover the goods from the seller 32 under Article 2 may be a buyer in ordinary course of 33 business. A person that acquires goods in a transfer in bulk 34 or as security for or in total or partial satisfaction of a SB1231 Enrolled -260- LRB9106284WHdv 1 money debt is not a buyer in ordinary course of business.but2does not include a transfer in bulk or as security for or in3total or partial satisfaction of a money debt.4 (10) "Conspicuous": A term or clause is conspicuous when 5 it is so written that a reasonable person against whom it is 6 to operate ought to have noticed it. A printed heading in 7 capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. 8 Language in the body of a form is "conspicuous" if it is in 9 larger or other contrasting type or color. But in a telegram 10 any stated term is "conspicuous". Whether a term or clause is 11 "conspicuous" or not is for decision by the court. 12 (11) "Contract" means the total legal obligation which 13 results from the parties' agreement as affected by this Act 14 and any other applicable rules of law. (Compare "Agreement".) 15 (12) "Creditor" includes a general creditor, a secured 16 creditor, a lien creditor and any representative of 17 creditors, including an assignee for the benefit of 18 creditors, a trustee in bankruptcy, a receiver in equity and 19 an executor or administrator of an insolvent debtor's or 20 assignor's estate. 21 (13) "Defendant" includes a person in the position of 22 defendant in a cross-action or counterclaim. 23 (14) "Delivery" with respect to instruments, documents 24 of title, chattel paper or certificated securities means 25 voluntary transfer of possession. 26 (15) "Document of title" includes bill of lading, dock 27 warrant, dock receipt, warehouse receipt or order for the 28 delivery of goods, and also any other document which in the 29 regular course of business or financing is treated as 30 adequately evidencing that the person in possession of it is 31 entitled to receive, hold and dispose of the document and the 32 goods it covers. To be a document of title a document must 33 purport to be issued by or addressed to a bailee and purport 34 to cover goods in the bailee's possession which are either SB1231 Enrolled -261- LRB9106284WHdv 1 identified or are fungible portions of an identified mass. 2 (16) "Fault" means wrongful act, omission or breach. 3 (17) "Fungible" with respect to goods or securities 4 means goods or securities of which any unit is, by nature or 5 usage of trade, the equivalent of any other like unit. Goods 6 which are not fungible shall be deemed fungible for the 7 purposes of this Act to the extent that under a particular 8 agreement or document unlike units are treated as 9 equivalents. 10 (18) "Genuine" means free of forgery or counterfeiting. 11 (19) "Good faith" means honesty in fact in the conduct 12 or transaction concerned. 13 (20) "Holder" with respect to a negotiable instrument 14 means the person in possession if the instrument is payable 15 to bearer or, in the case of an instrument payable to an 16 identified person, if the identified person is in possession. 17 "Holder" with respect to a document of title means the person 18 in possession if the goods are deliverable to bearer or to 19 the order of the person in possession. 20 (21) To "honor" is to pay or accept and pay, or where a 21 credit so engages to purchase or discount a draft complying 22 with the terms of the credit. 23 (22) "Insolvency proceedings" includes any assignment 24 for the benefit of creditors or other proceedings intended to 25 liquidate or rehabilitate the estate of the person involved. 26 (23) A person is "insolvent" who either has ceased to 27 pay his debts in the ordinary course of business or cannot 28 pay his debts as they become due or is insolvent within the 29 meaning of the federal bankruptcy law. 30 (24) "Money" means a medium of exchange authorized or 31 adopted by a domestic or foreign government and includes a 32 monetary unit of account established by an intergovernmental 33 organization or by agreement between 2 or more nations. 34 (25) A person has "notice" of a fact when SB1231 Enrolled -262- LRB9106284WHdv 1 (a) he has actual knowledge of it; or 2 (b) he has received a notice or notification of it; 3 or 4 (c) from all the facts and circumstances known to 5 him at the time in question he has reason to know that it 6 exists. A person "knows" or has "knowledge" of a fact 7 when he has actual knowledge of it. "Discover" or "learn" 8 or a word or phrase of similar import refers to knowledge 9 rather than to reason to know. The time and circumstances 10 under which a notice or notification may cease to be 11 effective are not determined by this Act. 12 (26) A person "notifies" or "gives" a notice or 13 notification to another by taking such steps as may be 14 reasonably required to inform the other in ordinary course 15 whether or not such other actually comes to know of it. A 16 person "receives" a notice or notification when 17 (a) it comes to his attention; or 18 (b) it is duly delivered at the place of business 19 through which the contract was made or at any other place 20 held out by him as the place for receipt of such 21 communications. 22 (27) Notice, knowledge or a notice or notification 23 received by an organization is effective for a particular 24 transaction from the time when it is brought to the attention 25 of the individual conducting that transaction, and in any 26 event from the time when it would have been brought to his 27 attention if the organization had exercised due diligence. An 28 organization exercises due diligence if it maintains 29 reasonable routines for communicating significant information 30 to the person conducting the transaction and there is 31 reasonable compliance with the routines. Due diligence does 32 not require an individual acting for the organization to 33 communicate information unless such communication is part of 34 his regular duties or unless he has reason to know of the SB1231 Enrolled -263- LRB9106284WHdv 1 transaction and that the transaction would be materially 2 affected by the information. 3 (28) "Organization" includes a corporation, government 4 or governmental subdivision or agency, business trust, 5 estate, trust, partnership or association, two or more 6 persons having a joint or common interest, or any other legal 7 or commercial entity. 8 (29) "Party", as distinct from "third party", means a 9 person who has engaged in a transaction or made an agreement 10 within this Act. 11 (30) "Person" includes an individual or an organization 12 (see Section 1-102). 13 (31) "Presumption" or "presumed" means that the trier of 14 fact must find the existence of the fact presumed unless and 15 until evidence is introduced which would support a finding of 16 its non-existence. 17 (32) "Purchase" includes taking by sale, discount, 18 negotiation, mortgage, pledge, lien, security interest, issue 19 or reissue, gift or any other voluntary transaction creating 20 an interest in property. 21 (33) "Purchaser" means a person who takes by purchase. 22 (34) "Remedy" means any remedial right to which an 23 aggrieved party is entitled with or without resort to a 24 tribunal. 25 (35) "Representative" includes an agent, an officer of a 26 corporation or association, and a trustee, executor or 27 administrator of an estate, or any other person empowered to 28 act for another. 29 (36) "Rights" includes remedies. 30 (37) "Security interest" means an interest in personal 31 property or fixtures which secures payment or performance of 32 an obligation.The retention or reservation of title by a33seller of goods notwithstanding shipment or delivery to the34buyer (Section 2-401) is limited in effect to a reservationSB1231 Enrolled -264- LRB9106284WHdv 1of a "security interest".The term also includes any interest 2 of a consignor and a buyer of accounts,orchattel paper, a 3 payment intangible, or a promissory note in a transaction 4 thatwhichis subject to Article 9. The special property 5 interest of a buyer of goods on identification of those goods 6 to a contract for sale under Section 2-401 is not a "security 7 interest", but a buyer may also acquire a "security 8 interest", by complying with Article 9. Except as otherwise 9 provided in Section 2-505, the right of a seller or lessor of 10 goods under Article 2 or 2A to retain or acquire possession 11 of the goods is not a "security interest", but a seller or 12 lessor may also acquire a "security interest" by complying 13 with Article 9. The retention or reservation of title by a 14 seller of goods notwithstanding shipment or delivery to the 15 buyer (Section 2-401) is limited in effect to a reservation 16 of a "security interest".Unless a consignment is intended as17security, reservation of title thereunder is not a "security18interest" but a consignment is in any event subject to the19provisions on consignment sales (Section 2-326).20 Whether a transaction creates a lease or security 21 interest is determined by the facts of each case; however, a 22 transaction creates a security interest if the consideration 23 the lessee is to pay the lessor for the right to possession 24 and use of the goods is an obligation for the term of the 25 lease not subject to termination by the lessee; and 26 (a) the original term of the lease is equal to or 27 greater than the remaining economic life of the goods; 28 (b) the lessee is bound to renew the lease for the 29 remaining economic life of the goods or is bound to 30 become the owner of the goods; 31 (c) the lessee has an option to renew the lease for 32 the remaining economic life of the goods for no 33 additional consideration or nominal additional 34 consideration upon compliance with the lease agreement; SB1231 Enrolled -265- LRB9106284WHdv 1 or 2 (d) the lessee has an option to become the owner of 3 the goods for no additional consideration or nominal 4 additional consideration upon compliance with the lease 5 agreement. 6 A transaction does not create a security interest merely 7 because it provides that: 8 (a) the present value of the consideration the 9 lessee is obligated to pay the lessor for the right to 10 possession and use of the goods is substantially equal to 11 or is greater than the fair market value of the goods at 12 the time the lease is entered into; 13 (b) the lessee assumes risk of loss of the goods, 14 or agrees to pay taxes, insurance, filing, recording, or 15 registration fees, or service or maintenance costs with 16 respect to the goods; 17 (c) the lessee has an option to renew the lease or 18 to become the owner of the goods; 19 (d) the lessee has an option to renew the lease for 20 a fixed rent that is equal to or greater than the 21 reasonably predictable fair market rent for the use of 22 the goods for the term of the renewal at the time the 23 option is to be performed; or 24 (e) the lessee has an option to become the owner of 25 the goods for a fixed price that is equal to or greater 26 than the reasonably predictable fair market value of the 27 goods at the time the option is to be performed. 28 For purposes of this subsection (37): 29 (x) Additional consideration is not nominal if (i) 30 when the option to renew the lease is granted to the 31 lessee the rent is stated to be the fair market rent for 32 the use of the goods for the term of the renewal 33 determined at the time the option is to be performed, or 34 (ii) when the option to become the owner of the goods is SB1231 Enrolled -266- LRB9106284WHdv 1 granted to the lessee the price is stated to be the fair 2 market value of the goods determined at the time the 3 option is to be performed. Additional consideration is 4 nominal if it is less than the lessee's reasonably 5 predictable cost of performing under the lease agreement 6 if the option is not exercised; 7 (y) "Reasonably predictable" and "remaining 8 economic life of the goods" are to be determined with 9 reference to the facts and circumstances at the time the 10 transaction is entered into; and 11 (z) "Present value" means the amount as of a date 12 certain of one or more sums payable in the future, 13 discounted to the date certain. The discount is 14 determined by the interest rate specified by the parties 15 if the rate is not manifestly unreasonable at the time 16 the transaction is entered into; otherwise, the discount 17 is determined by a commercially reasonable rate that 18 takes into account the facts and circumstances as of each 19 case at the time the transaction was entered into. 20 (38) "Send" in connection with any writing or notice 21 means to deposit in the mail or deliver for transmission by 22 any other usual means of communication with postage or cost 23 of transmission provided for and properly addressed and in 24 the case of an instrument to an address specified thereon or 25 otherwise agreed, or if there be none to any address 26 reasonable under the circumstances. The receipt of any 27 writing or notice within the time at which it would have 28 arrived if properly sent has the effect of a proper sending. 29 (39) "Signed" includes any symbol executed or adopted by 30 a party with present intention to authenticate a writing. 31 (40) "Surety" includes guarantor. 32 (41) "Telegram" includes a message transmitted by radio, 33 teletype, cable, any mechanical method of transmission, or 34 the like. SB1231 Enrolled -267- LRB9106284WHdv 1 (42) "Term" means that portion of an agreement which 2 relates to a particular matter. 3 (43) "Unauthorized" signature means one made without 4 actual, implied, or apparent authority and includes a 5 forgery. 6 (44) "Value". Except as otherwise provided with respect 7 to negotiable instruments and bank collections (Sections 8 3-303, 4-210,4-208and 4-2114-209), a person gives "value" 9 for rights if he acquires them: 10 (a) in return for a binding commitment to extend 11 credit or for the extension of immediately available 12 credit whether or not drawn upon and whether or not a 13 charge-back is provided for in the event of difficulties 14 in collection; or 15 (b) as security for or in total or partial 16 satisfaction of a pre-existing claim; or 17 (c) by accepting delivery pursuant to a 18 pre-existing contract for purchase; or 19 (d) generally, in return for any consideration 20 sufficient to support a simple contract. 21 (45) "Warehouse receipt" means a receipt issued by a 22 person engaged in the business of storing goods for hire. 23 (46) "Written" or "writing" includes printing, 24 typewriting or any other intentional reduction to tangible 25 form. 26 (Source: P.A. 87-493; 87-582; 87-895; 87-1135.) 27 (810 ILCS 5/2-103) (from Ch. 26, par. 2-103) 28 Sec. 2-103. Definitions and index of definitions. 29 (1) In this Article unless the context otherwise 30 requires 31 (a) "Buyer" means a person who buys or contracts to 32 buy goods. 33 (b) "Good faith" in the case of a merchant means SB1231 Enrolled -268- LRB9106284WHdv 1 honesty in fact and the observance of reasonable commercial 2 standards of fair dealing in the trade. 3 (c) "Receipt" of goods means taking physical 4 possession of them. 5 (d) "Seller" means a person who sells or contracts 6 to sell goods. 7 (2) Other definitions applying to this Article or to 8 specified Parts thereof, and the sections in which they 9 appear are: 10 "Acceptance". Section 2--606. 11 "Banker's credit". Section 2--325. 12 "Between merchants". Section 2--104. 13 "Cancellation". Section 2--106(4). 14 "Commercial unit". Section 2--105. 15 "Confirmed credit". Section 2--325. 16 "Conforming to contract". Section 2--106. 17 "Contract for sale". Section 2--106. 18 "Cover". Section 2--712. 19 "Entrusting". Section 2--403. 20 "Financing agency". Section 2--104. 21 "Future goods". Section 2--105. 22 "Goods". Section 2--105. 23 "Identification". Section 2--501. 24 "Installment contract". Section 2--612. 25 "Letter of Credit". Section 2--325. 26 "Lot". Section 2--105. 27 "Merchant". Section 2--104. 28 "Overseas". Section 2--323. 29 "Person in position of seller". Section 2--707. 30 "Present sale". Section 2--106. 31 "Sale". Section 2--106. 32 "Sale on approval". Section 2--326. 33 "Sale or return". Section 2--326. 34 "Termination". Section 2--106. SB1231 Enrolled -269- LRB9106284WHdv 1 (3) The following definitions in other Articles apply to 2 this Article: 3 "Check". Section 3--104. 4 "Consignee". Section 7--102. 5 "Consignor". Section 7--102. 6 "Consumer goods". Section 9-1029--109. 7 "Dishonor". Section 3-5023--507. 8 "Draft". Section 3--104. 9 (4) In addition Article 1 contains general definitions 10 and principles of construction and interpretation applicable 11 throughout this Article. 12 (Source: Laws 1961, p. 2101.) 13 (810 ILCS 5/2-210) (from Ch. 26, par. 2-210) 14 Sec. 2-210. Delegation of performance; assignment of 15 rights. 16 (1) A party may perform his duty through a delegate 17 unless otherwise agreed or unless the other party has a 18 substantial interest in having his original promisor perform 19 or control the acts required by the contract. No delegation 20 of performance relieves the party delegating of any duty to 21 perform or any liability for breach. 22 (2) Except as otherwise provided in Section 9-406, 23 unless otherwise agreed all rights of either seller or buyer 24 can be assigned except where the assignment would materially 25 change the duty of the other party, or increase materially 26 the burden or risk imposed on him by his contract, or impair 27 materially his chance of obtaining return performance. A 28 right to damages for breach of the whole contract or a right 29 arising out of the assignor's due performance of his entire 30 obligation can be assigned despite agreement otherwise. 31 (3) The creation, attachment, perfection, or enforcement 32 of a security interest in the seller's interest under a 33 contract is not a transfer that materially changes the duty SB1231 Enrolled -270- LRB9106284WHdv 1 of or increases materially the burden or risk imposed on the 2 buyer or impairs materially the buyer's chance of obtaining 3 return performance with the purview of subsection (2) unless, 4 and then only to the extent that, enforcement actually 5 results in a delegation of material performance of the 6 seller. Even in that event, the creation, attachment, 7 perfection, and enforcement of the security interest remain 8 effective, but (i) the seller is liable to the buyer for 9 damages caused by the delegation to the extent that the 10 damages could not reasonably be prevented by the buyer, and 11 (ii) a court having jurisdiction may grant other appropriate 12 relief, including cancellation of the contract for sale or an 13 injunction against enforcement of the security interest or 14 consummation of the enforcement. 15 (4)(3)Unless the circumstances indicate the contrary a 16 prohibition of assignment of "the contract" is to be 17 construed as barring only the delegation to the assignee of 18 the assignor's performance. 19 (5)(4)An assignment of "the contract" or of "all my 20 rights under the contract" or an assignment in similar 21 general terms is an assignment of rights and unless the 22 language or the circumstances (as in an assignment for 23 security) indicate the contrary, it is a delegation of 24 performance of the duties of the assignor and its acceptance 25 by the assignee constitutes a promise by him to perform those 26 duties. This promise is enforceable by either the assignor or 27 the other party to the original contract. 28 (6)(5)The other party may treat any assignment which 29 delegates performance as creating reasonable grounds for 30 insecurity and may without prejudice to his rights against 31 the assignor demand assurances from the assignee (Section 32 2--609). 33 (Source: Laws 1961, p. 2101.) SB1231 Enrolled -271- LRB9106284WHdv 1 (810 ILCS 5/2-326) (from Ch. 26, par. 2-326) 2 Sec. 2-326. Sale on approval and sale or return; 3consignment sales andrights of creditors. 4 (1) Unless otherwise agreed, if delivered goods may be 5 returned by the buyer even though they conform to the 6 contract, the transaction is 7 (a) a "sale on approval" if the goods are delivered 8 primarily for use, and 9 (b) a "sale or return" if the goods are delivered 10 primarily for resale. 11 (2)Except as provided in subsection (3),Goods held on 12 approval are not subject to the claims of the buyer's 13 creditors until acceptance; goods held on sale or return are 14 subject to such claims while in the buyer's possession. 15 (3)Where goods are delivered to a person for sale and16such person maintains a place of business at which he deals17in goods of the kind involved, under a name other than the18name of the person making delivery, then with respect to19claims of creditors of the person conducting the business the20goods are deemed to be on sale or return. The provisions of21this subsection are applicable even though an agreement22purports to reserve title to the person making delivery until23payment or resale or uses such words as "on consignment" or24"on memorandum". However, this subsection is not applicable25if the person making delivery26(a) complies with an applicable law providing for a27consignor's interest or the like to be evidenced by a sign,28or29(b) establishes that the person conducting the30business is generally known by his creditors to be31substantially engaged in selling the goods of others, or32(c) complies with the filing provisions of the33Article on Secured Transactions (Article 9).34(4)Any "or return" term of a contract for sale is to be SB1231 Enrolled -272- LRB9106284WHdv 1 treated as a separate contract for sale within the statute of 2 frauds section of this Article (Section 2--201) and as 3 contradicting the sale aspect of the contract within the 4 provisions of this Article on parol or extrinsic evidence 5 (Section 2--202). 6 (Source: Laws 1961, p. 2101.) 7 (810 ILCS 5/2-502) (from Ch. 26, par. 2-502) 8 Sec. 2-502. Buyer's right to goods on seller's 9 insolvency. 10 (1) Subject to subsectionssubsection(2) and (3) and 11 even though the goods have not been shipped a buyer who has 12 paid a part or all of the price of goods in which he has a 13 special property under the provisions of the immediately 14 preceding section may on making and keeping good a tender of 15 any unpaid portion of their price recover them from the 16 seller if: 17 (a) in the case of goods bought for personal, 18 family, or household purposes, the seller repudiates or 19 fails to deliver as required by the contract; or 20 (b) in all cases, the seller becomes insolvent 21 within 10 days after receipt of the first installment on 22 their price. 23 (2) The buyer's right to recover the goods under 24 subsection (1)(a) vests upon acquisition of a special 25 property, even if the seller had not then repudiated or 26 failed to deliver. 27 (3) If the identification creating his special property 28 has been made by the buyer he acquires the right to recover 29 the goods only if they conform to the contract for sale. 30 (Source: Laws 1961, p. 2101.) 31 (810 ILCS 5/2-716) (from Ch. 26, par. 2-716) 32 Sec. 2-716. Buyer's right to specific performance or SB1231 Enrolled -273- LRB9106284WHdv 1 replevin. 2 (1) Specific performance may be ordered where the goods 3 are unique or in other proper circumstances. 4 (2) The judgment for specific performance may include 5 such terms and conditions as to payment of the price, 6 damages, or other relief as the court may deem just. 7 (3) The buyer has a right of replevin for goods 8 identified to the contract if after reasonable effort he is 9 unable to effect cover for such goods or the circumstances 10 reasonably indicate that such effort will be unavailing or if 11 the goods have been shipped under reservation and 12 satisfaction of the security interest in them has been made 13 or tendered. In the case of goods bought for personal, 14 family, or household purposes, the buyer's right of replevin 15 vests upon acquisition of a special property, even if the 16 seller had not then repudiated or failed to deliver. 17 (Source: P.A. 84-545.) 18 (810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103) 19 Sec. 2A-103. Definitions and index of definitions. 20 (1) In this Article unless the context otherwise 21 requires: 22 (a) "Buyer in ordinary course of business" means a 23 person who, in good faith and without knowledge that the 24 sale to him or her is in violation of the ownership 25 rights or security interest or leasehold interest of a 26 third party in the goods, buys in ordinary course from a 27 person in the business of selling goods of that kind but 28 does not include a pawnbroker. "Buying" may be for cash 29 or by exchange of other property or on secured or 30 unsecured credit and includes receiving goods or 31 documents of title under a pre-existing contract for sale 32 but does not include a transfer in bulk or as security 33 for or in total or partial satisfaction of a money debt. SB1231 Enrolled -274- LRB9106284WHdv 1 (b) "Cancellation" occurs when either party puts an 2 end to the lease contract for default by the other party. 3 (c) "Commercial unit" means such a unit of goods as 4 by commercial usage is a single whole for purposes of 5 lease and division of which materially impairs its 6 character or value on the market or in use. A commercial 7 unit may be a single article, as a machine, or a set of 8 articles, as a suite of furniture or a line of machinery, 9 or a quantity, as a gross or carload, or any other unit 10 treated in use or in the relevant market as a single 11 whole. 12 (d) "Conforming" goods or performance under a lease 13 contract means goods or performance that are in 14 accordance with the obligations under the lease contract. 15 (e) "Consumer lease" means a lease that a lessor 16 regularly engaged in the business of leasing or selling 17 makes to a lessee who is an individual and who takes 18 under the lease primarily for a personal, family, or 19 household purpose, if the total payments to be made under 20 the lease contract, excluding payments for options to 21 renew or buy, do not exceed $40,000. 22 (f) "Fault" means wrongful act, omission, breach, 23 or default. 24 (g) "Finance lease" means a lease with respect to 25 which: 26 (i) the lessor does not select, manufacture, 27 or supply the goods; 28 (ii) the lessor acquires the goods or the 29 right to possession and use of the goods in 30 connection with the lease; and 31 (iii) one of the following occurs: 32 (A) the lessee receives a copy of the 33 contract by which the lessor acquired the goods 34 or the right to possession and use of the goods SB1231 Enrolled -275- LRB9106284WHdv 1 before signing the lease contract; 2 (B) the lessee's approval of the contract 3 by which the lessor acquired the goods or the 4 right to possession and use of the goods is a 5 condition to effectiveness of the lease 6 contract; 7 (C) the lessee, before signing the lease 8 contract, receives an accurate and complete 9 statement designating the promises and 10 warranties, and any disclaimers of warranties, 11 limitations or modifications of remedies, or 12 liquidated damages, including those of a third 13 party, such as the manufacturer of the goods, 14 provided to the lessor by the person supplying 15 the goods in connection with or as part of the 16 contract by which the lessor acquired the goods 17 or the right to possession and use of the 18 goods; or 19 (D) if the lease is not a consumer lease, 20 the lessor, before the lessee signs the lease 21 contract, informs the lessee in writing (a) of 22 the identity of the person supplying the goods 23 to the lessor, unless the lessee has selected 24 that person and directed the lessor to acquire 25 the goods or the right to possession and use of 26 the goods from that person, (b) that the lessee 27 is entitled under this Article to the promises 28 and warranties, including those of any third 29 party, provided to the lessor by the person 30 supplying the goods in connection with or as 31 part of the contract by which the lessor 32 acquired the goods or the right to possession 33 and use of the goods, and (c) that the lessee 34 may communicate with the person supplying the SB1231 Enrolled -276- LRB9106284WHdv 1 goods to the lessor and receive an accurate and 2 complete statement of those promises and 3 warranties, including any disclaimers and 4 limitations of them or of remedies. 5 (h) "Goods" means all things that are movable at 6 the time of identification to the lease contract, or are 7 fixtures (Section 2A-309), but the term does not include 8 money, documents, instruments, accounts, chattel paper, 9 general intangibles, or minerals or the like, including 10 oil and gas, before extraction. The term also includes 11 the unborn young of animals. 12 (i) "Installment lease contract" means a lease 13 contract that authorizes or requires the delivery of 14 goods in separate lots to be separately accepted, even 15 though the lease contract contains a clause "each 16 delivery is a separate lease" or its equivalent. 17 (j) "Lease" means a transfer of the right to 18 possession and use of goods for a term in return for 19 consideration, but a sale, including a sale on approval 20 or a sale or return, or retention or creation of a 21 security interest is not a lease. Unless the context 22 clearly indicates otherwise, the term includes a 23 sublease. 24 (k) "Lease agreement" means the bargain, with 25 respect to the lease, of the lessor and the lessee in 26 fact as found in their language or by implication from 27 other circumstances including course of dealing or usage 28 of trade or course of performance as provided in this 29 Article. Unless the context clearly indicates otherwise, 30 the term includes a sublease agreement. 31 (l) "Lease contract" means the total legal 32 obligation that results from the lease agreement as 33 affected by this Article and any other applicable rules 34 of law. Unless the context clearly indicates otherwise, SB1231 Enrolled -277- LRB9106284WHdv 1 the term includes a sublease contract. 2 (m) "Leasehold interest" means the interest of the 3 lessor or the lessee under a lease contact. 4 (n) "Lessee" means a person who acquires the right 5 to possession and use of goods under a lease. Unless the 6 context clearly indicates otherwise, the term includes a 7 sublessee. 8 (o) "Lessee in ordinary course of business" means a 9 person who in good faith and without knowledge that the 10 lease to him or her is in violation of the ownership 11 rights or security interest or leasehold interest of a 12 third party in the goods leases in ordinary course from a 13 person in the business of selling or leasing goods of 14 that kind but does not include a pawnbroker. "Leasing" 15 may be for cash or by exchange of other property or on 16 secured or unsecured credit and includes receiving goods 17 or documents of title under a pre-existing lease contract 18 but does not include a transfer in bulk or as security 19 for or in total or partial satisfaction of a money debt. 20 (p) "Lessor" means a person who transfers the right 21 to possession and use of goods under a lease. Unless the 22 context clearly indicates otherwise, the term includes a 23 sublessor. 24 (q) "Lessor's residual interest" means the lessor's 25 interest in the goods after expiration, termination, or 26 cancellation of the lease contract. 27 (r) "Lien" means a charge against or interest in 28 goods to secure payment of a debt or performance of an 29 obligation, but the term does not include a security 30 interest. 31 (s) "Lot" means a parcel or a single article that 32 is the subject matter of a separate lease or delivery, 33 whether or not it is sufficient to perform the lease 34 contract. SB1231 Enrolled -278- LRB9106284WHdv 1 (t) "Merchant lessee" means a lessee that is a 2 merchant with respect to goods of the kind subject to the 3 lease. 4 (u) "Present value" means the amount as of a date 5 certain of one or more sums payable in the future, 6 discounted to the date certain. The discount is 7 determined by the interest rate specified by the parties 8 if the rate was not manifestly unreasonable at the time 9 the transaction was entered into; otherwise, the discount 10 is determined by a commercially reasonable rate that 11 takes into account the facts and circumstances of each 12 case at the time the transaction was entered into. 13 (v) "Purchase" includes taking by sale, lease, 14 mortgage, security interest, pledge, gift, or any other 15 voluntary transaction creating an interest in goods. 16 (w) "Sublease" means a lease of goods the right to 17 possession and use of which was acquired by the lessor as 18 a lessee under an existing lease. 19 (x) "Supplier" means a person from whom a lessor 20 buys or leases goods to be leased under a finance lease. 21 (y) "Supply contract" means a contract under which 22 a lessor buys or leases goods to be leased. 23 (z) "Termination" occurs when either party pursuant 24 to a power created by agreement or law puts an end to the 25 lease contract otherwise than for default. 26 (2) Other definitions applying to this Article and the 27 Sections in which they appear are: 28 "Accessions". Section 2A-310(1). 29 "Construction mortgage". Section 2A-309(1)(d). 30 "Encumbrance". Section 2A-309(1)(e). 31 "Fixtures". Section 2A-309(1)(a). 32 "Fixture filing". Section 2A-309(1)(b). 33 "Purchase money lease". Section 2A-309(1)(c). 34 (3) The following definitions in other Articles apply to SB1231 Enrolled -279- LRB9106284WHdv 1 this Article: 2 "Account". Section 9-102(a)(2)9-106. 3 "Between merchants". Section 2-104(3). 4 "Buyer". Section 2-103(1)(a). 5 "Chattel paper". Section 9-102(a)(11)9-105 (1)(b). 6 "Consumer goods". Section 9-102(a)(23)9-109(1). 7 "Document". Section 9-102(a)(30)9-105 (1)(f). 8 "Entrusting". Section 2-403(3). 9 "General intangibleintangibles". Section 9-102(a)(42) 109-106. 11 "Good faith". Section 2-103(1)(b). 12 "Instrument". Section 9-102(a)(47)9-105 (1)(i). 13 "Merchant". Section 2-104(1). 14 "Mortgage". Section 9-102(a)(55)9-105 (1)(j). 15 "Pursuant to commitment". Section 9-102(a)(68)9-10516(1)(k). 17 "Receipt". Section 2-103(1)(c). 18 "Sale". Section 2-106(1). 19 "Sale on approval". Section 2-326. 20 "Sale or return". Section 2-326. 21 "Seller". Section 2-103(1)(d). 22 (4) In addition, Article 1 contains general definitions 23 and principles of construction and interpretation applicable 24 throughout this Article. 25 (Source: P.A. 87-493.) 26 (810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303) 27 Sec. 2A-303. Alienability of party's interest under 28 lease contract or of lessor's residual interest in goods; 29 delegation of performance; transfer of rights. 30 (1) As used in this Section, "creation of a security 31 interest" includes the sale of a lease contract that is 32 subject to Article 9, Secured Transactions, by reason of 33 Section 9-109(a)(3)9-102(1)(b). SB1231 Enrolled -280- LRB9106284WHdv 1 (2) Except as provided in subsectionsubsections(3) and 2 Section 9-407(4), a provision in a lease agreement which (i) 3 prohibits the voluntary or involuntary transfer, including a 4 transfer by sale, sublease, creation or enforcement of a 5 security interest, or attachment, levy, or other judicial 6 process, of an interest of a party under the lease contract 7 or of the lessor's residual interest in the goods, or (ii) 8 makes such a transfer an event of default, gives rise to the 9 rights and remedies provided in subsection (4)(5), but a 10 transfer that is prohibited or is an event of default under 11 the lease agreement is otherwise effective. 12 (3)A provision in a lease agreement which (i) prohibits13the creation or enforcement of a security interest in an14interest of a party under the lease contract or in the15lessor's residual interest in the goods, or (ii) makes such a16transfer an event of default, is not enforceable unless, and17then only to the extent that, there is an actual transfer by18the lessee of the lessee's right of possession or use of the19goods in violation of the provision or an actual delegation20of a material performance of either party to the lease21contract in violation of the provision. Neither the granting22nor the enforcement of a security interest in (i) the23lessor's interest under the lease contract or (ii) the24lessor's residual interest in the goods is a transfer that25materially impairs the prospect of obtaining return26performance by, materially changes the duty of, or materially27increases the burden or risk imposed on, the lessee within28the purview of subsection (5) unless, and then only to the29extent that, there is an actual delegation of a material30performance of the lessor.31(4)A provision in a lease agreement which (i) prohibits 32 a transfer of a right to damages for default with respect to 33 the whole lease contract or of a right to payment arising out 34 of the transferor's due performance of the transferor's SB1231 Enrolled -281- LRB9106284WHdv 1 entire obligation, or (ii) makes such a transfer an event of 2 default, is not enforceable, and such a transfer is not a 3 transfer that materially impairs the prospect of obtaining 4 return performance by, materially changes the duty of, or 5 materially increases the burden or risk imposed on, the other 6 party to the lease contract within the purview of subsection 7 (4)(5). 8 (4)(5)Subject to subsectionsubsections(3) and 9 Section 9-407(4): 10 (a) if a transfer is made which is made an event of 11 default under a lease agreement, the party to the lease 12 contract not making the transfer, unless that party 13 waives the default or otherwise agrees, has the rights 14 and remedies described in Section 2A-501(2); 15 (b) if paragraph (a) is not applicable and if a 16 transfer is made that (i) is prohibited under a lease 17 agreement or (ii) materially impairs the prospect of 18 obtaining return performance by, materially changes the 19 duty of, or materially increases the burden of risk 20 imposed on, the other party to the lease contract, unless 21 the party not making the transfer agrees at any time to 22 the transfer in the lease contract or otherwise, then, 23 except as limited by contract, (i) the transferor is 24 liable to the party not making the transfer for damages 25 caused by the transfer to the extent that the damages 26 could not reasonably be prevented by the party not making 27 the transfer and (ii) a court having jurisdiction may 28 grant other appropriate relief, including cancellation of 29 the lease contract or an injunction against the transfer. 30 (5)(6)A transfer of "the lease" or of "all my rights 31 under the lease", or a transfer in similar general terms, is 32 a transfer of rights and, unless the language or the 33 circumstances, as in a transfer for security, indicate the 34 contrary, the transfer is a delegation of duties by the SB1231 Enrolled -282- LRB9106284WHdv 1 transferor to the transferee. Acceptance by the transferee 2 constitutes a promise by the transferee to perform those 3 duties. The promise is enforceable by either the transferor 4 or the other party to the lease contract. 5 (6)(7)Unless otherwise agreed by the lessor and the 6 lessee, a delegation of performance does not relieve the 7 transferor as against the other party of any duty to perform 8 or of any liability for default. 9 (7)(8)In a consumer lease, to prohibit the transfer of 10 an interest of a party under the lease contract or to make a 11 transfer an event of default, the language must be specific, 12 by a writing, and conspicuous. 13 (Source: P.A. 87-493.) 14 (810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307) 15 Sec. 2A-307. Priority of liens arising by attachment or 16 levy on, security interests in, and other claims to goods. 17 (1) Except as otherwise provided in Section 2A-306, a 18 creditor of a lessee takes subject to the lease contract. 19 (2) Except as otherwise provided in subsection 20subsections(3)and (4)and in Sections 2A-306 and 2A-308, a 21 creditor of a lessor takes subject to the lease contract 22 unless: (a)the creditor holds a lien that attached to the 23 goods before the lease contract became enforceable,24(b) the creditor holds a security interest in the25goods and the lessee did not give value and receive26delivery of the goods without knowledge of the security27interest; or28(c) the creditor holds a security interest in the29goods which was perfected (Section 9-303) before the30lease contract became enforceable. 31 (3) Except as otherwise provided in Sections 9-317, 32 9-321, and 9-323, a lessee takes a leasehold interest subject 33 to a security interest held by a creditor of the lessor.ASB1231 Enrolled -283- LRB9106284WHdv 1lessee in the ordinary course of business takes the leasehold2interest free of a security interest in the goods created by3the lessor even though the security interest is perfected4(Section 9-303) and the lessee knows of its existence.5(4) A lessee other than a lessee in the ordinary course6of business takes the leasehold interest free of a security7interest to the extent that it secures future advances made8after the secured party acquires knowledge of the lease or9more than 45 days after the lease contract becomes10enforceable, whichever first occurs, unless the future11advances are made pursuant to a commitment entered into12without knowledge of the lease and before the expiration of13the 45-day period.14 (Source: P.A. 87-493.) 15 (810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309) 16 Sec. 2A-309. Lessor's and lessee's rights when goods 17 become fixtures. 18 (1) In this Section: 19 (a) goods are "fixtures" when they become so 20 related to particular real estate that an interest in 21 them arises under real estate law; 22 (b) a "fixture filing" is the filing, in the office 23 where a mortgage on the real estate would be filed or 24 recorded, of a financing statement covering goods that 25 are or are to become fixtures and conforming to the 26 requirements of Section 9-502(a) and (b)9-402(5); 27 (c) a lease is a "purchase money lease" unless the 28 lessee has possession or use of the goods or the right to 29 possession or use of the goods before the lease agreement 30 is enforceable; 31 (d) a mortgage is a "construction mortgage" to the 32 extent it secures an obligation incurred for the 33 construction of an improvement on land including the SB1231 Enrolled -284- LRB9106284WHdv 1 acquisition cost of the land, if the recorded writing so 2 indicates; and 3 (e) "encumbrance" includes real estate mortgages 4 and other liens on real estate and all other rights in 5 real estate that are not ownership interests. 6 (2) Under this Article a lease may be of goods that are 7 fixtures or may continue in goods that become fixtures, but 8 no lease exists under this Article of ordinary building 9 materials incorporated into an improvement on land. 10 (3) This Article does not prevent creation of a lease of 11 fixtures pursuant to real estate law. 12 (4) The perfected interest of a lessor of fixtures has 13 priority over a conflicting interest of an encumbrancer or 14 owner of the real estate if: 15 (a) the lease is a purchase money lease, the 16 conflicting interest of the encumbrancer or owner arises 17 before the goods become fixtures, the interest of the 18 lessor is perfected by a fixture filing before the goods 19 become fixtures or within 10 days thereafter, and the 20 lessee has an interest of record in the real estate or is 21 in possession of the real estate; or 22 (b) the interest of the lessor is perfected by a 23 fixture filing before the interest of the encumbrancer or 24 owner is of record, the lessor's interest has priority 25 over any conflicting interest of a predecessor in title 26 of the encumbrancer or owner, and the lessee has an 27 interest of record in the real estate or is in possession 28 of the real estate. 29 (5) The interest of a lessor of fixtures, whether or not 30 perfected, has priority over the conflicting interest of an 31 encumbrancer or owner of the real estate if: 32 (a) the fixtures are readily removable factory or 33 office machines, readily removable equipment that is not 34 primarily used or leased for use in the operation of the SB1231 Enrolled -285- LRB9106284WHdv 1 real estate, or readily removable replacements of 2 domestic appliances that are goods subject to a consumer 3 lease, and before the goods become fixtures the lease 4 contract is enforceable; or 5 (b) the conflicting interest is a lien on the real 6 estate obtained by legal or equitable proceedings after 7 the lease contract is enforceable; or 8 (c) the encumbrancer or owner has consented in 9 writing to the lease or has disclaimed an interest in the 10 goods as fixtures; or 11 (d) the lessee has a right to remove the goods as 12 against the encumbrancer or owner. If the lessee's right 13 to remove terminates, the priority of the interest of the 14 lessor continues for a reasonable time. 15 (6) Notwithstanding subsection (4)(a) but otherwise 16 subject to subsections (4) and (5), the interest of a lessor 17 of fixtures, including the lessor's residual interest, is 18 subordinate to the conflicting interest of an encumbrancer of 19 the real estate under a construction mortgage recorded before 20 the goods become fixtures if the goods become fixtures before 21 the completion of the construction. To the extent given to 22 refinance a construction mortgage, the conflicting interest 23 of an encumbrancer of the real estate under a mortgage has 24 this priority to the same extent as the encumbrancer of the 25 real estate under the construction mortgage. 26 (7) In cases not within the preceding subsections, 27 priority between the interest of a lessor of fixtures, 28 including the lessor's residual interest, and the conflicting 29 interest of an encumbrancer or owner of the real estate who 30 is not the lessee is determined by the priority rules 31 governing conflicting interests in real estate. 32 (8) If the interest of a lessor of fixtures, including 33 the lessor's residual interest, has priority over all 34 conflicting interests of all owners and encumbrancers of the SB1231 Enrolled -286- LRB9106284WHdv 1 real estate, the lessor or the lessee may (i) on default, 2 expiration, termination, or cancellation of the lease 3 agreement but subject to the lease agreement and this 4 Article, or (ii) if necessary to enforce other rights and 5 remedies of the lessor or lessee under this Article, remove 6 the goods from the real estate, free and clear of all 7 conflicting interests of all owners and encumbrancers of the 8 real estate, but the lessor or lessee must reimburse any 9 encumbrancer or owner of the real estate who is not the 10 lessee and who has not otherwise agreed for the cost of 11 repair of any physical injury, but not for any diminution in 12 value of the real estate caused by the absence of the goods 13 removed or by any necessity of replacing them. A person 14 entitled to reimbursement may refuse permission to remove 15 until the party seeking removal gives adequate security for 16 the performance of this obligation. 17 (9) Even though the lease agreement does not create a 18 security interest, the interest of a lessor of fixtures, 19 including the lessor's residual interest, is perfected by 20 filing a financing statement as a fixture filing for leased 21 goods that are or are to become fixtures in accordance with 22 the relevant provisions of the Article on Secured 23 Transactions (Article 9). 24 (Source: P.A. 87-493.) 25 (810 ILCS 5/4-210) (from Ch. 26, par. 4-210) 26 Sec. 4-210. Security interest of collecting bank in 27 items, accompanying documents and proceeds. 28 (a) A collecting bank has a security interest in an item 29 and any accompanying documents or the proceeds of either: 30 (1) in case of an item deposited in an account, to 31 the extent to which credit given for the item has been 32 withdrawn or applied; 33 (2) in case of an item for which it has given SB1231 Enrolled -287- LRB9106284WHdv 1 credit available for withdrawal as of right, to the 2 extent of the credit given, whether or not the credit is 3 drawn upon or there is a right of charge-back; or 4 (3) if it makes an advance on or against the item. 5 (b) If credit given for several items received at one 6 time or pursuant to a single agreement is withdrawn or 7 applied in part, the security interest remains upon all the 8 items, any accompanying documents or the proceeds of either. 9 For the purpose of this Section, credits first given are 10 first withdrawn. 11 (c) Receipt by a collecting bank of a final settlement 12 for an item is a realization on its security interest in the 13 item, accompanying documents, and proceeds. So long as the 14 bank does not receive final settlement for the item or give 15 up possession of the item or accompanying documents for 16 purposes other than collection, the security interest 17 continues to that extent and is subject to Article 9, but: 18 (1) no security agreement is necessary to make the 19 security interest enforceable Section 9-203(b)(3)(A) 209-203 (1)(a); 21 (2) no filing is required to perfect the security 22 interest; and 23 (3) the security interest has priority over 24 conflicting perfected security interests in the item, 25 accompanying documents, or proceeds. 26 (Source: P.A. 87-582; 87-1135.) 27 (810 ILCS 5/5-118 new) 28 Sec. 5-118. Security interest of issuer or nominated 29 person. 30 (a) An issuer or nominated person has a security 31 interest in a document presented under a letter of credit to 32 the extent that the issuer or nominated person honors or 33 gives value for the presentation. SB1231 Enrolled -288- LRB9106284WHdv 1 (b) So long as and to the extent that an issuer or 2 nominated person has not been reimbursed or has not otherwise 3 recovered the value given with respect to a security interest 4 in a document under subsection (a), the security interest 5 continues and is subject to Article 9, but: 6 (1) a security agreement is not necessary to make 7 the security interest enforceable under Section 8 9-203(b)(3); 9 (2) if the document is presented in a medium other 10 than a written or other tangible medium, the security 11 interest is perfected; and 12 (3) if the document is presented in a written or 13 other tangible medium and is not a certificated security, 14 chattel paper, a document of title, an instrument, or a 15 letter of credit, the security interest is perfected and 16 has priority over a conflicting security interest in the 17 document so long as the debtor does not have possession 18 of the document. 19 (810 ILCS 5/7-503) (from Ch. 26, par. 7-503) 20 Sec. 7-503. Document of title to goods defeated in 21 certain cases. 22 (1) A document of title confers no right in goods 23 against a person who before issuance of the document had a 24 legal interest or a perfected security interest in them and 25 who neither 26 (a) delivered or entrusted them or any document of 27 title covering them to the bailor or his nominee with actual 28 or apparent authority to ship, store, or sell with power to 29 obtain delivery under this Article (Section 7--403) or with 30 power of disposition under this Act (Sections 2--403 and 31 9-3209--307) or other statute or rule of law; nor 32 (b) acquiesced in the procurement by the bailor or 33 his nominee of any document of title. SB1231 Enrolled -289- LRB9106284WHdv 1 (2) Title to goods based upon an unaccepted delivery 2 order is subject to the rights of anyone to whom a negotiable 3 warehouse receipt or bill of lading covering the goods has 4 been duly negotiated. Such a title may be defeated under the 5 next section to the same extent as the right of the issuer or 6 a transferee from the issuer. 7 (3) Title to goods based upon a bill of lading issued to 8 a freight forwarder is subject to the rights of anyone to 9 whom a bill issued by the freight forwarder is duly 10 negotiated; but delivery by the carrier in accordance with 11 Part 4 of this Article pursuant to its own bill of lading 12 discharges the carrier's obligation to deliver. 13 (Source: Laws 1961, p. 2101.) 14 (810 ILCS 5/8-103) (from Ch. 26, par. 8-103) 15 Sec. 8-103. Rules for determining whether certain 16 obligations and interests are securities or financial assets. 17 (a) A share or similar equity interest issued by a 18 corporation, business trust, joint stock company, or similar 19 entity is a security. 20 (b) An "investment company security" is a security. 21 "Investment company security" means a share or similar equity 22 interest issued by an entity that is registered as an 23 investment company under the federal investment company laws, 24 an interest in a unit investment trust that is so registered, 25 or a face-amount certificate issued by a face-amount 26 certificate company that is so registered. Investment 27 company security does not include an insurance policy or 28 endowment policy or annuity contract issued by an insurance 29 company. 30 (c) An interest in a partnership or limited liability 31 company is not a security unless it is dealt in or traded on 32 securities exchanges or in securities markets, its terms 33 expressly provide that it is a security governed by this SB1231 Enrolled -290- LRB9106284WHdv 1 Article, or it is an investment company security. However, 2 an interest in a partnership or limited liability company is 3 a financial asset if it is held in a securities account. 4 (d) A writing that is a security certificate is governed 5 by this Article and not by Article 3, even though it also 6 meets the requirements of that Article. However, a 7 negotiable instrument governed by Article 3 is a financial 8 asset if it is held in a securities account. 9 (e) An option or similar obligation issued by a clearing 10 corporation to its participants is not a security, but is a 11 financial asset. 12 (f) A commodity contract, as defined in Section 13 9-102(a)(15)9-115, is not a security or a financial asset. 14 (Source: P.A. 89-364, eff. 1-1-96.) 15 (810 ILCS 5/8-106) (from Ch. 26, par. 8-106) 16 Sec. 8-106. Control. 17 (a) A purchaser has "control" of a certificated security 18 in bearer form if the certificated security is delivered to 19 the purchaser. 20 (b) A purchaser has "control" of a certificated security 21 in registered form if the certificated security is delivered 22 to the purchaser, and: 23 (1) the certificate is indorsed to the purchaser or 24 in blank by an effective indorsement; or 25 (2) the certificate is registered in the name of 26 the purchaser, upon original issue or registration of 27 transfer by the issuer. 28 (c) A purchaser has "control" of an uncertificated 29 security if: 30 (1) the uncertificated security is delivered to the 31 purchaser;or32 (2) the issuer has agreed that it will comply with 33 instructions originated by the purchaser without further SB1231 Enrolled -291- LRB9106284WHdv 1 consent by the registered owner; or 2 (3) another person has control of the security 3 entitlement on behalf of the purchaser or, having 4 previously acquired control of the security entitlement, 5 acknowledges that it has control on behalf of the 6 purchaser. 7 (d) A purchaser has "control" of a security entitlement 8 if: 9 (1) the purchaser becomes the entitlement holder; 10 or 11 (2) the securities intermediary has agreed that it 12 will comply with entitlement orders originated by the 13 purchaser without further consent by the entitlement 14 holder. 15 (e) If an interest in a security entitlement is granted 16 by the entitlement holder to the entitlement holder's own 17 securities intermediary, the securities intermediary has 18 control. 19 (f) A purchaser who has satisfied the requirements of 20 subsection (c)(2)or (d)(2)has control even if the 21 registered owner in the case of subsection (c)(2)or the 22 entitlement holder in the case of subsection (d)(2)retains 23 the right to make substitutions for the uncertificated 24 security or security entitlement, to originate instructions 25 or entitlement orders to the issuer or securities 26 intermediary, or otherwise to deal with the uncertificated 27 security or security entitlement. 28 (g) An issuer or a securities intermediary may not enter 29 into an agreement of the kind described in subsection (c)(2) 30 or (d)(2) without the consent of the registered owner or 31 entitlement holder, but an issuer or a securities 32 intermediary is not required to enter into such an agreement 33 even though the registered owner or entitlement holder so 34 directs. An issuer or securities intermediary that has SB1231 Enrolled -292- LRB9106284WHdv 1 entered into such an agreement is not required to confirm the 2 existence of the agreement to another party unless requested 3 to do so by the registered owner or entitlement holder. 4 (Source: P.A. 89-364, eff. 1-1-96.) 5 (810 ILCS 5/8-110) 6 Sec. 8-110. Applicability; choice of law. 7 (a) The local law of the issuer's jurisdiction, as 8 specified in subsection (d), governs: 9 (1) the validity of a security; 10 (2) the rights and duties of the issuer with 11 respect to registration of transfer; 12 (3) the effectiveness of registration of transfer 13 by the issuer; 14 (4) whether the issuer owes any duties to an 15 adverse claimant to a security; and 16 (5) whether an adverse claim can be asserted 17 against a person to whom transfer of a certificated or 18 uncertificated security is registered or a person who 19 obtains control of an uncertificated security. 20 (b) The local law of the securities intermediary's 21 jurisdiction, as specified in subsection (e), governs: 22 (1) acquisition of a security entitlement from the 23 securities intermediary; 24 (2) the rights and duties of the securities 25 intermediary and entitlement holder arising out of a 26 security entitlement; 27 (3) whether the securities intermediary owes any 28 duties to an adverse claimant to a security entitlement; 29 and 30 (4) whether an adverse claim can be asserted 31 against a person who acquires a security entitlement from 32 the securities intermediary or a person who purchases a 33 security entitlement or interest therein from an SB1231 Enrolled -293- LRB9106284WHdv 1 entitlement holder. 2 (c) The local law of the jurisdiction in which a 3 security certificate is located at the time of delivery 4 governs whether an adverse claim can be asserted against a 5 person to whom the security certificate is delivered. 6 (d) "Issuer's jurisdiction" means the jurisdiction under 7 which the issuer of the security is organized or, if 8 permitted by the law of that jurisdiction, the law of another 9 jurisdiction specified by the issuer. An issuer organized 10 under the law of this State may specify the law of another 11 jurisdiction as the law governing the matters specified in 12 subsection (a)(2) through (5). 13 (e) The following rules determine a "securities 14 intermediary's jurisdiction" for purposes of this Section: 15 (1) If an agreement between the securities 16 intermediary and its entitlement holder governing the 17 securities account expressly provides that a particular 18 jurisdiction is the securities intermediary's 19 jurisdiction for purposes of this Part, this Article, or 20 this Actspecifies that it is governed by the law of a21particular jurisdiction, that jurisdiction is the 22 securities intermediary's jurisdiction. 23 (2) If paragraph (1) does not apply and an 24 agreement between the securities intermediary and its 25 entitlement holder governing the securities account 26 expressly provides that the agreement is governed by the 27 law of a particular jurisdiction, that jurisdiction is 28 the securities intermediary's jurisdiction. 29 (3) If neither paragraph (1) nor paragraph (2) 30 applies and an agreement between the securities 31 intermediary and its entitlement holder governing the 32 securities accountdoes not specify the governing law as33provided in paragraph (1), butexpressly provides 34specifiesthat the securities account is maintained at an SB1231 Enrolled -294- LRB9106284WHdv 1 office in a particular jurisdiction, that jurisdiction is 2 the securities intermediary's jurisdiction. 3 (4)(3)If none of the preceding paragraphs applies 4an agreement between the securities intermediary and its5entitlement holder does not specify a jurisdiction as6provided in paragraph (1) or (2), the securities 7 intermediary's jurisdiction is the jurisdiction in which 8is locatedthe office identified in an account statement 9 as the office serving the entitlement holder's account is 10 located. 11 (5)(4)If none of the preceding paragraphs 12 applies,an agreement between the securities intermediary13and its entitlement holder does not specify a14jurisdiction as provided in paragraph (1) or (2) and an15account statement does not identify an office serving the16entitlement holder's account as provided in paragraph17(3),the securities intermediary's jurisdiction is the 18 jurisdiction in whichis locatedthe chief executive 19 office of the securities intermediary is located. 20 (f) A securities intermediary's jurisdiction is not 21 determined by the physical location of certificates 22 representing financial assets, or by the jurisdiction in 23 which is organized the issuer of the financial asset with 24 respect to which an entitlement holder has a security 25 entitlement, or by the location of facilities for data 26 processing or other record keeping concerning the account. 27 (Source: P.A. 89-364, eff. 1-1-96.) 28 (810 ILCS 5/8-301) (from Ch. 26, par. 8-301) 29 Sec. 8-301. Delivery. 30 (a) Delivery of a certificated security to a purchaser 31 occurs when: 32 (1) the purchaser acquires possession of the 33 security certificate; SB1231 Enrolled -295- LRB9106284WHdv 1 (2) another person, other than a securities 2 intermediary, either acquires possession of the security 3 certificate on behalf of the purchaser or, having 4 previously acquired possession of the certificate, 5 acknowledges that it holds for the purchaser; or 6 (3) a securities intermediary acting on behalf of 7 the purchaser acquires possession of the security 8 certificate, only if the certificate is in registered 9 form and is (i) registered in the name of the purchaser, 10 (ii) payable to the order of the purchaser, or (iii)has11beenspecially indorsed to the purchaser by an effective 12 indorsement and has not been indorsed to the securities 13 intermediary or in blank. 14 (b) Delivery of an uncertificated security to a 15 purchaser occurs when: 16 (1) the issuer registers the purchaser as the 17 registered owner, upon original issue or registration of 18 transfer; or 19 (2) another person, other than a securities 20 intermediary, either becomes the registered owner of the 21 uncertificated security on behalf of the purchaser or, 22 having previously become the registered owner, 23 acknowledges that it holds for the purchaser. 24 (Source: P.A. 89-364, eff. 1-1-96.) 25 (810 ILCS 5/8-302) (from Ch. 26, par. 8-302) 26 Sec. 8-302. Rights of purchaser. 27 (a) Except as otherwise provided in subsections (b) and 28 (c),upon deliveryof a certificated or uncertificated 29 securityto a purchaser, the purchaseracquires all rights in 30 the security that the transferor had or had power to 31 transfer. 32 (b) A purchaser of a limited interest acquires rights 33 only to the extent of the interest purchased. SB1231 Enrolled -296- LRB9106284WHdv 1 (c) A purchaser of a certificated security who as a 2 previous holder had notice of an adverse claim does not 3 improve its position by taking from a protected purchaser. 4 (Source: P.A. 89-364, eff. 1-1-96.) 5 (810 ILCS 5/8-510) 6 Sec. 8-510. Rights of purchaser of security entitlement 7 from entitlement holder. 8 (a) In a case not covered by the priority rules in 9 Article 9 or the rules stated in subsection (c), an action 10 based on an adverse claim to a financial asset or security 11 entitlement, whether framed in conversion, replevin, 12 constructive trust, equitable lien, or other theory, may not 13 be asserted against a person who purchases a security 14 entitlement, or an interest therein, from an entitlement 15 holder if the purchaser gives value, does not have notice of 16 the adverse claim, and obtains control. 17 (b) If an adverse claim could not have been asserted 18 against an entitlement holder under Section 8-502, the 19 adverse claim cannot be asserted against a person who 20 purchases a security entitlement, or an interest therein, 21 from the entitlement holder. 22 (c) In a case not covered by the priority rules in 23 Article 9, a purchaser for value of a security entitlement, 24 or an interest therein, who obtains control has priority over 25 a purchaser of a security entitlement, or an interest 26 therein, who does not obtain control. Except as otherwise 27 provided in subsection (d), purchasers who have control rank 28 according to priority in time of: 29 (1) the purchaser's becoming the person for whom 30 the securities account, in which the security entitlement 31 is carried, is maintained, if the purchaser obtained 32 control under Section 8-106(d)(1); 33 (2) the securities intermediary's agreement to SB1231 Enrolled -297- LRB9106284WHdv 1 comply with the purchaser's entitlement orders with 2 respect to security entitlements carried or to be 3 carried in the securities account in which the security 4 entitlement is carried, if the purchaser obtained control 5 under Section 8-106(d)(2); or 6 (3) if the purchaser obtained control through 7 another person under Section 8-106(d)(3), the time on 8 which priority would be based under this subsection if 9 the other person were the secured party. 10 (d) Aequally, except that asecurities intermediary as 11 purchaser has priority over a conflicting purchaser who has 12 control unless otherwise agreed by the securities 13 intermediary. 14 (Source: P.A. 89-364, eff. 1-1-96.) 15 Section 15. The Local Records Act is amended by changing 16 Section 14 as follows: 17 (50 ILCS 205/14) (from Ch. 116, par. 43.114) 18 Sec. 14. Part 54of Article 9 of the"Uniform Commercial 19 Code", approved July 31, 1961, as amended,is subject to the 20 provisions of this Act, as now or hereafter amended. 21 (Source: P.A. 76-1708.) 22 Section 20. The Counties Code is amended by changing 23 Section 3-5018 as follows: 24 (55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018) 25 Sec. 3-5018. Fees. The recorder elected as provided for 26 in this Division shall receive such fees as are or may be 27 provided for him by law, in case of provision therefor: 28 otherwise he shall receive the same fees as are or may be 29 provided in this Section, except when increased by county 30 ordinance pursuant to the provisions of this Section, to be SB1231 Enrolled -298- LRB9106284WHdv 1 paid to the county clerk for his services in the office of 2 recorder for like services.No filing fee shall be charged3for providing informational copies of financing statements to4the recorder pursuant to subsection (8) of Section 9-403 of5the Uniform Commercial Code.6 For recording deeds or other instruments $12 for the 7 first 4 pages thereof, plus $1 for each additional page 8 thereof, plus $1 for each additional document number therein 9 noted. The aggregate minimum fee for recording any one 10 instrument shall not be less than $12. 11 For recording deeds or other instruments wherein the 12 premises affected thereby are referred to by document number 13 and not by legal description a fee of $1 in addition to that 14 hereinabove referred to for each document number therein 15 noted. 16 For recording assignments of mortgages, leases or liens 17 $12 for the first 4 pages thereof, plus $1 for each 18 additional page thereof. However, except for leases and 19 liens pertaining to oil, gas and other minerals, whenever a 20 mortgage, lease or lien assignment assigns more than one 21 mortgage, lease or lien document, a $7 fee shall be charged 22 for the recording of each such mortgage, lease or lien 23 document after the first one. 24 For recording maps or plats of additions or subdivisions 25 approved by the county or municipality (including the 26 spreading of the same of record in map case or other proper 27 books) or plats of condominiums $50 for the first page, plus 28 $1 for each additional page thereof except that in the case 29 of recording a single page, legal size 8 1/2 x 14, plat of 30 survey in which there are no more than two lots or parcels of 31 land, the fee shall be $12. In each county where such maps 32 or plats are to be recorded, the recorder may require the 33 same to be accompanied by such number of exact, true and 34 legible copies thereof as the recorder deems necessary for SB1231 Enrolled -299- LRB9106284WHdv 1 the efficient conduct and operation of his office. 2 For certified copies of records the same fees as for 3 recording, but in no case shall the fee for a certified copy 4 of a map or plat of an addition, subdivision or otherwise 5 exceed $10. 6 Each certificate of such recorder of the recording of the 7 deed or other writing and of the date of recording the same 8 signed by such recorder, shall be sufficient evidence of the 9 recording thereof, and such certificate including the 10 indexing of record, shall be furnished upon the payment of 11 the fee for recording the instrument, and no additional fee 12 shall be allowed for the certificate or indexing. 13 The recorder shall charge an additional fee, in an amount 14 equal to the fee otherwise provided by law, for recording a 15 document (other than a document filed under the Plat Act or 16 the Uniform Commercial Code) that does not conform to the 17 following standards: 18 (1) The document shall consist of one or more 19 individual sheets measuring 8.5 inches by 11 inches, not 20 permanently bound and not a continuous form. Graphic 21 displays accompanying a document to be recorded that 22 measure up to 11 inches by 17 inches shall be recorded 23 without charging an additional fee. 24 (2) The document shall be legibly printed in black 25 ink, by hand, type, or computer. Signatures and dates 26 may be in contrasting colors if they will reproduce 27 clearly. 28 (3) The document shall be on white paper of not 29 less than 20-pound weight and shall have a clean margin 30 of at least one-half inch on the top, the bottom, and 31 each side. Margins may be used for non-essential 32 notations that will not affect the validity of the 33 document, including but not limited to form numbers, page 34 numbers, and customer notations. SB1231 Enrolled -300- LRB9106284WHdv 1 (4) The first page of the document shall contain a 2 blank space, measuring at least 3 inches by 5 inches, 3 from the upper right corner. 4 (5) The document shall not have any attachment 5 stapled or otherwise affixed to any page. 6 A document that does not conform to these standards shall not 7 be recorded except upon payment of the additional fee 8 required under this paragraph. This paragraph, as amended by 9 this amendatory Act of 1995, applies only to documents dated 10 after the effective date of this amendatory Act of 1995. 11 The county board of any county may provide for an 12 additional charge of $3 for filing every instrument, paper, 13 or notice for record, in order to defray the cost of 14 converting the county recorder's document storage system to 15 computers or micrographics. 16 A special fund shall be set up by the treasurer of the 17 county and such funds collected pursuant to Public Act 18 83-1321 shall be used solely for a document storage system to 19 provide the equipment, materials and necessary expenses 20 incurred to help defray the costs of implementing and 21 maintaining such a document records system. 22 The foregoing fees allowed by this Section are the 23 maximum fees that may be collected from any officer, agency, 24 department or other instrumentality of the State. The county 25 board may, however, by ordinance, increase the fees allowed 26 by this Section and collect such increased fees from all 27 persons and entities other than officers, agencies, 28 departments and other instrumentalities of the State if the 29 increase is justified by an acceptable cost study showing 30 that the fees allowed by this Section are not sufficient to 31 cover the cost of providing the service. 32 A statement of the costs of providing each service, 33 program and activity shall be prepared by the county board. 34 All supporting documents shall be public record and subject SB1231 Enrolled -301- LRB9106284WHdv 1 to public examination and audit. All direct and indirect 2 costs, as defined in the United States Office of Management 3 and Budget Circular A-87, may be included in the 4 determination of the costs of each service, program and 5 activity. 6 (Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.) 7 Section 25. The Public Utilities Act is amended by 8 changing Section 18-107 as follows: 9 (220 ILCS 5/18-107) 10 Sec. 18-107. Security interests in intangible transition 11 property and grantee instruments. 12 (a) Notwithstanding any other provision of law, neither 13 intangible transition property, grantee instruments nor any 14 right, title or interest therein, shall constitute property 15 in which a security interest may be created under the Uniform 16 Commercial Code nor shall any such rights be deemed proceeds 17 of any property which is not intangible transition property 18 or grantee instruments, as the case may be. For purposes of 19 the foregoing, the terms "account",and"general intangible", 20(as defined under Section 9-106 of the Uniform Commercial21Code) and the term"instrument", and "payment intangible" (as 22 defined under Section 9-1029-105of the Uniform Commercial 23 Code) shall, as used in the Uniform Commercial Code, be 24 deemed to exclude any such intangible transition property, 25 grantee instruments or any right, title, or interest therein. 26 (b) The granting, perfection and enforcement of security 27 interests in intangible transition property or grantee 28 instruments are governed by this Section rather than by 29 Article 9 of the Uniform Commercial Code. 30 (c) A valid and enforceable security interest in 31 intangible transition property and in grantee instruments 32 shall attach and be perfected only by the means set forth SB1231 Enrolled -302- LRB9106284WHdv 1 below in this subsection (c) of Section 18-107: 2 (1) To the extent transitional funding instruments 3 or grantee instruments are purported to be secured by 4 intangible transition property or to the extent 5 transitional funding instruments are purported to be 6 secured by grantee instruments, as the case may be, as 7 specified in the applicable transitional funding order, 8 the lien of the transitional funding instruments and 9 grantee instruments, if any, shall attach automatically 10 to such intangible transition property and grantee 11 instruments, if any, from the time of issuance of the 12 transitional funding instruments and grantee instruments, 13 if any. Such lien shall be a valid and enforceable 14 security interest in the intangible transition property 15 or the grantee instruments, as the case may be, securing 16 the transitional funding instruments and grantee 17 instruments, if any, and shall be continuously perfected 18 if, before the date of issuance of the applicable 19 transitional funding instruments or grantee instruments, 20 if any, or within no more than 10 days thereafter, a 21 filing has been made by or on behalf of the holder with 22 the Chief Clerk of the Commission stating that such 23 transitional funding instruments or grantee instruments, 24 if any, have been issued. Any such filing made with the 25 Commission in respect to such transitional funding 26 instruments or grantee instruments shall take precedence 27 over any subsequent filing except as may otherwise be 28 provided in the applicable transitional funding order. 29 (2) The liens under subparagraph (1) are 30 enforceable against the electric utility, any assignee, 31 grantee or issuer, and all third parties, including 32 judicial lien creditors, subject only to the rights of 33 any third parties holding security interests in the 34 intangible transition property or grantee instruments SB1231 Enrolled -303- LRB9106284WHdv 1 previously perfected in the manner described in this 2 subsection if value has been given by the purchasers of 3 transitional funding instruments or grantee instruments. 4 A perfected lien in intangible transition property and 5 grantee instruments, if any, is a continuously perfected 6 security interest in all then existing or thereafter 7 arising revenues and proceeds arising with respect to the 8 associated intangible transition property or grantee 9 instruments, as the case may be, whether or not the 10 electric power and energy included in the calculation of 11 such revenues and proceeds have been provided. The lien 12 created under this subsection is perfected and ranks 13 prior to any other lien, including any judicial lien, 14 which subsequently attaches to the intangible transition 15 property or grantee instruments, as the case may be, and 16 to any other rights created by the transitional funding 17 order or any revenues or proceeds of the foregoing. The 18 relative priority of a lien created under this subsection 19 is not defeated or adversely affected by changes to the 20 transitional funding order or to the instrument funding 21 charges payable by any retail customer, class of retail 22 customers or other person or group of persons obligated 23 to pay such charges. 24 (3) The relative priority of a lien created under 25 this subsection is not defeated or adversely affected by 26 the commingling of revenues arising with respect to 27 intangible transition property or grantee instruments 28 with funds of the electric utility or other funds of the 29 assignee, issuer or grantee. 30 (4) If an event of default occurs under 31 transitional funding instruments or grantee instruments, 32 the holders thereof or their authorized representatives, 33 as secured parties, may foreclose or otherwise enforce 34 the lien in the grantee instruments or in the intangible SB1231 Enrolled -304- LRB9106284WHdv 1 transition property securing the transitional funding 2 instruments or grantee instruments, as applicable, 3 subject to the rights of any third parties holding prior 4 security interests in the intangible transition property 5 or grantee instruments previously perfected in the manner 6 provided in this subsection. Upon application by the 7 holders or their authorized representatives, without 8 limiting their other remedies, the Commission shall order 9 the sequestration and payment to the holders or their 10 authorized representatives of revenues arising with 11 respect to the intangible transition property or grantee 12 instruments pledged to the holders. An order under this 13 subsection shall remain in full force and effect 14 notwithstanding any bankruptcy, reorganization, or other 15 insolvency proceedings with respect to the electric 16 utility, grantee, assignee or issuer. 17 (5) The Commission shall maintain segregated 18 records which reflect the date and time of receipt of all 19 filings made under this subsection. The Commission may 20 provide that transfers of intangible transition property 21 or of grantee instruments be filed in accordance with the 22 same system. 23 (Source: P.A. 90-561, eff. 12-16-97.) 24 Section 30. The Illinois Vehicle Code is amended by 25 changing Section 3-114 as follows: 26 (625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114) 27 Sec. 3-114. Transfer by operation of law. 28 (a) If the interest of an owner in a vehicle passes to 29 another other than by voluntary transfer, the transferee 30 shall, except as provided in paragraph (b), promptly mail or 31 deliver within 20 days to the Secretary of State the last 32 certificate of title, if available, proof of the transfer, SB1231 Enrolled -305- LRB9106284WHdv 1 and his application for a new certificate in the form the 2 Secretary of State prescribes. It shall be unlawful for any 3 person having possession of a certificate of title for a 4 motor vehicle, semi-trailer, or house car by reason of his 5 having a lien or encumbrance on such vehicle, to fail or 6 refuse to deliver such certificate to the owner, upon the 7 satisfaction or discharge of the lien or encumbrance, 8 indicated upon such certificate of title. 9 (b) If the interest of an owner in a vehicle passes to 10 another under the provisions of the Small Estates provisions 11 of the Probate Act of 1975 the transferee shall promptly mail 12 or deliver to the Secretary of State, within 120 days, the 13 last certificate of title, if available, the documentation 14 required under the provisions of the Probate Act of 1975, and 15 an application for certificate of title. The Small Estate 16 Affidavit form shall be furnished by the Secretary of State. 17 The transfer may be to the transferee or to the nominee of 18 the transferee. 19 (c) If the interest of an owner in a vehicle passes to 20 another under other provisions of the Probate Act of 1975, as 21 amended, and the transfer is made by a representative or 22 guardian, such transferee shall promptly mail or deliver to 23 the Secretary of State, the last certificate of title, if 24 available, and a certified copy of the letters of office or 25 guardianship, and an application for certificate of title. 26 Such application shall be made before the estate is closed. 27 The transfer may be to the transferee or to the nominee of 28 the transferee. 29 (d) If the interest of an owner in joint tenancy passes 30 to the other joint tenant with survivorship rights as 31 provided by law, the transferee shall promptly mail or 32 deliver to the Secretary of State, the last certificate of 33 title, if available, proof of death of the one joint tenant 34 and survivorship of the surviving joint tenant, and an SB1231 Enrolled -306- LRB9106284WHdv 1 application for certificate of title. Such application shall 2 be made within 120 days after the death of the joint tenant. 3 The transfer may be to the transferee or to the nominee of 4 the transferee. 5 (e) The Secretary of State shall transfer a decedent's 6 vehicle title to any legatee, representative or heir of the 7 decedent who submits to the Secretary a death certificate and 8 an affidavit by an attorney at law on the letterhead 9 stationery of the attorney at law stating the facts of the 10 transfer. 11 (f) Repossession with assignment of title. In all cases 12 wherein a lienholder has repossessed a vehicle by other than 13 judicial process and holds it for resale under a security 14 agreement, and the owner of record has executed an assignment 15 of the existing certificate of title after default, the 16 lienholder may proceed to sell or otherwise dispose of the 17 vehicle as authorized under the Uniform Commercial Code. 18 Upon selling the vehicle to another person, the lienholder 19 need not send the certificate of title to the Secretary of 20 State, but shall promptly and within 20 days mail or deliver 21 to the purchaser as transferee the existing certificate of 22 title for the repossessed vehicle, reflecting the release of 23 the lienholder's security interest in the vehicle. The 24 application for a certificate of title made by the purchaser 25 shall comply with subsection (a) of Section 3-104 and be 26 accompanied by the existing certificate of title for the 27 repossessed vehicle. The lienholder shall execute the 28 assignment and warranty of title showing the name and address 29 of the purchaser in the spaces provided therefor on the 30 certificate of title or as the Secretary of State prescribes. 31 The lienholder shall complete the assignment of title in the 32 certificate of title to reflect the transfer of the vehicle 33 to the lienholder and also a reassignment to reflect the 34 transfer from the lienholder to the purchaser. For this SB1231 Enrolled -307- LRB9106284WHdv 1 purpose, the lienholder is specifically authorized to 2 complete and execute the space reserved in the certificate of 3 title for a dealer reassignment, notwithstanding that the 4 lienholder is not a licensed dealer. Nothing herein shall be 5 construed to mean that the lienholder is taking title to the 6 repossessed vehicle for purposes of liability for retailer 7 occupation, vehicle use, or other tax with respect to the 8 proceeds from the repossession sale. Delivery of the 9 existing certificate of title to the purchaser shall be 10 deemed disclosure to the purchaser of the owner of the 11 vehicle. 12 (f-5) Repossession without assignment of title. In all 13 cases wherein a lienholder has repossessed a vehicle by other 14 than judicial process and holds it for resale under a 15 security agreement, and the owner of record has not executed 16 an assignment of the existing certificate of title, the 17 lienholder shall comply with the following provisions: 18 (1) Prior to sale, the lienholder shall deliver or 19 mail to the owner at the owner's last known address and 20 to any other lienholder of record, a notice of redemption 21 setting forth the following information: (i) the name of 22 the owner of record and in bold type at or near the top 23 of the notice a statement that the owner's vehicle was 24 repossessed on a specified date for failure to make 25 payments on the loan (or other reason), (ii) a 26 description of the vehicle subject to the lien sufficient 27 to identify it, (iii) the right of the owner to redeem 28 the vehicle, (iv) the lienholder's intent to sell or 29 otherwise dispose of the vehicle after the expiration of 30 21 days from the date of mailing or delivery of the 31 notice, and (v) the name, address, and telephone number 32 of the lienholder from whom information may be obtained 33 concerning the amount due to redeem the vehicle and from 34 whom the vehicle may be redeemed under Section 9-623 SB1231 Enrolled -308- LRB9106284WHdv 19-506of the Uniform Commercial Code. At the 2 lienholder's option, the information required to be set 3 forth in this notice of redemption may be made a part of 4 or accompany the notification of sale or other 5 disposition required undersubsection (3) ofSection 6 9-6119-504of the Uniform Commercial Code, but none of 7 the information required by this notice shall be 8 construed to impose any requirement under Article 9 of 9 the Uniform Commercial Code. 10 (2) With respect to the repossession of a vehicle 11 used primarily for personal, family, or household 12 purposes, the lienholder shall also deliver or mail to 13 the owner at the owner's last known address an affidavit 14 of defense. The affidavit of defense shall accompany the 15 notice of redemption required in subdivision (f-5)(1) of 16 this Section. The affidavit of defense shall (i) identify 17 the lienholder, owner, and the vehicle; (ii) provide 18 space for the owner to state the defense claimed by the 19 owner; and (iii) include an acknowledgment by the owner 20 that the owner may be liable to the lienholder for fees, 21 charges, and costs incurred by the lienholder in 22 establishing the insufficiency or invalidity of the 23 owner's defense. To stop the transfer of title, the 24 affidavit of defense must be received by the lienholder 25 no later than 21 days after the date of mailing or 26 delivery of the notice required in subdivision (f-5)(1) 27 of this Section. If the lienholder receives the affidavit 28 from the owner in a timely manner, the lienholder must 29 apply to a court of competent jurisdiction to determine 30 if the lienholder is entitled to possession of the 31 vehicle. 32 (3) Upon selling the vehicle to another person, the 33 lienholder need not send the certificate of title to the 34 Secretary of State, but shall promptly and within 20 days SB1231 Enrolled -309- LRB9106284WHdv 1 mail or deliver to the purchaser as transferee (i) the 2 existing certificate of title for the repossessed 3 vehicle, reflecting the release of the lienholder's 4 security interest in the vehicle; and (ii) an affidavit 5 of repossession made by or on behalf of the lienholder 6 which provides the following information: that the 7 vehicle was repossessed, a description of the vehicle 8 sufficient to identify it, whether the vehicle has been 9 damaged in excess of 33 1/3% of its fair market value as 10 required under subdivision (b)(3) of Section 3-117.1, 11 that the owner and any other lienholder of record were 12 given the notice required in subdivision (f-5)(1) of this 13 Section, that the owner of record was given the affidavit 14 of defense required in subdivision (f-5)(2) of this 15 Section, that the interest of the owner was lawfully 16 terminated or sold pursuant to the terms of the security 17 agreement, and the purchaser's name and address. If the 18 vehicle is damaged in excess of 33 1/3% of its fair 19 market value, the lienholder shall make application for a 20 salvage certificate under Section 3-117.1 and transfer 21 the vehicle to a person eligible to receive assignments 22 of salvage certificates identified in Section 3-118. 23 (4) The application for a certificate of title made 24 by the purchaser shall comply with subsection (a) of 25 Section 3-104 and be accompanied by the affidavit of 26 repossession furnished by the lienholder and the existing 27 certificate of title for the repossessed vehicle. The 28 lienholder shall execute the assignment and warranty of 29 title showing the name and address of the purchaser in 30 the spaces provided therefor on the certificate of title 31 or as the Secretary of State prescribes. The lienholder 32 shall complete the assignment of title in the certificate 33 of title to reflect the transfer of the vehicle to the 34 lienholder and also a reassignment to reflect the SB1231 Enrolled -310- LRB9106284WHdv 1 transfer from the lienholder to the purchaser. For this 2 purpose, the lienholder is specifically authorized to 3 execute the assignment on behalf of the owner as seller 4 if the owner has not done so and to complete and execute 5 the space reserved in the certificate of title for a 6 dealer reassignment, notwithstanding that the lienholder 7 is not a licensed dealer. Nothing herein shall be 8 construed to mean that the lienholder is taking title to 9 the repossessed vehicle for purposes of liability for 10 retailer occupation, vehicle use, or other tax with 11 respect to the proceeds from the repossession sale. 12 Delivery of the existing certificate of title to the 13 purchaser shall be deemed disclosure to the purchaser of 14 the owner of the vehicle. In the event the lienholder 15 does not hold the certificate of title for the 16 repossessed vehicle, the lienholder shall make 17 application for and may obtain a new certificate of title 18 in the name of the lienholder upon furnishing information 19 satisfactory to the Secretary of State. Upon receiving 20 the new certificate of title, the lienholder may proceed 21 with the sale described in subdivision (f-5)(3), except 22 that upon selling the vehicle the lienholder shall 23 promptly and within 20 days mail or deliver to the 24 purchaser the new certificate of title reflecting the 25 assignment and transfer of title to the purchaser. 26 (5) Neither the lienholder nor the owner shall file 27 with the Office of the Secretary of State the notice of 28 redemption or affidavit of defense described in 29 subdivisions (f-5)(1) and (f-5)(2) of this Section. The 30 Office of the Secretary of State shall not determine the 31 merits of an owner's affidavit of defense, nor consider 32 any allegations or assertions regarding the validity or 33 invalidity of a lienholder's claim to the vehicle or an 34 owner's asserted defenses to the repossession action. SB1231 Enrolled -311- LRB9106284WHdv 1 (f-7) Notice of reinstatement in certain cases. 2 (1) If, at the time of repossession by a lienholder 3 that is seeking to transfer title pursuant to subsection 4 (f-5), the owner has paid an amount equal to 30% or more 5 of the deferred payment price or total of payments due, 6 the owner may, within 21 days of the date of 7 repossession, reinstate the contract or loan agreement 8 and recover the vehicle from the lienholder by tendering 9 in a lump sum (i) the total of all unpaid amounts, 10 including any unpaid delinquency or deferral charges due 11 at the date of reinstatement, without acceleration; and 12 (ii) performance necessary to cure any default other than 13 nonpayment of the amounts due; and (iii) all reasonable 14 costs and fees incurred by the lienholder in retaking, 15 holding, and preparing the vehicle for disposition and in 16 arranging for the sale of the vehicle. Reasonable costs 17 and fees incurred by the lienholder include without 18 limitation repossession and storage expenses and, if 19 authorized by the contract or loan agreement, reasonable 20 attorneys' fees and collection agency charges. 21 (2) Tender of payment and performance pursuant to 22 this limited right of reinstatement restores to the owner 23 his rights under the contract or loan agreement as though 24 no default had occurred. The owner has the right to 25 reinstate the contract or loan agreement and recover the 26 vehicle from the lienholder only once under this 27 subsection. The lienholder may, in the lienholder's sole 28 discretion, extend the period during which the owner may 29 reinstate the contract or loan agreement and recover the 30 vehicle beyond the 21 days allowed under this subsection, 31 and the extension shall not subject the lienholder to 32 liability to the owner under the laws of this State. 33 (3) The lienholder shall deliver or mail written 34 notice to the owner at the owner's last known address, SB1231 Enrolled -312- LRB9106284WHdv 1 within 3 business days of the date of repossession, of 2 the owner's right to reinstate the contract or loan 3 agreement and recover the vehicle pursuant to the limited 4 right of reinstatement described in this subsection. At 5 the lienholder's option, the information required to be 6 set forth in this notice of reinstatement may be made 7 part of or accompany the notice of redemption required in 8 subdivision (f-5)(1) of this Section and the notification 9 of sale or other disposition required undersubsection10(3) ofSection 9-6119-504of the Uniform Commercial 11 Code, but none of the information required by this notice 12 of reinstatement shall be construed to impose any 13 requirement under Article 9 of the Uniform Commercial 14 Code. 15 (4) The reinstatement period, if applicable, and 16 the redemption period described in subdivision (f-5)(1) 17 of this Section, shall run concurrently if the 18 information required to be set forth in the notice of 19 reinstatement is part of or accompanies the notice of 20 redemption. In any event, the 21 day redemption period 21 described in subdivision (f-5)(1) of this Section shall 22 commence on the date of mailing or delivery to the owner 23 of the information required to be set forth in the notice 24 of redemption, and the 21 day reinstatement period 25 described in this subdivision, if applicable, shall 26 commence on the date of mailing or delivery to the owner 27 of the information required to be set forth in the notice 28 of reinstatement. 29 (5) The Office of the Secretary of State shall not 30 determine the merits of an owner's claim of right to 31 reinstatement, nor consider any allegations or assertions 32 regarding the validity or invalidity of a lienholder's 33 claim to the vehicle or an owner's asserted right to 34 reinstatement. Where a lienholder is subject to SB1231 Enrolled -313- LRB9106284WHdv 1 licensing and regulatory supervision by the State of 2 Illinois, the lienholder shall be subject to all of the 3 powers and authority of the lienholder's primary State 4 regulator to enforce compliance with the procedures set 5 forth in this subsection (f-7). 6 (f-10) Repossession by judicial process. In all cases 7 wherein a lienholder has repossessed a vehicle by judicial 8 process and holds it for resale under a security agreement, 9 order for replevin, or other court order establishing the 10 lienholder's right to possession of the vehicle, the 11 lienholder may proceed to sell or otherwise dispose of the 12 vehicle as authorized under the Uniform Commercial Code or 13 the court order. Upon selling the vehicle to another person, 14 the lienholder need not send the certificate of title to the 15 Secretary of State, but shall promptly and within 20 days 16 mail or deliver to the purchaser as transferee (i) the 17 existing certificate of title for the repossessed vehicle 18 reflecting the release of the lienholder's security interest 19 in the vehicle; (ii) a certified copy of the court order; and 20 (iii) a bill of sale identifying the new owner's name and 21 address and the year, make, model, and vehicle identification 22 number of the vehicle. The application for a certificate of 23 title made by the purchaser shall comply with subsection (a) 24 of Section 3-104 and be accompanied by the certified copy of 25 the court order furnished by the lienholder and the existing 26 certificate of title for the repossessed vehicle. The 27 lienholder shall execute the assignment and warranty of title 28 showing the name and address of the purchaser in the spaces 29 provided therefor on the certificate of title or as the 30 Secretary of State prescribes. The lienholder shall complete 31 the assignment of title in the certificate of title to 32 reflect the transfer of the vehicle to the lienholder and 33 also a reassignment to reflect the transfer from the 34 lienholder to the purchaser. For this purpose, the SB1231 Enrolled -314- LRB9106284WHdv 1 lienholder is specifically authorized to execute the 2 assignment on behalf of the owner as seller if the owner has 3 not done so and to complete and execute the space reserved in 4 the certificate of title for a dealer reassignment, 5 notwithstanding that the lienholder is not a licensed dealer. 6 Nothing herein shall be construed to mean that the lienholder 7 is taking title to the repossessed vehicle for purposes of 8 liability for retailer occupation, vehicle use, or other tax 9 with respect to the proceeds from the repossession sale. 10 Delivery of the existing certificate of title to the 11 purchaser shall be deemed disclosure to the purchaser of the 12 owner of the vehicle. In the event the lienholder does not 13 hold the certificate of title for the repossessed vehicle, 14 the lienholder shall make application for and may obtain a 15 new certificate of title in the name of the lienholder upon 16 furnishing information satisfactory to the Secretary of 17 State. Upon receiving the new certificate of title, the 18 lienholder may proceed with the sale described in this 19 subsection, except that upon selling the vehicle the 20 lienholder shall promptly and within 20 days mail or deliver 21 to the purchaser the new certificate of title reflecting the 22 assignment and transfer of title to the purchaser. 23 (f-15) The Secretary of State shall not issue a 24 certificate of title to a purchaser under subsection (f), 25 (f-5), or (f-10) of this Section, unless the person from whom 26 the vehicle has been repossessed by the lienholder is shown 27 to be the last registered owner of the motor vehicle. The 28 Secretary of State may provide by rule for the standards to 29 be followed by a lienholder in assigning and transferring 30 certificates of title with respect to repossessed vehicles. 31 (f-20) If applying for a salvage certificate or a 32 junking certificate, the lienholder shall within 20 days make 33 an application to the Secretary of State for a salvage 34 certificate or a junking certificate, as set forth in this SB1231 Enrolled -315- LRB9106284WHdv 1 Code. The Secretary of State shall not issue a salvage 2 certificate or a junking certificate to such lienholder 3 unless the person from whom such vehicle has been repossessed 4 is shown to be the last registered owner of such motor 5 vehicle and such lienholder establishes to the satisfaction 6 of the Secretary of State that he is entitled to such salvage 7 certificate or junking certificate. The Secretary of State 8 may provide by rule for the standards to be followed by a 9 lienholder in order to obtain a salvage certificate or 10 junking certificate for a repossessed vehicle. 11 (g) A person holding a certificate of title whose 12 interest in the vehicle has been extinguished or transferred 13 other than by voluntary transfer shall mail or deliver the 14 certificate, within 20 days upon request of the Secretary of 15 State. The delivery of the certificate pursuant to the 16 request of the Secretary of State does not affect the rights 17 of the person surrendering the certificate, and the action of 18 the Secretary of State in issuing a new certificate of title 19 as provided herein is not conclusive upon the rights of an 20 owner or lienholder named in the old certificate. 21 (h) The Secretary of State may decline to process any 22 application for a transfer of an interest in a vehicle 23 hereunder if any fees or taxes due under this Act from the 24 transferor or the transferee have not been paid upon 25 reasonable notice and demand. 26 (i) The Secretary of State shall not be held civilly or 27 criminally liable to any person because any purported 28 transferor may not have had the power or authority to make a 29 transfer of any interest in any vehicle or because a 30 certificate of title issued in error is subsequently used to 31 commit a fraudulent act. 32 (Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.) 33 Section 31. The Illinois Vehicle Code is amended by SB1231 Enrolled -316- LRB9106284WHdv 1 changing Section 3-202 as follows: 2 (625 ILCS 5/3-202) (from Ch. 95 1/2, par. 3-202) 3 Sec. 3-202. Perfection of security interest. 4 (a) Unless excepted by Section 3-201, a security 5 interest in a vehicle of a type for which a certificate of 6 title is required is not valid against subsequent transferees 7 or lienholders of the vehicle unless perfected as provided in 8 this Act. 9 (b) A security interest is perfected by the delivery to 10 the Secretary of State of the existing certificate of title, 11 if any, an application for a certificate of title containing 12 the name and address of the lienholder and the required fee. 13 The security interestItis perfected as of the time of its 14 creation if the delivery to the Secretary of State is 15 completed within 21 days after the creation of the security 16 interest or receipt by the new lienholder of the existing 17 certificate of title from a prior lienholder or licensed 18 dealerthereafter, otherwise as of the time of the delivery. 19 (c) If a vehicle is subject to a security interest when 20 brought into this State, the validity of the security 21 interest is determined by the law of the jurisdiction where 22 the vehicle was when the security interest attached, subject 23 to the following: 24 1. If the parties understood at the time the security 25 interest attached that the vehicle would be kept in this 26 State and it was brought into this State within 30 days 27 thereafter for purposes other than transportation through 28 this State, the validity of the security interest in this 29 State is determined by the law of this State. 30 2. If the security interest was perfected under the law 31 of the jurisdiction where the vehicle was when the security 32 interest attached, the following rules apply: 33 (A) If the name of the lienholder is shown on an SB1231 Enrolled -317- LRB9106284WHdv 1 existing certificate of title issued by that jurisdiction, 2 his security interest continues perfected in this State. 3 (B) If the name of the lienholder is not shown on an 4 existing certificate of title issued by that jurisdiction, a 5 security interest may be perfected by the lienholder 6 delivering to the Secretary of State the prescribed notice 7 and by payment of the required fee. Such security interest is 8 perfected as of the time of delivery of the prescribed notice 9 and payment of the required fee. 10 3. If the security interest was not perfected under the 11 law of the jurisdiction where the vehicle was when the 12 security interest attached, it may be perfected in this 13 State; in that case perfection dates from the time of 14 perfection in this State. 15 4. A security interest may be perfected under paragraph 16 3 of this subsection either as provided in subsection (b) or 17 by the lienholder delivering to the Secretary of State a 18 notice of security interest in the form the Secretary of 19 State prescribes and the required fee. 20 (Source: P.A. 81-557.) 21 Section 33. The Code of Civil Procedure is amended by 22 changing Section 9-316 as follows: 23 (735 ILCS 5/9-316) (from Ch. 110, par. 9-316) 24 Sec. 9-316. Lien upon crops. Every landlord shall have a 25 lien upon the crops grown or growing upon the demised 26 premises for the rent thereof, whether the same is payable 27 wholly or in part in money or specific articles of property 28 or products of the premises, or labor, and also for the 29 faithful performance of the terms of the lease. Such lien 30 shall continue for the period of 6 months after the 31 expiration of the term for which the premises are demised, 32 and may be enforced by distraint as provided in Part 3 of SB1231 Enrolled -318- LRB9106284WHdv 1 Article IX of this Act. 2 A good faith purchaser shall, however, take such crops 3 free of any landlord's lien unless, within 6 months prior to 4 the purchase, the landlord provides written notice of his 5 lien to the purchaser by registered or certified mail. Such 6 notice shall contain the names and addresses of the landlord 7 and tenant, and clearly identify the leased property. 8 A landlord may require that, prior to his tenant's 9 selling any crops grown on the demised premises, the tenant 10 disclose the name of the person to whom the tenant intends to 11 sell those crops. Where such a requirement has been imposed, 12 the tenant shall not sell the crops to any person other than 13 a person who has been disclosed to the landlord as a 14 potential buyer of the crops. 15 A lien arising under this Section and duly perfected 16 under Article 9 of the Uniform Commercial Code shall have 17 priority over any other agricultural lien as defined in, and 18 over any security interest arising under, provisions of 19 Article 9 of the Uniform Commercial Code. 20 (Source: P.A. 83-70.) 21 Section 35. The Uniform Federal Lien Registration Act is 22 amended by changing Section 4 as follows: 23 (770 ILCS 110/4) (from Ch. 82, par. 404) 24 Sec. 4. (a) If a notice of federal lien, a refiling of a 25 notice of federal lien or a notice of revocation of any 26 certificate described in subsection (b) is presented to a 27 filing officer who is: 28 (1) the Secretary of State, he shall cause the notice to 29 be marked, held and indexed in accordance with the provisions 30 of Section 9-5199-403(4)of the Uniform Commercial Code as 31 if the notice were a financing statement within the meaning 32 of that Code; or SB1231 Enrolled -319- LRB9106284WHdv 1 (2) any other officer described in Section 2, he shall 2 endorse thereon his identification and the date and time of 3 receipt and forthwith file it alphabetically or enter it in 4 an alphabetical index showing the name and address of the 5 person named in the notice, the date and time of receipt, the 6 title and address of the official or entity certifying the 7 lien, the total amount appearing on the notice of lien, and 8 in the case of federal tax liens, the collector's serial 9 number of the notice. 10 (b) If a certificate of release, nonattachment, 11 discharge or subordination of any lien is presented to the 12 Secretary of State for filing he shall: 13 (1) cause a certificate of release or nonattachment to 14 be marked, held and indexed as if the certificate were a 15 termination statement within the meaning of the Uniform 16 Commercial Code, but the notice of lien to which the 17 certificate relates may not be removed from the files; and 18 (2) cause a certificate of discharge or subordination to 19 be marked, held and indexed as if the certificate were a 20 release of collateral within the meaning of the Uniform 21 Commercial Code. 22 (c) If a refiled notice of federal lien referred to in 23 subsection (a) or any of the certificates or notices referred 24 to in subsection (b) is presented for filing to any other 25 filing officer specified in Section 2, he shall permanently 26 attach the refiled notice or the certificate to the original 27 notice of lien and enter the refiled notice or the 28 certificate with the date of filing in any alphabetical lien 29 index on the line where the original notice of lien is 30 entered. 31 (d) Upon request of any person, the filing officer shall 32 issue his certificate showing whether there is on file, on 33 the date and hour stated therein, any notice of lien or 34 certificate or notice affecting any lien filed under this Act SB1231 Enrolled -320- LRB9106284WHdv 1 or "An Act in relation to liens of the United States of 2 America", approved June 27, 1923, as amended, naming a 3 particular person, and if a notice or certificate is on file, 4 giving the date and hour of filing of each notice or 5 certificate. The fee for a certificate is $5. Upon request, 6 the filing officer shall furnish a copy of any notice of 7 federal lien, or notice or certificate affecting a federal 8 lien, for a fee of 50¢ per page. 9 (Source: P.A. 86-254.) 10 Section 37. The Uniform Commercial Code is amended by 11 adding Section 9-404.5 as follows: 12 (810 ILCS 5/9-404.5 new) 13 Sec. 9-404.5. Termination statement; duties of filing 14 officer. 15 (1) If a financing statement covering consumer goods is 16 filed on or after July 1, 1973, then within one month or 17 within 10 days following written demand by the debtor after 18 there is no outstanding secured obligation and no commitment 19 to make advances, incur obligations or otherwise give value, 20 the secured party must file with each filing officer with 21 whom the financing statement was filed, a termination 22 statement to the effect that he no longer claims a security 23 interest under the financing statement, which shall be 24 identified by file number. In other cases whenever there is 25 no outstanding secured obligation and no commitment to make 26 advances, incur obligations or otherwise give value, the 27 secured party must on written demand by the debtor send the 28 debtor, for each filing officer with whom the financing 29 statement was filed, a termination statement to the effect 30 that he no longer claims a security interest under the 31 financing statement, which shall be identified by file 32 number. A termination statement signed by a person other than SB1231 Enrolled -321- LRB9106284WHdv 1 the secured party of record must be accompanied by a separate 2 written statement of assignment signed by the secured party 3 of record. If the affected secured party fails to file such 4 a termination statement as required by this subsection, or to 5 send such a termination statement within 10 days after proper 6 demand therefor, he shall be liable to the debtor for $100 7 and in addition for any loss caused to the debtor by such 8 failure. 9 (2) On presentation to the filing officer of such a 10 termination statement he must note it in the index. If he has 11 received the termination statement in duplicate, he shall 12 return one copy of the termination statement to the secured 13 party stamped to show the time of receipt thereof. If the 14 filing officer has a microfilm or other photographic record 15 of the financing statement, and of any related continuation 16 statement, statement of assignment and statement of release, 17 he may remove the originals from the files at any time after 18 receipt of the termination statement, or if he has no such 19 record, he may remove them from the files at any time after 20 one year after receipt of the termination statement. 21 (3) If the termination statement is in the standard form 22 prescribed by the Secretary of State, the uniform fee for 23 filing and indexing the termination statement in the office 24 of a county recorder shall be $5 and otherwise shall be $10, 25 plus in each case an additional fee of $5 for each name more 26 than one at each address listed against which the termination 27 statement is required to be indexed. 28 Section 40. The Toxic Substances Disclosure to Employees 29 Act is amended by changing Section 6 as follows: 30 (820 ILCS 255/6) (from Ch. 48, par. 1406) 31 Sec. 6. Exemptions. This Act shall not apply to: 32 (a) Use of toxic substances, compounds or mixtures SB1231 Enrolled -322- LRB9106284WHdv 1 regulated by this Act which are: 2 (1) Intended for personal consumption by employees in 3 the workplace. 4 (2) Consumer goods used, stored or sold by an employer, 5 manufacturer, importer, retailer or supplier in the same 6 form, approximate amount, concentration and manner as they 7 are sold to consumers, provided that employee exposure to 8 such consumer goods is not significantly greater than 9 consumer exposure occurring during the principal consumer 10 uses of the consumer goods. For purposes of this Act, 11 "consumer goods" shall be defined as in Section 9-1029-109.112 of the Uniform Commercial Code. 13 (3) Present in a concentration of less than 1%. In the 14 cases of carcinogens, mutagens or teratogens, only those 15 substances shall be exempt which are present in a 16 concentration of 0.1% or less. No substance shall be exempt 17 under this paragraph which is present in concentrations 18 exceeding threshold concentrations established by regulation 19 of the Department. 20 (b) Laboratories in which a toxic substance, compound or 21 mixture regulated by this Act is used by or under the direct 22 supervision of a technically qualified individual, provided 23 that the toxic substance or mixture is not produced in the 24 laboratories for commercial sale. The Department shall 25 promulgate rules prescribing the standards used in 26 determining whether a laboratory is under the direct 27 supervision of a technically qualified individual. 28 (c) All retail trade establishments as listed in the 29 "Standard Industrial Classification Manual" Division G, 30 Retail Trade, published by the U.S. Government Printing 31 Office, except the Act shall apply to those retail trade 32 establishments listed within Major Groups: 52 - Building 33 Materials, Hardware, Garden Supply, and Mobile Home Dealers; 34 and 55 - Automotive Dealers and Gasoline Service Stations, SB1231 Enrolled -323- LRB9106284WHdv 1 except for those activities involving the retail sales of 2 gasoline motor fuels or lubricants, or if the retail trade 3 establishments are engaged in any of the following specific 4 activities, this Act shall apply only to the retail trade 5 establishments' involvement in such specific activities: 6 paint mixing, other than the tinting of consumer sized 7 containers of paint; finishing or refinishing operations 8 using paint or paint related products; automobile battery 9 servicing, photo finishing operations; and dry cleaning 10 operations. 11 (Source: P.A. 85-506.) 12 Section 99. Effective date. This Act takes effect on 13 July 1, 2001, except that this Section and Sections 31 and 37 14 take effect upon becoming law.