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91_SB1231eng SB1231 Engrossed 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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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 Engrossed -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; or 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.Classification of goods; "consumer goods";10"equipment"; "farm products"; "inventory". Goods are11(1) "consumer goods" if they are used or bought for use12primarily for personal, family or household purposes;13(2) "equipment" if they are used or bought for use14primarily in business (including farming or a profession) or15by a debtor who is a non-profit organization or a16governmental subdivision or agency or if the goods are not17included in the definitions of inventory, farm products or18consumer goods;19(3) "farm products" if they are crops or livestock or20supplies used or produced in farming operations or if they21are products of crops or livestock in their unmanufactured22states (such as ginned cotton, wool-clip, maple syrup, milk23and eggs) or if they are aquatic products as defined in the24Aquaculture Development Act, and if they are in the25possession of a debtor engaged in raising, fattening, grazing26or other farming or aquacultural operations. If goods are27farm products they are neither equipment nor inventory;28(4) "inventory" if they are held by a person who holds29them for sale or lease or to be furnished under contracts of30service or if he has so furnished them, or if they are raw31materials, work in process or materials used or consumed in a32business. Inventory of a person is not to be classified as33his equipment.34 (Source: P.A. 85-856.) SB1231 Engrossed -44- LRB9106284WHdv 1 (810 ILCS 5/9-110) (from Ch. 26, par. 9-110) 2 Sec. 9-110. Security interests arising under Article 2 3 or 2A. A security interest arising under Section 2-401, 4 2-505, 2-711(3), or 2A-508(5) is subject to this Article. 5 However, until the debtor obtains possession of the goods: 6 (1) the security interest is enforceable, even if 7 Section 9-203(b)(3) has not been satisfied; 8 (2) filing is not required to perfect the security 9 interest; 10 (3) the rights of the secured party after default 11 by the debtor are governed by Article 2 or 2A; and 12 (4) the security interest has priority over a 13 conflicting security interest created by the debtor. 14Sufficiency of description.15For the purposes of this Article any description of16personal property or real estate is sufficient whether or not17it is specific if it reasonably identifies what is described.18 (Source: Laws 1961, p. 2101.) 19 (810 ILCS 5/9-112) (from Ch. 26, par. 9-112) 20 Sec. 9-112. (Blank).Where collateral is not owned by21debtor.22Unless otherwise agreed, when a secured party knows that23collateral is owned by a person who is not the debtor, the24owner of the collateral is entitled to receive from the25secured party any surplus under Section 9-- 502(2) or under26Section 9--504(1), and is not liable for the debt or for any27deficiency after resale, and he has the same right as the28debtor29(a) to receive statements under Section 9--208;30(b) to receive notice of and to object to a secured31party's proposal to retain the collateral in satisfaction of32the indebtedness under Section 9--505;33(c) to redeem the collateral under Section 9--506;SB1231 Engrossed -45- LRB9106284WHdv 1(d) to obtain injunctive or other relief under2Section 9--507(1); and3(e) to recover losses caused to him under Section49--208(2).5 (Source: Laws 1961, 1st S.S., p. 7.) 6 (810 ILCS 5/9-113) (from Ch. 26, par. 9-113) 7 Sec. 9-113. (Blank).Security interests arising under8Article on Sales or under Article on Leases.9A security interest arising solely under the Article on10Sales (Article 2) or the Article on Leases (Article 2A) is11subject to the provisions of this Article except that to the12extent that and so long as the debtor does not have or does13not lawfully obtain possession of the goods14(a) no security agreement is necessary to make the15security interest enforceable; and16(b) no filing is required to perfect the security17interest; and18(c) the rights of the secured party on default by19the debtor are governed (i) by the Article on Sales20(Article 2) in the case of a security interest arising21solely under such Article or (ii) by the Article on22Leases (Article 2A) in the case of a security interest23arising solely under such Article.24 (Source: P.A. 87-493.) 25 (810 ILCS 5/9-114) (from Ch. 26, par. 9-114) 26 Sec. 9-114. (Blank).Consignment.27(1) A person who delivers goods under a consignment28which is not a security interest and who would be required to29file under this Article by paragraph (3) (c) of Section 2-32630has priority over a secured party who is or becomes a31creditor of the consignee and who would have a perfected32security interest in the goods if they were the property ofSB1231 Engrossed -46- LRB9106284WHdv 1the consignee, and also has priority with respect to2identifiable cash proceeds received on or before delivery of3the goods to a buyer, if4(a) the consignor complies with the filing provision of5the Article on Sales with respect to consignments (paragraph6(3) (c) of Section 2-326 before the consignee receives7possession of the goods; and8(b) the consignor gives notification in writing to the9holder of the security interest if the holder has filed a10financing statement covering the same types of goods before11the date of the filing made by the consignor; and12(c) the holder of the security interest receives the13notification within 5 years before the consignee receives14possession of the goods; and15(d) the notification states that the consignor expects16to deliver goods on consignment to the consignee, describing17the goods by item or type.18(2) In the case of a consignment which is not a security19interest and in which the requirements of the preceding20subsection have not been met, a person who delivers goods to21another is subordinate to a person who would have a perfected22security interest in the goods if they were the property of23the debtor.24 (Source: P. A. 78-238.) 25 (810 ILCS 5/9-115) (from Ch. 26, par. 9-115) 26 Sec. 9-115. (Blank).Investment property.27(1) In this Article:28(a) "Commodity account" means an account maintained29by a commodity intermediary in which a commodity contract30is carried for a commodity customer.31(b) "Commodity contract" means a commodity futures32contract, an option on a commodity futures contract, a33commodity option, or other contract that, in each case,SB1231 Engrossed -47- LRB9106284WHdv 1is:2(i) traded on or subject to the rules of a3board of trade that has been designated as a4contract market for such a contract pursuant to the5federal commodities laws; or6(ii) traded on a foreign commodity board of7trade, exchange, or market, and is carried on the8books of a commodity intermediary for a commodity9customer.10(c) "Commodity customer" means a person for whom a11commodity intermediary carries a commodity contract on12its books.13(d) "Commodity intermediary" means:14(i) a person who is registered as a futures15commission merchant under the federal commodities16laws; or17(ii) a person who in the ordinary course of18its business provides clearance or settlement19services for a board of trade that has been20designated as a contract market pursuant to the21federal commodities laws.22(e) "Control" with respect to a certificated23security, uncertificated security, or security24entitlement has the meaning specified in Section 8-106.25A secured party has control over a commodity contract if26by agreement among the commodity customer, the commodity27intermediary, and the secured party, the commodity28intermediary has agreed that it will apply any value29distributed on account of the commodity contract as30directed by the secured party without further consent by31the commodity customer. If a commodity customer grants a32security interest in a commodity contract to its own33commodity intermediary, the commodity intermediary as34secured party has control. A secured party has controlSB1231 Engrossed -48- LRB9106284WHdv 1over a securities account or commodity account if the2secured party has control over all security entitlements3or commodity contracts carried in the securities account4or commodity account.5(f) "Investment property" means:6(i) a security, whether certificated or7uncertificated;8(ii) a security entitlement;9(iii) a securities account;10(iv) a commodity contract; or11(v) a commodity account.12(2) Attachment or perfection of a security interest in a13securities account is also attachment or perfection of a14security interest in all security entitlements carried in the15securities account. Attachment or perfection of a security16interest in a commodity account is also attachment or17perfection of a security interest in all commodity contracts18carried in the commodity account.19(3) A description of collateral in a security agreement20or financing statement is sufficient to create or perfect a21security interest in a certificated security, uncertificated22security, security entitlement, securities account, commodity23contract, or commodity account whether it describes the24collateral by those terms, or as investment property, or by25description of the underlying security, financial asset, or26commodity contract. A description of investment property27collateral in a security agreement or financing statement is28sufficient if it identifies the collateral by specific29listing, by category, by quantity, by a computational or30allocational formula or procedure, or by any other method, if31the identity of the collateral is objectively determinable.32(4) Perfection of a security interest in investment33property is governed by the following rules:34(a) A security interest in investment property maySB1231 Engrossed -49- LRB9106284WHdv 1be perfected by control.2(b) Except as otherwise provided in paragraphs (c)3and (d), a security interest in investment property may4be perfected by filing.5(c) If the debtor is a broker or securities6intermediary a security interest in investment property7is perfected when it attaches. The filing of a financing8statement with respect to a security interest in9investment property granted by a broker or securities10intermediary has no effect for purposes of perfection or11priority with respect to that security interest.12(d) If a debtor is a commodity intermediary, a13security interest in a commodity contract or a commodity14account is perfected when it attaches. The filing of a15financing statement with respect to a security interest16in a commodity contract or a commodity account granted by17a commodity intermediary has no effect for purposes of18perfection or priority with respect to that security19interest.20(5) Priority between conflicting security interests in21the same investment property is governed by the following22rules:23(a) A security interest of a secured party who has24control over investment property has priority over a25security interest of a secured party who does not have26control over the investment property.27(b) Except as otherwise provided in paragraphs (c)28and (d), conflicting security interests of secured29parties each of whom has control rank equally.30(c) Except as otherwise agreed by the securities31intermediary, a security interest in a security32entitlement or a securities account granted to the33debtor's own securities intermediary has priority over34any security interest granted by the debtor to anotherSB1231 Engrossed -50- LRB9106284WHdv 1secured party.2(d) Except as otherwise agreed by the commodity3intermediary, a security interest in a commodity contract4or a commodity account granted to the debtor's own5commodity intermediary has priority over any security6interest granted by the debtor to another secured party.7(e) Conflicting security interests granted by a8broker, a securities intermediary, or a commodity9intermediary which are perfected without control rank10equally.11(f) In all other cases, priority between12conflicting security interests in investment property is13governed by Section 9-312(5), (6), and (7). Section149-312(4) does not apply to investment property.15(6) If a security certificate in registered form is16delivered to a secured party pursuant to agreement, a written17security agreement is not required for attachment or18enforceability of the security interest, delivery suffices19for perfection of the security interest, and the security20interest has priority over a conflicting security interest21perfected by means other than control, even if a necessary22indorsement is lacking.23 (Source: P.A. 89-364, eff. 1-1-96.) 24 (810 ILCS 5/9-116) 25 Sec. 9-116. (Blank).Security interest arising in26purchase or delivery of financial asset.27(1) If a person buys a financial asset through a28securities intermediary in a transaction in which the buyer29is obligated to pay the purchase price to the securities30intermediary at the time of the purchase, and the securities31intermediary credits the financial asset to the buyer's32securities account before the buyer pays the securities33intermediary, the securities intermediary has a securitySB1231 Engrossed -51- LRB9106284WHdv 1interest in the buyer's security entitlement securing the2buyer's obligation to pay. A security agreement is not3required for attachment or enforceability of the security4interest, and the security interest is automatically5perfected.6(2) If a certificated security, or other financial asset7represented by a writing which in the ordinary course of8business is transferred by delivery with any necessary9indorsement or assignment is delivered pursuant to an10agreement between persons in the business of dealing with11such securities or financial assets and the agreement calls12for delivery versus payment, the person delivering the13certificate or other financial asset has a security interest14in the certificated security or other financial asset15securing the seller's right to receive payment. A security16agreement is not required for attachment or enforceability of17the security interest, and the security interest is18automatically perfected.19 (Source: P.A. 89-364, eff. 1-1-96.) 20 (810 ILCS 5/9-150) 21 Sec. 9-150. (Blank).Secretary of State; rules. The22Secretary of State, under the Illinois Administrative23Procedure Act, may adopt rules necessary to administer the24Secretary of State's responsibilities under this Article.25 (Source: P.A. 89-364, eff. 1-1-96.) 26 (810 ILCS 5/Art. 9, Part 2 heading) 27 PART 2. EFFECTIVENESS OF SECURITY AGREEMENT; 28 ATTACHMENT OF SECURITY INTEREST; 29 RIGHTS OF PARTIES TO SECURITY AGREEMENT 30VALIDITY OF SECURITY AGREEMENT31AND RIGHTS OF PARTIES THERETOSB1231 Engrossed -52- LRB9106284WHdv 1 (810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new) 2 SUBPART 1. EFFECTIVENESS AND ATTACHMENT 3 (810 ILCS 5/9-201) (from Ch. 26, par. 9-201) 4 Sec. 9-201. General effectiveness of security agreement. 5 (a) General effectiveness. Except as otherwise provided 6 in the Uniform Commercial Code, a security agreement is 7 effective according to its terms between the parties, against 8 purchasers of the collateral, and against creditors. 9 (b) Applicable consumer laws and other law. A 10 transaction subject to this Article is subject to any 11 applicable rule of law, statute, or regulation which 12 establishes a different rule for consumers, including: 13 (1) the Retail Installment Sales Act; 14 (2) the Motor Vehicle Retail Installment Sales Act; 15 (3) Article II of Chapter 3 of the Illinois Vehicle 16 Code; 17 (4) Article IIIB of the Boat Registration and 18 Safety Act; 19 (5) the Pawnbroker Regulation Act; 20 (6) the Motor Vehicle Leasing Act; 21 (7) the Consumer Installment Loan Act; and 22 (8) the Consumer Deposit Security Act of 1987. 23 (c) Other applicable law controls. In case of conflict 24 between this Article and a rule of law, statute, or 25 regulation described in subsection (b), the rule of law, 26 statute, or regulation controls. Failure to comply with a 27 rule of law, statute, or regulation described in subsection 28 (b) has only the effect such rule of law, statute, or 29 regulation specifies. 30 (d) Further deference to other applicable law. This 31 Article does not: 32 (1) validate any rate, charge, agreement, or 33 practice that violates a rule of law, statute, or SB1231 Engrossed -53- LRB9106284WHdv 1 regulation described in subsection (b); or 2 (2) extend the application of the rule of law, 3 statute, or regulation to a transaction not otherwise 4 subject to it.General validity of security agreement.5Except as otherwise provided by this Act a security6agreement is effective according to its terms between the7parties, against purchasers of the collateral and against8creditors. Nothing in this Article validates any charge or9practice illegal under any statute or regulation thereunder10governing usury, small loans, retail installment sales, or11the like, or extends the application of any such statute or12regulation to any transaction not otherwise subject thereto.13 (Source: Laws 1961, p. 2101.) 14 (810 ILCS 5/9-202) (from Ch. 26, par. 9-202) 15 Sec. 9-202. Title to collateral immaterial. Except as 16 otherwise provided with respect to consignments or sales of 17 accounts, chattel paper, payment intangibles, or promissory 18 notes, the provisions of this Article with regard to rights 19 and obligations apply whether title to collateral is in the 20 secured party or the debtor. 21Each provision of this Article with regard to rights,22obligations and remedies applies whether title to collateral23is in the secured party or in the debtor.24 (Source: Laws 1961, p. 2101.) 25 (810 ILCS 5/9-203) (from Ch. 26, par. 9-203) 26 Sec. 9-203. Attachment and enforceability of security 27 interest; proceeds; supporting obligations; formal 28 requisites. 29 (a) Attachment. A security interest attaches to 30 collateral when it becomes enforceable against the debtor 31 with respect to the collateral, unless an agreement expressly 32 postpones the time of attachment. SB1231 Engrossed -54- LRB9106284WHdv 1 (b) Enforceability. Except as otherwise provided in 2 subsections (c) through (i), a security interest is 3 enforceable against the debtor and third parties with respect 4 to the collateral only if: 5 (1) value has been given; 6 (2) the debtor has rights in the collateral or the 7 power to transfer rights in the collateral to a secured 8 party; and 9 (3) one of the following conditions is met: 10 (A) the debtor has authenticated a security 11 agreement that provides a description of the 12 collateral and, if the security interest covers 13 timber to be cut, a description of the land 14 concerned; 15 (B) the collateral is not a certificated 16 security and is in the possession of the secured 17 party under Section 9-313 pursuant to the debtor's 18 security agreement; 19 (C) the collateral is a certificated security 20 in registered form and the security certificate has 21 been delivered to the secured party under Section 22 8-301 pursuant to the debtor's security agreement; 23 or 24 (D) the collateral is deposit accounts, 25 electronic chattel paper, investment property, or 26 letter-of-credit rights, and the secured party has 27 control under Section 9-104, 9-105, 9-106, or 9-107 28 pursuant to the debtor's security agreement. 29 (c) Other UCC provisions. Subsection (b) is subject to 30 Section 4-210 on the security interest of a collecting bank, 31 Section 5-118 on the security interest of a letter-of-credit 32 issuer or nominated person, Section 9-110 on a security 33 interest arising under Article 2 or 2A, and Section 9-206 on 34 security interests in investment property. SB1231 Engrossed -55- LRB9106284WHdv 1 (d) When person becomes bound by another person's 2 security agreement. A person becomes bound as debtor by a 3 security agreement entered into by another person if, by 4 operation of law other than this Article or by contract: 5 (1) the security agreement becomes effective to 6 create a security interest in the person's property; or 7 (2) the person becomes generally obligated for the 8 obligations of the other person, including the obligation 9 secured under the security agreement, and acquires or 10 succeeds to all or substantially all of the assets of the 11 other person. 12 (e) Effect of new debtor becoming bound. If a new 13 debtor becomes bound as debtor by a security agreement 14 entered into by another person: 15 (1) the agreement satisfies subsection (b)(3) with 16 respect to existing or after-acquired property of the new 17 debtor to the extent the property is described in the 18 agreement; and 19 (2) another agreement is not necessary to make a 20 security interest in the property enforceable. 21 (f) Proceeds and supporting obligations. The attachment 22 of a security interest in collateral gives the secured party 23 the rights to proceeds provided by Section 9-315 and is also 24 attachment of a security interest in a supporting obligation 25 for the collateral. 26 (g) Lien securing right to payment. The attachment of a 27 security interest in a right to payment or performance 28 secured by a security interest or other lien on personal or 29 real property is also attachment of a security interest in 30 the security interest, mortgage, or other lien. 31 (h) Security entitlement carried in securities account. 32 The attachment of a security interest in a securities account 33 is also attachment of a security interest in the security 34 entitlements carried in the securities account. SB1231 Engrossed -56- LRB9106284WHdv 1 (i) Commodity contracts carried in commodity account. 2 The attachment of a security interest in a commodity account 3 is also attachment of a security interest in the commodity 4 contracts carried in the commodity account.Attachment and5Enforceability of Security Interest; Proceeds; Requisites.6(1) Subject to the provisions of Section 4-208 on the7security interest of a collecting bank, Sections 9-115 and89-116 on security interests in investment property, and9Section 9-113 on a security interest arising under the10Article on Sales, a security interest is not enforceable11against the debtor or third parties with respect to the12collateral and does not attach unless:13(a) the collateral is in the possession of the14secured party pursuant to agreement, the collateral is15investment property and the secured party has control16pursuant to agreement, or the debtor has signed a17security agreement which contains a description of the18collateral and, in addition, a description of the land19when the security agreement covers (i) crops growing or20to be grown and is signed by the debtor prior to January211, 1996, or (ii) timber to be cut;22(b) value has been given; and23(c) the debtor has rights in the collateral.24(2) A security interest attaches when it becomes25enforceable against the debtor with respect to the26collateral. Attachment occurs as soon as all of the events27specified in subsection (1) have taken place unless explicit28agreement postpones the time of attaching.29(3) Unless otherwise agreed a security agreement gives30the secured party the rights to proceeds provided by Section319-306.32(4) A transaction, although subject to this Article, is33also subject to the "Consumer Finance Act", approved July 10,341935, as now or hereafter amended; the "Retail InstallmentSB1231 Engrossed -57- LRB9106284WHdv 1Sales Act", approved July 28, 1967, as now or hereafter2amended; the "Motor Vehicle Retail Installment Sales Act",3approved July 28, 1967, as now or hereafter amended; Article4II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of5the "Boat Registration and Safety Act", as now or hereafter6amended; and "An Act for the regulation of pawnbrokers, and7repealing a certain act therein named", approved June 9,81909, as now or hereafter amended; and in the case of9conflict between the provisions of this Article and any such10statute, the provisions of such statute control. Failure to11comply with any applicable statute has only the effect which12is specified therein.13 (Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96; 14 89-626, eff. 8-9-96.) 15 (810 ILCS 5/9-204) (from Ch. 26, par. 9-204) 16 Sec. 9-204. After-acquired property; future advances. 17 (a) After-acquired collateral. Except as otherwise 18 provided in subsection (b), a security agreement may create 19 or provide for a security interest in after-acquired 20 collateral. 21 (b) When after-acquired property clause not effective. 22 A security interest does not attach under a term constituting 23 an after-acquired property clause to: 24 (1) consumer goods, other than an accession when 25 given as additional security, unless the debtor acquires 26 rights in them within 10 days after the secured party 27 gives value; or 28 (2) a commercial tort claim. 29 (c) Future advances and other value. A security 30 agreement may provide that collateral secures, or that 31 accounts, chattel paper, payment intangibles, or promissory 32 notes are sold in connection with, future advances or other 33 value, whether or not the advances or value are given SB1231 Engrossed -58- LRB9106284WHdv 1 pursuant to commitment.After-acquired property; future2advances.3(1) Except as provided in Subsection (2), a security4agreement may provide that any obligations covered by the5security agreement are to be secured by after-acquired6collateral.7(2) No security interest attaches under an8after-acquired property clause to consumer goods other than9accessions (Section 9-314) when given as additional security10unless the debtor acquires rights in them within 10 days11after the secured party gives value.12(3) Obligations covered by a security agreement may13include future advances or other value whether or not the14advances or value are given pursuant to commitment15(subsection (1) of Section 9-105).16 (Source: P. A. 77-2810.) 17 (810 ILCS 5/9-205) (from Ch. 26, par. 9-205) 18 Sec. 9-205. Use or disposition of collateral 19 permissible. 20 (a) When security interest not invalid or fraudulent. A 21 security interest is not invalid or fraudulent against 22 creditors solely because: 23 (1) the debtor has the right or ability to: 24 (A) use, commingle, or dispose of all or part 25 of the collateral, including returned or repossessed 26 goods; 27 (B) collect, compromise, enforce, or otherwise 28 deal with collateral; 29 (C) accept the return of collateral or make 30 repossessions; or 31 (D) use, commingle, or dispose of proceeds; or 32 (2) the secured party fails to require the debtor 33 to account for proceeds or replace collateral. SB1231 Engrossed -59- LRB9106284WHdv 1 (b) Requirements of possession not relaxed. This 2 Section does not relax the requirements of possession if 3 attachment, perfection, or enforcement of a security interest 4 depends upon possession of the collateral by the secured 5 party.Use or Disposition of Collateral Without Accounting6Permissible.7A security interest is not invalid or fraudulent against8creditors by reason of liberty in the debtor to use,9commingle or dispose of all or part of the collateral10(including returned or repossessed goods) or to collect or11compromise accounts or chattel paper, or to accept the return12of goods or make repossessions, or to use, commingle or13dispose of proceeds, or by reason of the failure of the14secured party to require the debtor to account for proceeds15or replace collateral. This Section does not relax the16requirements of possession where perfection of a security17interest depends upon possession of the collateral by the18secured party or by a bailee.19 (Source: P.A. 77-2810.) 20 (810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1) 21 Sec. 9-205.1. Listing by debtor of purchasers or 22 receivers of collateral. A secured party may require that 23 the debtor include as part of the security agreement a list 24 of persons to whom the debtor desires to sell or otherwise 25 dispose of the collateral. The debtor shall not sell or 26 otherwise dispose of the collateral to a person not included 27 in that list unless the debtor has notified the secured party 28 of his desire to sell or otherwise dispose of the collateral 29 to such person at least 7 days prior to the sale or other 30 disposition. 31 (Source: P.A. 83-69.) 32 (810 ILCS 5/9-206) (from Ch. 26, par. 9-206) SB1231 Engrossed -60- LRB9106284WHdv 1 Sec. 9-206. Security interest arising in purchase or 2 delivery of financial asset. 3 (a) Security interest when person buys through 4 securities intermediary. A security interest in favor of a 5 securities intermediary attaches to a person's security 6 entitlement if: 7 (1) the person buys a financial asset through the 8 securities intermediary in a transaction in which the 9 person is obligated to pay the purchase price to the 10 securities intermediary at the time of the purchase; and 11 (2) the securities intermediary credits the 12 financial asset to the buyer's securities account before 13 the buyer pays the securities intermediary. 14 (b) Security interest secures obligation to pay for 15 financial asset. The security interest described in 16 subsection (a) secures the person's obligation to pay for the 17 financial asset. 18 (c) Security interest in payment against delivery 19 transaction. A security interest in favor of a person that 20 delivers a certificated security or other financial asset 21 represented by a writing attaches to the security or other 22 financial asset if: 23 (1) the security or other financial asset: 24 (A) in the ordinary course of business is 25 transferred by delivery with any necessary 26 indorsement or assignment; and 27 (B) is delivered under an agreement between 28 persons in the business of dealing with such 29 securities or financial assets; and 30 (2) the agreement calls for delivery against 31 payment. 32 (d) Security interest secures obligation to pay for 33 delivery. The security interest described in subsection (c) 34 secures the obligation to make payment for the delivery. SB1231 Engrossed -61- LRB9106284WHdv 1Agreement not to assert defenses against assignee;2modification of sales warranties where security agreement3exists.4(1) Subject to any statute or decision which establishes5a different rule for buyers or lessees of consumer goods, an6agreement by a buyer or lessee that he will not assert7against an assignee any claim or defense which he may have8against the seller or lessor is enforceable by an assignee9who takes his assignment for value, in good faith and without10notice of a claim or defense, except as to defenses of a type11which may be asserted against a holder in due course of a12negotiable instrument under the Article on Commercial Paper13(Article 3). A buyer who as part of one transaction signs14both a negotiable instrument and a security agreement makes15such an agreement.16(2) When a seller retains a purchase money security17interest in goods the Article on Sales (Article 2) governs18the sale and any disclaimer, limitation or modification of19the seller's warranties.20 (Source: Laws 1965, p. 803.) 21 (810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new) 22 SUBPART 2. RIGHTS AND DUTIES 23 (810 ILCS 5/9-207) (from Ch. 26, par. 9-207) 24 Sec. 9-207. Rights and duties of secured party having 25 possession or control of collateral. 26 (a) Duty of care when secured party in possession. 27 Except as otherwise provided in subsection (d), a secured 28 party shall use reasonable care in the custody and 29 preservation of collateral in the secured party's possession. 30 In the case of chattel paper or an instrument, reasonable 31 care includes taking necessary steps to preserve rights 32 against prior parties unless otherwise agreed. SB1231 Engrossed -62- LRB9106284WHdv 1 (b) Expenses, risks, duties, and rights when secured 2 party in possession. Except as otherwise provided in 3 subsection (d), if a secured party has possession of 4 collateral: 5 (1) reasonable expenses, including the cost of 6 insurance and payment of taxes or other charges, incurred 7 in the custody, preservation, use, or operation of the 8 collateral are chargeable to the debtor and are secured 9 by the collateral; 10 (2) the risk of accidental loss or damage is on the 11 debtor to the extent of a deficiency in any effective 12 insurance coverage; 13 (3) the secured party shall keep the collateral 14 identifiable, but fungible collateral may be commingled; 15 and 16 (4) the secured party may use or operate the 17 collateral: 18 (A) for the purpose of preserving the 19 collateral or its value; 20 (B) as permitted by an order of a court having 21 competent jurisdiction; or 22 (C) except in the case of consumer goods, in 23 the manner and to the extent agreed by the debtor. 24 (c) Duties and rights when secured party in possession 25 or control. Except as otherwise provided in subsection (d), a 26 secured party having possession of collateral or control of 27 collateral under Section 9-104, 9-105, 9-106, or 9-107: 28 (1) may hold as additional security any proceeds, 29 except money or funds, received from the collateral; 30 (2) shall apply money or funds received from the 31 collateral to reduce the secured obligation, unless 32 remitted to the debtor; and 33 (3) may create a security interest in the 34 collateral. SB1231 Engrossed -63- LRB9106284WHdv 1 (d) Buyer of certain rights to payment. If the secured 2 party is a buyer of accounts, chattel paper, payment 3 intangibles, or promissory notes or a consignor: 4 (1) subsection (a) does not apply unless the 5 secured party is entitled under an agreement: 6 (A) to charge back uncollected collateral; or 7 (B) otherwise to full or limited recourse 8 against the debtor or a secondary obligor based on 9 the nonpayment or other default of an account debtor 10 or other obligor on the collateral; and 11 (2) subsections (b) and (c) do not apply.Rights12and duties when collateral is in secured party's13possession.14(1) A secured party must use reasonable care in the15custody and preservation of collateral in his possession. In16the case of an instrument or chattel paper reasonable care17includes taking necessary steps to preserve rights against18prior parties unless otherwise agreed.19(2) Unless otherwise agreed, when collateral is in the20secured party's possession21(a) reasonable expenses (including the cost of any22insurance and payment of taxes or other charges) incurred in23the custody, preservation, use or operation of the collateral24are chargeable to the debtor and are secured by the25collateral;26(b) the risk of accidental loss or damage is on the27debtor to the extent of any deficiency in any effective28insurance coverage;29(c) the secured party may hold as additional30security any increase or profits (except money) received from31the collateral, but money so received, unless remitted to the32debtor, shall be applied in reduction of the secured33obligation;34(d) the secured party must keep the collateralSB1231 Engrossed -64- LRB9106284WHdv 1identifiable but fungible collateral may be commingled;2(e) the secured party may repledge the collateral3upon terms which do not impair the debtor's right to redeem4it.5(3) A secured party is liable for any loss caused by his6failure to meet any obligation imposed by the preceding7subsections but does not lose his security interest.8(4) A secured party may use or operate the collateral9for the purpose of preserving the collateral or its value or10pursuant to the order of a court of appropriate jurisdiction11or, except in the case of consumer goods, in the manner and12to the extent provided in the security agreement.13 (Source: Laws 1961, p. 2101.) 14 (810 ILCS 5/9-208) (from Ch. 26, par. 9-208) 15 Sec. 9-208. Additional duties of secured party having 16 control of collateral. 17 (a) Applicability of Section. This Section applies to 18 cases in which there is no outstanding secured obligation and 19 the secured party is not committed to make advances, incur 20 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: 24 (1) a secured party having control of a deposit 25 account under Section 9-104(a)(2) shall send to the bank 26 with which the deposit account is maintained an 27 authenticated statement that releases the bank from any 28 further obligation to comply with instructions originated 29 by the secured party; 30 (2) a secured party having control of a deposit 31 account under Section 9-104(a)(3) shall: 32 (A) pay the debtor the balance on deposit in 33 the deposit account; or SB1231 Engrossed -65- LRB9106284WHdv 1 (B) transfer the balance on deposit into a 2 deposit account in the debtor's name; 3 (3) a secured party, other than a buyer, having 4 control of electronic chattel paper under Section 9-105 5 shall: 6 (A) communicate the authoritative copy of the 7 electronic chattel paper to the debtor or its 8 designated custodian; 9 (B) if the debtor designates a custodian that 10 is the designated custodian with which the 11 authoritative copy of the electronic chattel paper 12 is maintained for the secured party, communicate to 13 the custodian an authenticated record releasing the 14 designated custodian from any further obligation to 15 comply with instructions originated by the secured 16 party and instructing the custodian to comply with 17 instructions originated by the debtor; and 18 (C) take appropriate action to enable the 19 debtor or its designated custodian to make copies of 20 or revisions to the authoritative copy which add or 21 change an identified assignee of the authoritative 22 copy without the consent of the secured party; 23 (4) a secured party having control of investment 24 property under Section 8-106(d)(2) or 9-106(b) shall send 25 to the securities intermediary or commodity intermediary 26 with which the security entitlement or commodity contract 27 is maintained an authenticated record that releases the 28 securities intermediary or commodity intermediary from 29 any further obligation to comply with entitlement orders 30 or directions originated by the secured party; and 31 (5) a secured party having control of a 32 letter-of-credit right under Section 9-107 shall send to 33 each person having an unfulfilled obligation to pay or 34 deliver proceeds of the letter of credit to the secured SB1231 Engrossed -66- LRB9106284WHdv 1 party an authenticated release from any further 2 obligation to pay or deliver proceeds of the letter of 3 credit to the secured party.Request for statement of4account or list of collateral.5(1) A debtor may sign a statement indicating what he6believes to be the aggregate amount of unpaid indebtedness as7of a specified date and may send it to the secured party with8a request that the statement be approved or corrected and9returned to the debtor. When the security agreement or any10other record kept by the secured party identifies the11collateral a debtor may similarly request the secured party12to approve or correct a list of the collateral.13(2) The secured party must comply with such a request14within two weeks after receipt by sending a written15correction or approval. If the secured party claims a16security interest in all of a particular type of collateral17owned by the debtor he may indicate that fact in his reply18and need not approve or correct an itemized list of such19collateral. If the secured party without reasonable excuse20fails to comply he is liable for any loss caused to the21debtor thereby; and if the debtor has properly included in22his request a good faith statement of the obligation or a23list of the collateral or both the secured party may claim a24security interest only as shown in the statement against25persons misled by his failure to comply. If he no longer has26an interest in the obligation or collateral at the time the27request is received he must disclose the name and address of28any successor in interest known to him and he is liable for29any loss caused to the debtor as a result of failure to30disclose. A successor in interest is not subject to this31Section until a request is received by him.32(3) A debtor is entitled to such a statement once every336 months without charge. The secured party may require34payment of a charge not exceeding $10 for each additionalSB1231 Engrossed -67- LRB9106284WHdv 1statement furnished.2 (Source: Laws 1961, p. 2101.) 3 (810 ILCS 5/9-209 new) 4 Sec. 9-209. Duties of secured party if account debtor 5 has been notified of assignment. 6 (a) Applicability of Section. Except as otherwise 7 provided in subsection (c), this Section applies if: 8 (1) there is no outstanding secured obligation; and 9 (2) the secured party is not committed to make 10 advances, incur obligations, or otherwise give value. 11 (b) Duties of secured party after receiving demand from 12 debtor. Within 10 days after receiving an authenticated 13 demand by the debtor, a secured party shall send to an 14 account debtor that has received notification of an 15 assignment to the secured party as assignee under Section 16 9-406(a) an authenticated record that releases the account 17 debtor from any further obligation to the secured party. 18 (c) Inapplicability to sales. This Section does not 19 apply to an assignment constituting the sale of an account, 20 chattel paper, or payment intangible. 21 (810 ILCS 5/9-210 new) 22 Sec. 9-210. Request for accounting; request regarding 23 list of collateral or statement of account. 24 (a) Definitions. In this Section: 25 (1) "Request" means a record of a type described in 26 paragraph (2), (3), or (4). 27 (2) "Request for an accounting" means a record 28 authenticated by a debtor requesting that the recipient 29 provide an accounting of the unpaid obligations secured 30 by collateral and reasonably identifying the transaction 31 or relationship that is the subject of the request. 32 (3) "Request regarding a list of collateral" means SB1231 Engrossed -68- LRB9106284WHdv 1 a record authenticated by a debtor requesting that the 2 recipient approve or correct a list of what the debtor 3 believes to be the collateral securing an obligation and 4 reasonably identifying the transaction or relationship 5 that is the subject of the request. 6 (4) "Request regarding a statement of account" 7 means a record authenticated by a debtor requesting that 8 the recipient approve or correct a statement indicating 9 what the debtor believes to be the aggregate amount of 10 unpaid obligations secured by collateral as of a 11 specified date and reasonably identifying the transaction 12 or relationship that is the subject of the request. 13 (b) Duty to respond to requests. Subject to subsections 14 (c), (d), (e), and (f), a secured party, other than a buyer 15 of accounts, chattel paper, payment intangibles, or 16 promissory notes or a consignor, shall comply with a request 17 within 14 days after receipt: 18 (1) in the case of a request for an accounting, by 19 authenticating and sending to the debtor an accounting; 20 and 21 (2) in the case of a request regarding a list of 22 collateral or a request regarding a statement of account, 23 by authenticating and sending to the debtor an approval 24 or correction. 25 (c) Request regarding list of collateral; statement 26 concerning type of collateral. A secured party that claims a 27 security interest in all of a particular type of collateral 28 owned by the debtor may comply with a request regarding a 29 list of collateral by sending to the debtor an authenticated 30 record including a statement to that effect within 14 days 31 after receipt. 32 (d) Request regarding list of collateral; no interest 33 claimed. A person that receives a request regarding a list 34 of collateral, claims no interest in the collateral when it SB1231 Engrossed -69- LRB9106284WHdv 1 receives the request, and claimed an interest in the 2 collateral at an earlier time shall comply with the request 3 within 14 days after receipt by sending to the debtor an 4 authenticated record: 5 (1) disclaiming any interest in the collateral; and 6 (2) if known to the recipient, providing the name 7 and mailing address of any assignee of or successor to 8 the recipient's interest in the collateral. 9 (e) Request for accounting or regarding statement of 10 account; no interest in obligation claimed. A person that 11 receives a request for an accounting or a request regarding a 12 statement of account, claims no interest in the obligations 13 when it receives the request, and claimed an interest in the 14 obligations at an earlier time shall comply with the request 15 within 14 days after receipt by sending to the debtor an 16 authenticated record: 17 (1) disclaiming any interest in the obligations; 18 and 19 (2) if known to the recipient, providing the name 20 and mailing address of any assignee of or successor to 21 the recipient's interest in the obligations. 22 (f) Charges for responses. A debtor is entitled without 23 charge to one response to a request under this Section during 24 any six-month period. The secured party may require payment 25 of a charge not exceeding $25 for each additional response. 26 (810 ILCS 5/Art. 9, Part 3 heading) 27 PART 3. PERFECTION AND PRIORITY 28RIGHTS OF THIRD PARTIES;29PERFECTED AND UNPERFECTED SECURITY30INTERESTS: RULES OF PRIORITY31 (810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new) 32 SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY SB1231 Engrossed -70- LRB9106284WHdv 1 (810 ILCS 5/9-301) (from Ch. 26, par. 9-301) 2 Sec. 9-301. Law governing perfection and priority of 3 security interests. Except as otherwise provided in Sections 4 9-303 through 9-306, the following rules determine the law 5 governing perfection, the effect of perfection or 6 nonperfection, and the priority of a security interest in 7 collateral: 8 (1) Except as otherwise provided in this Section, 9 while a debtor is located in a jurisdiction, the local 10 law of that jurisdiction governs perfection, the effect 11 of perfection or nonperfection, and the priority of a 12 security interest in collateral. 13 (2) While collateral is located in a jurisdiction, 14 the local law of that jurisdiction governs perfection, 15 the effect of perfection or nonperfection, and the 16 priority of a possessory security interest in that 17 collateral. 18 (3) Except as otherwise provided in paragraph (4), 19 while negotiable documents, goods, instruments, money, or 20 tangible chattel paper is located in a jurisdiction, the 21 local law of that jurisdiction governs: 22 (A) perfection of a security interest in the 23 goods by filing a fixture filing; 24 (B) perfection of a security interest in 25 timber to be cut; and 26 (C) the effect of perfection or nonperfection 27 and the priority of a nonpossessory security 28 interest in the collateral. 29 (4) The local law of the jurisdiction in which the 30 wellhead or minehead is located governs perfection, the 31 effect of perfection or nonperfection, and the priority 32 of a security interest in as-extracted collateral. 33Persons Who Take Priority Over Unperfected Security34Interests; Rights of "Lien Creditor".SB1231 Engrossed -71- LRB9106284WHdv 1(1) Except as otherwise provided in subsection (2), an2unperfected security interest is subordinate to the rights of3(a) persons entitled to priority under Section49-312;5(b) a person who becomes a lien creditor before the6security interest is perfected;7(c) in the case of goods, instruments, documents,8and chattel paper, a person who is not a secured party9and who is a transferee in bulk or other buyer not in10ordinary course of business or is a buyer of farm11products in ordinary course of business, to the extent12that he gives value and receives delivery of the13collateral without knowledge of the security interest and14before it is perfected;15(d) in the case of accounts, general intangibles,16and investment property, a person who is not a secured17party and who is a transferee to the extent that he gives18value without knowledge of the security interest and19before it is perfected;20provided, however, that an unperfected security interest21shall take priority over the rights of a lien creditor if (i)22the lien creditor is a trustee or receiver of a state or23federally chartered financial institution acting in24furtherance of its supervisory authority over the financial25institution and (ii) a security interest is granted by the26financial institution to secure a deposit of public funds27with the financial institution or a repurchase agreement with28the financial institution pursuant to the Government29Securities Act of 1986, as amended.30(2) If the secured party files with respect to a31purchase money security interest before or within 20 days32after the debtor receives possession of the collateral, he33takes priority over the rights of a transferee in bulk or of34a lien creditor which arise between the time the securitySB1231 Engrossed -72- LRB9106284WHdv 1interest attaches and the time of filing.2(3) A "lien creditor" means a creditor who has acquired3a lien on the property involved by attachment, levy or the4like and includes an assignee for benefit of creditors from5the time of assignment, and a trustee in bankruptcy from the6date of the filing of the petition or a receiver in equity7from the time of appointment.8(4) A person who becomes a lien creditor while a9security interest is perfected takes subject to the security10interest only to the extent that it secures advances made11before he becomes a lien creditor or within 45 days12thereafter or made without knowledge of the lien or pursuant13to a commitment entered into without knowledge of the lien.14 (Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.) 15 (810 ILCS 5/9-302) (from Ch. 26, par. 9-302) 16 Sec. 9-302. Law governing perfection and priority of 17 agricultural liens. While farm products are located in a 18 jurisdiction, the local law of that jurisdiction governs 19 perfection, the effect of perfection or nonperfection, and 20 the priority of an agricultural lien on the farm products. 21When filing is required to perfect security interest;22security interests to which filing provisions of this Article23do not apply.24(1) A financing statement must be filed to perfect all25security interests except the following:26(a) a security interest in collateral in possession27of the secured party under Section 9-305;28(b) a security interest temporarily perfected in29instruments, certificated securities, or documents30without delivery under Section 9-304 or in proceeds for a3120 day period under Section 9-306;32(c) a security interest created by an assignment of33a beneficial interest in a trust or a decedent's estate;SB1231 Engrossed -73- LRB9106284WHdv 1(d) a purchase money security interest in consumer2goods; but filing is required for a motor vehicle3required to be registered; and fixture filing is required4for priority over conflicting interests in fixtures to5the extent provided in Section 9-313;6(e) an assignment of accounts which does not alone7or in conjunction with other assignments to the same8assignee transfer a significant part of the outstanding9accounts of the assignor;10(f) a security interest of a collecting bank11(Section 4-208) or arising under the Article on Sales12(see Section 9-113) or covered in subsection (3) of this13Section;14(g) an assignment for the benefit of all creditors15of the transferor, and subsequent transfers by the16assignee thereunder;17(h) a security interest in investment property18which is perfected without filing under Section 9-115 or19Section 9-116;20(i) a security interest in a deposit account. Such21a security interest is perfected:22(i) as to a deposit account maintained with23the secured party, when the security agreement is24executed;25(ii) as to a deposit account maintained with26any organization other than the secured party, when27notice thereof is given in writing to the28organization with whom the deposit account is29maintained and that organization provides written30acknowledgement of and consent to the notice of the31secured party.32(j) a security interest in an uncertificated33certificate of deposit. Such a security interest is34perfected;SB1231 Engrossed -74- LRB9106284WHdv 1(i) as to an uncertificated certificate of2deposit issued by the secured party, when the3security agreement is executed;4(ii) as to an uncertificated certificate of5deposit issued by any organization other than the6secured party, when notice thereof is given in7writing to the issuer of the uncertificated8certificate of deposit and the issuer provides9written acknowledgement of and consent to the notice10of the secured party.11(2) If a secured party assigns a perfected security12interest, no filing under this Article is required in order13to continue the perfected status of the security interest14against creditors of and transferees from the original15debtor.16(3) The filing of a financing statement otherwise17required by this Article is not necessary or effective to18perfect a security interest in property subject to19(a) a statute or treaty of the United States which20provides for a national or international registration or21a national or international certificate of title or which22specifies a place of filing different from that specified23in this Article for filing of the security interest; or24(b) the following statutes of this State: the25Illinois Vehicle Code; the Boat Registration and Safety26Act; but during any period in which collateral is27inventory held for sale by a person who is in the28business of selling goods of that kind, the filing29provisions of this Article (Part 4) apply to a security30interest in that collateral created by him as debtor; or31(c) a certificate of title statute of another32jurisdiction under the law of which indication of a33security interest on the certificate is required as a34condition of perfection (subsection (2) of SectionSB1231 Engrossed -75- LRB9106284WHdv 19-103).2(4) Compliance with a statute or treaty described in3subsection (3) is equivalent to the filing of a financing4statement under this Article, and a security interest in5property subject to the statute or treaty can be perfected6only by compliance therewith except as provided in Section79-103 on multiple state transactions. Duration and renewal of8perfection of a security interest perfected by compliance9with the statute or treaty are governed by the provisions of10the statute or treaty; in other respects the security11interest is subject to this Article.12 (Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.) 13 (810 ILCS 5/9-303) (from Ch. 26, par. 9-303) 14 Sec. 9-303. Law governing perfection and priority of 15 security interests in goods covered by a certificate of 16 title. 17 (a) Applicability of Section. This Section applies to 18 goods covered by a certificate of title, even if there is no 19 other relationship between the jurisdiction under whose 20 certificate of title the goods are covered and the goods or 21 the debtor. 22 (b) When goods covered by certificate of title. Goods 23 become covered by a certificate of title when a valid 24 application for the certificate of title and the applicable 25 fee are delivered to the appropriate authority. Goods cease 26 to be covered by a certificate of title at the earlier of the 27 time the certificate of title ceases to be effective under 28 the law of the issuing jurisdiction or the time the goods 29 become covered subsequently by a certificate of title issued 30 by another jurisdiction. 31 (c) Applicable law. The local law of the jurisdiction 32 under whose certificate of title the goods are covered 33 governs perfection, the effect of perfection or SB1231 Engrossed -76- LRB9106284WHdv 1 nonperfection, and the priority of a security interest in 2 goods covered by a certificate of title from the time the 3 goods become covered by the certificate of title until the 4 goods cease to be covered by the certificate of title.When5security interest is perfected; continuity of perfection.6(1) A security interest is perfected when it has7attached and when all of the applicable steps required for8perfection have been taken. Such steps are specified in9Sections 9--302, 9--304, 9--305 and 9--306. If such steps are10taken before the security interest attaches, it is perfected11at the time when it attaches.12(2) If a security interest is originally perfected in13any way permitted under this Article and is subsequently14perfected in some other way under this Article, without an15intermediate period when it was unperfected, the security16interest shall be deemed to be perfected continuously for the17purposes of this Article.18 (Source: Laws 1961, p. 2101.) 19 (810 ILCS 5/9-304) (from Ch. 26, par. 9-304) 20 Sec. 9-304. Law governing perfection and priority of 21 security interests in deposit accounts. 22 (a) Law of bank's jurisdiction governs. The local law 23 of a bank's jurisdiction governs perfection, the effect of 24 perfection or nonperfection, and the priority of a security 25 interest in a deposit account maintained with that bank. 26 (b) Bank's jurisdiction. The following rules determine 27 a bank's jurisdiction for purposes of this Part: 28 (1) If an agreement between the bank and the debtor 29 governing the deposit account expressly provides that a 30 particular jurisdiction is the bank's jurisdiction for 31 purposes of this Part, this Article, or the Uniform 32 Commercial Code, that jurisdiction is the bank's 33 jurisdiction. SB1231 Engrossed -77- LRB9106284WHdv 1 (2) If paragraph (1) does not apply and an 2 agreement between the bank and its customer governing the 3 deposit account expressly provides that the agreement is 4 governed by the law of a particular jurisdiction, that 5 jurisdiction is the bank's jurisdiction. 6 (3) If neither paragraph (1) nor paragraph (2) 7 applies and an agreement between the bank and its 8 customer governing the deposit account expressly provides 9 that the deposit account is maintained at an office in a 10 particular jurisdiction, that jurisdiction is the bank's 11 jurisdiction. 12 (4) If none of the preceding paragraphs applies, 13 the bank's jurisdiction is the jurisdiction in which the 14 office identified in an account statement as the office 15 serving the customer's account is located. 16 (5) If none of the preceding paragraphs applies, 17 the bank's jurisdiction is the jurisdiction in which the 18 chief executive office of the bank is located.Perfection19of security interest in instruments, documents, proceeds20of a written letter of credit, and goods covered by21documents; perfection by permissive filing; temporary22perfection without filing or transfer of possession.23(1) A security interest in chattel paper or negotiable24documents may be perfected by filing. A security interest in25the rights to proceeds of a written letter of credit can be26perfected only by the secured party's taking possession of27the letter of credit. A security interest in money or28instruments (other than instruments which constitute part of29chattel paper) can be perfected only by the secured party's30taking possession, except as provided in subsections (4) and31(5) of this Section and subsections (2) and (3) of Section329-306 on proceeds.33(2) During the period that goods are in the possession34of the issuer of a negotiable document therefor, a securitySB1231 Engrossed -78- LRB9106284WHdv 1interest in the goods is perfected by perfecting a security2interest in the document, and any security interest in the3goods otherwise perfected during such period is subject4thereto.5(3) A security interest in goods in the possession of a6bailee other than one who has issued a negotiable document7therefor is perfected by issuance of a document in the name8of the secured party or by the bailee's receipt of9notification of the secured party's interest or by filing as10to the goods.11(4) A security interest in instruments, certificated12securities, or negotiable documents is perfected without13filing or the taking of possession for a period of 21 days14from the time it attaches to the extent that it arises for15new value given under a written security agreement.16(5) A security interest remains perfected for a period17of 21 days without filing where a secured party having a18perfected security interest in an instrument, a certificated19security, a negotiable document, or goods in possession of a20bailee other than one who has issued a negotiable document21therefor.22(a) makes available to the debtor the goods or23documents representing the goods for the purpose of24ultimate sale or exchange or for the purpose of loading,25unloading, storing, shipping, transshipping,26manufacturing, processing or otherwise dealing with them27in a manner preliminary to their sale or exchange, but28priority between conflicting security interests in the29goods is subject to subsection (3) of Section 9-312; or30(b) delivers the instrument or certificated31security to the debtor for the purpose of ultimate sale32or exchange or of presentation, collection, renewal or33registration of transfer.34(6) After the 21 day period in subsections (4) and (5)SB1231 Engrossed -79- LRB9106284WHdv 1perfection depends upon compliance with applicable provisions2of this Article.3 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.) 4 (810 ILCS 5/9-305) (from Ch. 26, par. 9-305) 5 Sec. 9-305. Law governing perfection and priority of 6 security interests in investment property. 7 (a) Governing law: general rules. Except as otherwise 8 provided in subsection (c), the following rules apply: 9 (1) While a security certificate is located in a 10 jurisdiction, the local law of that jurisdiction governs 11 perfection, the effect of perfection or nonperfection, 12 and the priority of a security interest in the 13 certificated security represented thereby. 14 (2) The local law of the issuer's jurisdiction as 15 specified in Section 8-110(d) governs perfection, the 16 effect of perfection or nonperfection, and the priority 17 of a security interest in an uncertificated security. 18 (3) The local law of the securities intermediary's 19 jurisdiction as specified in Section 8-110(e) governs 20 perfection, the effect of perfection or nonperfection, 21 and the priority of a security interest in a security 22 entitlement or securities account. 23 (4) The local law of the commodity intermediary's 24 jurisdiction governs perfection, the effect of perfection 25 or nonperfection, and the priority of a security interest 26 in a commodity contract or commodity account. 27 (b) Commodity intermediary's jurisdiction. The 28 following rules determine a commodity intermediary's 29 jurisdiction for purposes of this Part: 30 (1) If an agreement between the commodity 31 intermediary and commodity customer governing the 32 commodity account expressly provides that a particular 33 jurisdiction is the commodity intermediary's jurisdiction SB1231 Engrossed -80- LRB9106284WHdv 1 for purposes of this Part, this Article, or the Uniform 2 Commercial Code, that jurisdiction is the commodity 3 intermediary's jurisdiction. 4 (2) If paragraph (1) does not apply and an 5 agreement between the commodity intermediary and 6 commodity customer governing the commodity account 7 expressly provides that the agreement is governed by the 8 law of a particular jurisdiction, that jurisdiction is 9 the commodity intermediary's jurisdiction. 10 (3) If neither paragraph (1) nor paragraph (2) 11 applies and an agreement between the commodity 12 intermediary and commodity customer governing the 13 commodity account expressly provides that the commodity 14 account is maintained at an office in a particular 15 jurisdiction, that jurisdiction is the commodity 16 intermediary's jurisdiction. 17 (4) If none of the preceding paragraphs applies, 18 the commodity intermediary's jurisdiction is the 19 jurisdiction in which the office identified in an account 20 statement as the office serving the commodity customer's 21 account is located. 22 (5) If none of the preceding paragraphs applies, 23 the commodity intermediary's jurisdiction is the 24 jurisdiction in which the chief executive office of the 25 commodity intermediary is located. 26 (c) When perfection governed by law of jurisdiction 27 where debtor located. The local law of the jurisdiction in 28 which the debtor is located governs: 29 (1) perfection of a security interest in investment 30 property by filing; 31 (2) automatic perfection of a security interest in 32 investment property created by a broker or securities 33 intermediary; and 34 (3) automatic perfection of a security interest in SB1231 Engrossed -81- LRB9106284WHdv 1 a commodity contract or commodity account created by a 2 commodity intermediary.When possession by secured party3perfects security interest without filing. A security4interest in goods, instruments, money, negotiable5documents, or chattel paper may be perfected by the6secured party's taking possession of the collateral. A7security interest in the right to proceeds of a written8letter of credit may be perfected by the secured party's9taking possession of the letter of credit. If such10collateral other than goods covered by a negotiable11document is held by a bailee, the secured party is deemed12to have possession from the time the bailee receives13notification of the secured party's interest. A security14interest is perfected by possession from the time15possession is taken without relation back and continues16only so long as possession is retained, unless otherwise17specified in this Article. The security interest may be18otherwise perfected as provided in this Article before or19after the period of possession by the secured party.20 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.) 21 (810 ILCS 5/9-306) (from Ch. 26, par. 9-306) 22 Sec. 9-306. Law governing perfection and priority of 23 security interests in letter-of-credit rights. 24 (a) Governing law: issuer's or nominated person's 25 jurisdiction. Subject to subsection (c), the local law of the 26 issuer's jurisdiction or a nominated person's jurisdiction 27 governs perfection, the effect of perfection or 28 nonperfection, and the priority of a security interest in a 29 letter-of-credit right if the issuer's jurisdiction or 30 nominated person's jurisdiction is a State. 31 (b) Issuer's or nominated person's jurisdiction. For 32 purposes of this Part, an issuer's jurisdiction or nominated 33 person's jurisdiction is the jurisdiction whose law governs SB1231 Engrossed -82- LRB9106284WHdv 1 the liability of the issuer or nominated person with respect 2 to the letter-of-credit right as provided in Section 5-116. 3 (c) When Section not applicable. This Section does not 4 apply to a security interest that is perfected only under 5 Section 9-308(d)."Proceeds"; Secured Party's Rights on6Disposition of Collateral.7(1) "Proceeds" includes whatever is received upon the8sale, exchange, collection or other disposition of collateral9or proceeds. Insurance payable by reason of loss or damage to10the collateral is proceeds, except to the extent that it is11payable to a person other than a party to the security12agreement. Any payments or distributions made with respect to13investment property collateral are proceeds. Money, checks,14deposit accounts, and the like are "cash proceeds". All other15proceeds are "non-cash proceeds".16(2) Except where this Article otherwise provides, a17security interest continues in collateral notwithstanding18sale, exchange or other disposition thereof unless the19disposition was authorized by the secured party in the20security agreement or otherwise, and also continues in any21identifiable proceeds including collections received by the22debtor.23(3) The security interest in proceeds is a continuously24perfected security interest if the interest in the original25collateral was perfected but it ceases to be a perfected26security interest and becomes unperfected 20 days after27receipt of the proceeds by the debtor unless28(a) a filed financing statement covers the original29collateral and the proceeds are collateral in which a30security interest may be perfected by filing in the31office or offices where the financing statement has been32filed and, if the proceeds are acquired with cash33proceeds, the description of collateral in the financing34statement indicates the types of property constitutingSB1231 Engrossed -83- LRB9106284WHdv 1the proceeds; or2(b) a filed financing statement covers the original3collateral and the proceeds are identifiable cash4proceeds;5(c) the original collateral was investment property6and the proceeds are identifiable cash proceeds; or7(d) the security interest in the proceeds is8perfected before the expiration of the 20 day period.9Except as provided in this Section, a security interest10in proceeds can be perfected only by the methods or under the11circumstances permitted in this Article for original12collateral of the same type.13(4) In the event of insolvency proceedings instituted by14or against a debtor, a secured party with a perfected15security interest in proceeds has a perfected security16interest only in the following proceeds:17(a) in identifiable non-cash proceeds and in18separate deposit accounts containing only proceeds;19(b) in identifiable cash proceeds in the form of20money which is neither commingled with other money nor21deposited in a deposit account prior to the insolvency22proceedings;23(c) in identifiable cash proceeds in the form of24checks and the like which are not deposited in a deposit25account prior to the insolvency proceedings; and26(d) in all cash and deposit accounts of the debtor27in which proceeds have been commingled with other funds,28but the perfected security interest under this paragraph29(d) is30(i) subject to any right to set-off; and31(ii) limited to an amount not greater than the32amount of any cash proceeds received by the debtor33within 20 days before the institution of the34insolvency proceedings less the sum of (I) theSB1231 Engrossed -84- LRB9106284WHdv 1payments to the secured party on account of cash2proceeds received by the debtor during such period3and (II) the cash proceeds received by the debtor4during such period to which the secured party is5entitled under paragraphs (a) through (c) of this6subsection (4).7(5) If a sale of goods results in an account or chattel8paper which is transferred by the seller to a secured party,9and if the goods are returned to or are repossessed by the10seller or the secured party, the following rules determine11priorities:12(a) If the goods were collateral at the time of13sale, for an indebtedness of the seller which is still14unpaid, the original security interest attaches again to15the goods and continues as a perfected security interest16if it was perfected at the time when the goods were sold.17If the security interest was originally perfected by a18filing which is still effective, nothing further is19required to continue the perfected status; in any other20case, the secured party must take possession of the21returned or repossessed goods or must file.22(b) An unpaid transferee of the chattel paper has a23security interest in the goods against the transferor.24Such security interest is prior to a security interest25asserted under paragraph (a) to the extent that the26transferee of the chattel paper was entitled to priority27under Section 9-308.28(c) An unpaid transferee of the account has a29security interest in the goods against the transferor.30Such security interest is subordinate to a security31interest asserted under paragraph (a).32(d) A security interest of an unpaid transferee33asserted under paragraph (b) or (c) must be perfected for34protection against creditors of the transferor andSB1231 Engrossed -85- LRB9106284WHdv 1purchasers of the returned or repossessed goods.2 (Source: P.A. 89-364, eff. 1-1-96.) 3 (810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01) 4 Sec. 9-306.01. (Blank).Debtor disposing of collateral5and failing to pay secured party amount due under security6agreement; penalties for violation.7(1) It is unlawful for a debtor under the terms of a8security agreement (a) who has no right of sale or other9disposition of the collateral or (b) who has a right of sale10or other disposition of the collateral and is to account to11the secured party for the proceeds of any sale or other12disposition of the collateral, to sell or otherwise dispose13of the collateral and willfully and wrongfully to fail to pay14the secured party the amount of said proceeds due under the15security agreement. Failure to pay such proceeds to the16secured party within 10 days after the sale or other17disposition of the collateral is prima facie evidence of a18willful and wanton failure to pay.19(2) An individual convicted of a violation of this20Section shall be guilty of a Class 3 felony.21(3) A corporation convicted of a violation of this22Section shall be guilty of a business offense and shall be23fined not less than two thousand dollars nor more than ten24thousand dollars.25(4) In the event the debtor under the terms of a26security agreement is a corporation or a partnership, any27officer, director, manager, or managerial agent of the debtor28who violates this Section or causes the debtor to violate29this Section shall be guilty of a Class 3 felony.30 (Source: P.A. 83-69.) 31 (810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02) 32 Sec. 9-306.02. (Blank).(1) Where, pursuant to SectionSB1231 Engrossed -86- LRB9106284WHdv 19-205.1, a secured party has required that before the debtor2sells or otherwise disposes of collateral in the debtor's3possession he disclose to the secured party the persons to4whom he desires to sell or otherwise dispose of such5collateral, it is unlawful for the debtor to sell or6otherwise dispose of the collateral to a person other than a7person so disclosed to the secured party.8(2) An individual convicted of a violation of this9Section shall be guilty of a Class A misdemeanor.10(3) A corporation convicted of a violation of this11Section shall be guilty of a business offense and shall be12fined not less than $2,000 nor more than $10,000.13(4) In the event the debtor under the terms of a14security agreement is a corporation or a partnership, any15officer, director, manager or managerial agent of the debtor16who violates this Section or causes the debtor to violate17this Section shall be guilty of a Class A misdemeanor.18(5) It is an affirmative defense to a prosecution for19the violation of this Section that the debtor has paid to the20secured party the proceeds from the sale or other disposition21of the collateral within 10 days after such sale or22disposition.23 (Source: P.A. 84-1372.) 24 (810 ILCS 5/9-307) (from Ch. 26, par. 9-307) 25 Sec. 9-307. Location of debtor. 26 (a) "Place of business." In this Section, "place of 27 business" means a place where a debtor conducts its affairs. 28 (b) Debtor's location: general rules. Except as 29 otherwise provided in this Section, the following rules 30 determine a debtor's location: 31 (1) A debtor who is an individual is located at the 32 individual's principal residence. 33 (2) A debtor that is an organization and has only SB1231 Engrossed -87- LRB9106284WHdv 1 one place of business is located at its place of 2 business. 3 (3) A debtor that is an organization and has more 4 than one place of business is located at its chief 5 executive office. 6 (c) Limitation of applicability of subsection (b). 7 Subsection (b) applies only if a debtor's residence, place of 8 business, or chief executive office, as applicable, is 9 located in a jurisdiction whose law generally requires 10 information concerning the existence of a nonpossessory 11 security interest to be made generally available in a filing, 12 recording, or registration system as a condition or result of 13 the security interest's obtaining priority over the rights of 14 a lien creditor with respect to the collateral. If 15 subsection (b) does not apply, the debtor is located in the 16 District of Columbia. 17 (d) Continuation of location: cessation of existence, 18 etc. A person that ceases to exist, have a residence, or 19 have a place of business continues to be located in the 20 jurisdiction specified by subsections (b) and (c). 21 (e) Location of registered organization organized under 22 State law. A registered organization that is organized under 23 the law of a State is located in that State. 24 (f) Location of registered organization organized under 25 federal law; bank branches and agencies. Except as otherwise 26 provided in subsection (i), a registered organization that is 27 organized under the law of the United States and a branch or 28 agency of a bank that is not organized under the law of the 29 United States or a State are located: 30 (1) in the State that the law of the United States 31 designates, if the law designates a State of location; 32 (2) in the State that the registered organization, 33 branch, or agency designates, if the law of the United 34 States authorizes the registered organization, branch, or SB1231 Engrossed -88- LRB9106284WHdv 1 agency to designate its State of location; or 2 (3) in the District of Columbia, if neither 3 paragraph (1) nor paragraph (2) applies. 4 (g) Continuation of location: change in status of 5 registered organization. A registered organization continues 6 to be located in the jurisdiction specified by subsection (e) 7 or (f) notwithstanding: 8 (1) the suspension, revocation, forfeiture, or 9 lapse of the registered organization's status as such in 10 its jurisdiction of organization; or 11 (2) the dissolution, winding up, or cancellation of 12 the existence of the registered organization. 13 (h) Location of United States. The United States is 14 located in the District of Columbia. 15 (i) Location of foreign bank branch or agency if 16 licensed in only one State. A branch or agency of a bank 17 that is not organized under the law of the United States or a 18 State is located in the State in which the branch or agency 19 is licensed, if all branches and agencies of the bank are 20 licensed in only one State. 21 (j) Location of foreign air carrier. A foreign air 22 carrier under the Federal Aviation Act of 1958, as amended, 23 is located at the designated office of the agent upon which 24 service of process may be made on behalf of the carrier. 25 (k) Section applies only to this Part. This Section 26 applies only for purposes of this Part.Protection of Buyers27of Goods.28(1) Except as provided in subsection (4), a buyer in the29ordinary course of business, as defined in subsection (9) of30Section 1-201, takes free of a security interest created by31his seller even though the security interest is perfected and32even though the buyer knows of its existence.33(2) In the case of consumer goods, a buyer takes free of34a security interest even though perfected if he buys withoutSB1231 Engrossed -89- LRB9106284WHdv 1knowledge of the security interest, for value and for his own2personal, family or household purposes unless prior to the3purchase the secured party has filed a financing statement4covering such goods.5(3) A buyer other than a buyer in ordinary course of6business (subsection (1) of this Section) takes free of a7security interest to the extent that it secures future8advances made after the secured party acquires knowledge of9the purchase, or more than 45 days after the purchase,10whichever first occurs, unless made pursuant to a commitment11entered into without knowledge of the purchase and before the12expiration of the 45 day period.13(4) A buyer of farm products takes subject to a security14interest created by the seller if:15(a) within one year before the sale of the farm16products, the buyer has received from the secured party17or the seller written notice of the security interest18organized according to farm products that:19(i) is an original or reproduced copy thereof;20(ii) contains,21(I) the name and address of the secured22party;23(II) the name and address of the person24indebted to the secured party;25(III) the social security number of the26debtor or, in the case of a debtor doing27business other than as an individual, the28Internal Revenue Service taxpayer29identification number of such debtor;30(IV) a description of the farm products31subject to the security interest created by the32debtor, including the amount of such products33where applicable, crop year, county, and a34reasonable description of the property;SB1231 Engrossed -90- LRB9106284WHdv 1(iii) must be amended in writing, within 32months, similarly signed and transmitted, to reflect3material changes;4(iv) will lapse on either the expiration5period of the statement or the transmission of a6notice signed by the secured party that the7statement has lapsed, whichever occurs first; and8(v) sets forth any payment obligations imposed9on the buyer by the secured party as conditions for10waiver or release of the security interest; and11(b) the buyer has failed to perform the payment12obligations.13For the purposes of this subsection (4), a buyer of farm14products has received notice from the secured party or seller15when written notice of the security interest is sent to the16buyer by registered or certified mail.17 (Source: P.A. 84-1372; revised 10-31-98.) 18 (810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1) 19 Sec. 9-307.1. (Blank).A commission merchant or selling20agent who sells a farm product for others shall be subject to21a security interest created by the seller in such farm22product if-23(a) within one year before the sale of the farm24products, the buyer has received from the secured party or25the seller written notice of the security interest organized26according to farm products that:27(i) is an original or reproduced copy thereof;28(ii) contains,29(I) the name and address of the secured party;30(II) the name and address of the person indebted to the31secured party;32(III) the social security number of the debtor or, in33the case of a debtor doing business other than as anSB1231 Engrossed -91- LRB9106284WHdv 1individual, the Internal Revenue Service taxpayer2identification number of such debtor;3(IV) a description of the farm products subject to the4security interest created by the debtor, including the amount5of such products where applicable, crop year, county, and a6reasonable description of the property;7(iii) must be amended in writing, within 3 months,8similarly signed and transmitted, to reflect material9changes;10(iv) will lapse on either the expiration period of the11statement or the transmission of a notice signed by the12secured party that the statement has lapsed, whichever occurs13first; and14(v) sets forth any payment obligations imposed on the15buyer by the secured party as conditions for waiver or16release of the security interest; and17(b) the commission merchant or selling agent has failed18to perform the payment obligations.19For the purposes of this Section, a commission merchant20or selling agent has received notice from the secured party21or seller when written notice of the security interest is22sent to the commission merchant or selling agent by23registered or certified mail.24 (Source: P.A. 84-1372.) 25 (810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2) 26 Sec. 9-307.2. (Blank).A commission merchant or27selling agent who sells farm products for others, and28any person buying farm products in the ordinary course29of business from a person engaged in farming operations,30shall post at each licensed location where said31merchant, agent or person buying farm products in the32ordinary course of business does business a notice33which shall read as follows:SB1231 Engrossed -92- LRB9106284WHdv 1"NOTICE TO SELLERS OF FARM PRODUCTS2It is a criminal offense to sell farm products subject to3a security interest without making payment to the secured4party. You should notify the purchaser if there is a security5interest in the farm products you are selling."6Such notice shall be posted in a conspicuous manner and7shall be in contrasting type, large enough to be read from a8distance of 10 feet.9 (Source: P.A. 83-69.) 10 (810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new) 11 SUBPART 2. PERFECTION 12 (810 ILCS 5/9-308) (from Ch. 26, par. 9-308) 13 Sec. 9-308. When security interest or agricultural lien 14 is perfected; continuity of perfection. 15 (a) Perfection of security interest. Except as 16 otherwise provided in this Section and Section 9-309, a 17 security interest is perfected if it has attached and all of 18 the applicable requirements for perfection in Sections 9-310 19 through 9-316 have been satisfied. A security interest is 20 perfected when it attaches if the applicable requirements are 21 satisfied before the security interest attaches. 22 (b) Perfection of agricultural lien. An agricultural 23 lien is perfected if it has become effective and all of the 24 applicable requirements for perfection in Section 9-310 have 25 been satisfied. An agricultural lien is perfected when it 26 becomes effective if the applicable requirements are 27 satisfied before the agricultural lien becomes effective. 28 (c) Continuous perfection; perfection by different 29 methods. A security interest or agricultural lien is 30 perfected continuously if it is originally perfected by one 31 method under this Article and is later perfected by another 32 method under this Article, without an intermediate period SB1231 Engrossed -93- LRB9106284WHdv 1 when it was unperfected. 2 (d) Supporting obligation. Perfection of a security 3 interest in collateral also perfects a security interest in a 4 supporting obligation for the collateral. 5 (e) Lien securing right to payment. Perfection of a 6 security interest in a right to payment or performance also 7 perfects a security interest in a security interest, 8 mortgage, or other lien on personal or real property securing 9 the right. 10 (f) Security entitlement carried in securities account. 11 Perfection of a security interest in a securities account 12 also perfects a security interest in the security 13 entitlements carried in the securities account. 14 (g) Commodity contract carried in commodity account. 15 Perfection of a security interest in a commodity account also 16 perfects a security interest in the commodity contracts 17 carried in the commodity account.Purchase of Chattel Paper18and Instruments.19A purchaser of chattel paper or an instrument who gives20new value and takes possession of it in the ordinary course21of his business has priority over a security interest in the22chattel paper or instrument23(a) which is perfected under Section 9-304 (permissive24filing and temporary perfection) or under Section 9-30625(perfection as to proceeds) if he acts without knowledge that26the specific paper or instrument is subject to a security27interest; or28(b) which is claimed merely as proceeds of inventory29subject to a security interest (Section 9-306) even though he30knows that the specific paper or instrument is subject to the31security interest.32 (Source: P. A. 77-2810.) 33 (810 ILCS 5/9-309) (from Ch. 26, par. 9-309) SB1231 Engrossed -94- LRB9106284WHdv 1 Sec. 9-309. Security interest perfected upon attachment. 2 The following security interests are perfected when they 3 attach: 4 (1) a purchase-money security interest in consumer 5 goods, except as otherwise provided in Section 9-311(b) 6 with respect to consumer goods that are subject to a 7 statute or treaty described in Section 9-311(a); 8 (2) an assignment of accounts or payment 9 intangibles which does not by itself or in conjunction 10 with other assignments to the same assignee transfer a 11 significant part of the assignor's outstanding accounts 12 or payment intangibles; 13 (3) a sale of a payment intangible; 14 (4) a sale of a promissory note; 15 (5) a security interest created by the assignment 16 of a health-care-insurance receivable to the provider of 17 the health-care goods or services; 18 (6) a security interest arising under Section 19 2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor 20 obtains possession of the collateral; 21 (7) a security interest of a collecting bank 22 arising under Section 4-210; 23 (8) a security interest of an issuer or nominated 24 person arising under Section 5-118; 25 (9) a security interest arising in the delivery of 26 a financial asset under Section 9-206(c); 27 (10) a security interest in investment property 28 created by a broker or securities intermediary; 29 (11) a security interest in a commodity contract or 30 a commodity account created by a commodity intermediary; 31 (12) an assignment for the benefit of all creditors 32 of the transferor and subsequent transfers by the 33 assignee thereunder; and 34 (13) a security interest created by an assignment SB1231 Engrossed -95- LRB9106284WHdv 1 of a beneficial interest in a decedent's estate. 2Protection of purchasers of instruments, documents and3securities. Nothing in this Article limits the rights of4a holder in due course of a negotiable instrument5(Section 3-302) or a holder to whom a negotiable document6of title has been duly negotiated (Section 7-501) or a7protected purchaser of a security (Section 8-303) and8such holders or purchasers take priority over an earlier9security interest even though perfected. Filing under10this Article does not constitute notice of the security11interest to such holders or purchasers.12 (Source: P.A. 89-364, eff. 1-1-96.) 13 (810 ILCS 5/9-310) (from Ch. 26, par. 9-310) 14 Sec. 9-310. When filing required to perfect security 15 interest or agricultural lien; security interests and 16 agricultural liens to which filing provisions do not apply. 17 (a) General rule: perfection by filing. Except as 18 otherwise provided in subsection (b) and Section 9-312(b), a 19 financing statement must be filed to perfect all security 20 interests and agricultural liens. 21 (b) Exceptions: filing not necessary. The filing of a 22 financing statement is not necessary to perfect a security 23 interest: 24 (1) that is perfected under Section 9-308(d), (e), 25 (f), or (g); 26 (2) that is perfected under Section 9-309 when it 27 attaches; 28 (3) in property subject to a statute, regulation, 29 or treaty described in Section 9-311(a); 30 (4) in goods in possession of a bailee which is 31 perfected under Section 9-312(d)(1) or (2); 32 (5) in certificated securities, documents, goods, 33 or instruments which is perfected without filing or SB1231 Engrossed -96- LRB9106284WHdv 1 possession under Section 9-312(e), (f), or (g); 2 (6) in collateral in the secured party's possession 3 under Section 9-313; 4 (7) in a certificated security which is perfected 5 by delivery of the security certificate to the secured 6 party under Section 9-313; 7 (8) in deposit accounts, electronic chattel paper, 8 investment property, or letter-of-credit rights which is 9 perfected by control under Section 9-314; 10 (9) in proceeds which is perfected under Section 11 9-315; or 12 (10) that is perfected under Section 9-316. 13 (c) Assignment of perfected security interest. If a 14 secured party assigns a perfected security interest or 15 agricultural lien, a filing under this Article is not 16 required to continue the perfected status of the security 17 interest against creditors of and transferees from the 18 original debtor.Priority of certain liens arising by19operation of law.20When a person in the ordinary course of his business21furnishes services or materials with respect to goods subject22to a security interest, a lien upon goods in the possession23of such person given by statute or rule of law for such24materials or services takes priority over a perfected25security interest unless the lien is statutory and the26statute expressly provides otherwise.27 (Source: Laws 1961, p. 2101.) 28 (810 ILCS 5/9-311) (from Ch. 26, par. 9-311) 29 Sec. 9-311. Perfection of security interests in property 30 subject to certain statutes, regulations, and treaties. 31 (a) Security interest subject to other law. Except as 32 otherwise provided in subsection (d), the filing of a 33 financing statement is not necessary or effective to perfect SB1231 Engrossed -97- LRB9106284WHdv 1 a security interest in property subject to: 2 (1) a statute, regulation, or treaty of the United 3 States whose requirements for a security interest's 4 obtaining priority over the rights of a lien creditor 5 with respect to the property preempt Section 9-310(a); 6 (2) the Illinois Vehicle Code or the Boat 7 Registration and Safety Act; or 8 (3) a certificate-of-title statute of another 9 jurisdiction which provides for a security interest to be 10 indicated on the certificate as a condition or result of 11 the security interest's obtaining priority over the 12 rights of a lien creditor with respect to the property. 13 (b) Compliance with other law. Compliance with the 14 requirements of a statute, regulation, or treaty described in 15 subsection (a) for obtaining priority over the rights of a 16 lien creditor is equivalent to the filing of a financing 17 statement under this Article. Except as otherwise provided 18 in subsection (d) and Sections 9-313 and 9-316(d) and (e) for 19 goods covered by a certificate of title, a security interest 20 in property subject to a statute, regulation, or treaty 21 described in subsection (a) may be perfected only by 22 compliance with those requirements, and a security interest 23 so perfected remains perfected notwithstanding a change in 24 the use or transfer of possession of the collateral. 25 (c) Duration and renewal of perfection. Except as 26 otherwise provided in subsection (d) and Section 9-316(d) and 27 (e), duration and renewal of perfection of a security 28 interest perfected by compliance with the requirements 29 prescribed by a statute, regulation, or treaty described in 30 subsection (a) are governed by the statute, regulation, or 31 treaty. In other respects, the security interest is subject 32 to this Article. 33 (d) Inapplicability to certain inventory. During any 34 period in which collateral subject to a statute specified in SB1231 Engrossed -98- LRB9106284WHdv 1 subsection (a)(2) is inventory held for sale or lease by a 2 person or leased by that person as lessor and that person is 3 in the business of selling or leasing goods of that kind, 4 this Section does not apply to a security interest in that 5 collateral created by that person as debtor.Alienability of6debtor's rights: judicial process.7The debtor's rights in collateral may be voluntarily or8involuntarily transferred (by way of sale, creation of a9security interest, attachment, levy, garnishment or other10judicial process) notwithstanding a provision in the security11agreement prohibiting any transfer or making the transfer12constitute a default.13 (Source: Laws 1961, p. 2101.) 14 (810 ILCS 5/9-312) (from Ch. 26, par. 9-312) 15 Sec. 9-312. Perfection of security interests in chattel 16 paper, deposit accounts, documents, goods covered by 17 documents, instruments, investment property, letter-of-credit 18 rights, and money; perfection by permissive filing; temporary 19 perfection without filing or transfer of possession. 20 (a) Perfection by filing permitted. A security interest 21 in chattel paper, negotiable documents, instruments, or 22 investment property may be perfected by filing. 23 (b) Control or possession of certain collateral. Except 24 as otherwise provided in Section 9-315(c) and (d) for 25 proceeds: 26 (1) a security interest in a deposit account may be 27 perfected only by control under Section 9-314; 28 (2) and except as otherwise provided in Section 29 9-308(d), a security interest in a letter-of-credit right 30 may be perfected only by control under Section 9-314; and 31 (3) a security interest in money may be perfected 32 only by the secured party's taking possession under 33 Section 9-313. SB1231 Engrossed -99- LRB9106284WHdv 1 (c) Goods covered by negotiable document. While goods 2 are in the possession of a bailee that has issued a 3 negotiable document covering the goods: 4 (1) a security interest in the goods may be 5 perfected by perfecting a security interest in the 6 document; and 7 (2) a security interest perfected in the document 8 has priority over any security interest that becomes 9 perfected in the goods by another method during that 10 time. 11 (d) Goods covered by nonnegotiable document. While 12 goods are in the possession of a bailee that has issued a 13 nonnegotiable document covering the goods, a security 14 interest in the goods may be perfected by: 15 (1) issuance of a document in the name of the 16 secured party; 17 (2) the bailee's receipt of notification of the 18 secured party's interest; or 19 (3) filing as to the goods. 20 (e) Temporary perfection: new value. A security 21 interest in certificated securities, negotiable documents, or 22 instruments is perfected without filing or the taking of 23 possession for a period of 20 days from the time it attaches 24 to the extent that it arises for new value given under an 25 authenticated security agreement. 26 (f) Temporary perfection: goods or documents made 27 available to debtor. A perfected security interest in a 28 negotiable document or goods in possession of a bailee, other 29 than one that has issued a negotiable document for the goods, 30 remains perfected for 20 days without filing if the secured 31 party makes available to the debtor the goods or documents 32 representing the goods for the purpose of: 33 (1) ultimate sale or exchange; or 34 (2) loading, unloading, storing, shipping, SB1231 Engrossed -100- LRB9106284WHdv 1 transshipping, manufacturing, processing, or otherwise 2 dealing with them in a manner preliminary to their sale 3 or exchange. 4 (g) Temporary perfection: delivery of security 5 certificate or instrument to debtor. A perfected security 6 interest in a certificated security or instrument remains 7 perfected for 20 days without filing if the secured party 8 delivers the security certificate or instrument to the debtor 9 for the purpose of: 10 (1) ultimate sale or exchange; or 11 (2) presentation, collection, enforcement, renewal, 12 or registration of transfer. 13 (h) Expiration of temporary perfection. After the 14 20-day period specified in subsection (e), (f), or (g) 15 expires, perfection depends upon compliance with this 16 Article.Priorities Among Conflicting Security Interests in17the Same Collateral.18(1) The rules of priority stated in other Sections of19this Part and in the following Sections shall govern when20applicable: Section 4-210 with respect to the security21interests of collecting banks in items being collected,22accompanying documents and proceeds; Section 9-103 on23security interests related to other jurisdictions; Section249-114 on consignments; Section 9-115 on security interests in25investment property.26(2) A perfected security interest in crops for new value27given to enable the debtor to produce the crops during the28production season and given not more than three months before29the crops become growing crops by planting or otherwise takes30priority over an earlier perfected security interest to the31extent that such earlier interest secures obligations due32more than six months before the crops become growing crops by33planting or otherwise, even though the person giving new34value had knowledge of the earlier security interest.SB1231 Engrossed -101- LRB9106284WHdv 1(3) A perfected purchase money security interest in2inventory has priority over a conflicting security interest3in the same inventory and also has priority in identifiable4cash proceeds received on or before the delivery of the5inventory to a buyer if6(a) the purchase money security interest is7perfected at the time the debtor receives possession of8the inventory; and9(b) the purchase money secured party gives10notification in writing to the holder of the conflicting11security interest if the holder had filed a financing12statement covering the same types of inventory (i) before13the date of the filing made by the purchase money secured14party, or (ii) before the beginning of the 21 day period15where the purchase money security interest is temporarily16perfected without filing or possession (subsection (5) of17Section 9-304); and18(c) the holder of the conflicting security interest19receives the notification within 5 years before the20debtor receives possession of the inventory; and21(d) the notification states that the person giving22the notice has or expects to acquire a purchase money23security interest in inventory of the debtor, describing24such inventory by item or type.25(4) A purchase money security interest in collateral26other than inventory has priority over a conflicting security27interest in the same collateral or its proceeds if the28purchase money security interest is perfected at the time the29debtor receives possession of the collateral or within 2030days thereafter.31(5) In all cases not governed by other rules stated in32this Section (including cases of purchase money security33interests which do not qualify for the special priorities set34forth in subsections (3) and (4) of this Section), prioritySB1231 Engrossed -102- LRB9106284WHdv 1between conflicting security interests in the same collateral2shall be determined according to the following rules:3(a) Conflicting security interests rank according4to priority in time of filing or perfection. Priority5dates from the time a filing is first made covering the6collateral or the time the security interest is first7perfected, whichever is earlier, provided that there is8no period thereafter when there is neither filing nor9perfection.10(b) So long as conflicting security interests are11unperfected, the first to attach has priority.12(6) For the purposes of subsection (5) a date of filing13or perfection as to collateral is also a date of filing or14perfection as to proceeds.15(7) If future advances are made while a security16interest is perfected by filing, the taking of possession or17under Section 9-115 or 9-116 on investment property, the18security interest has the same priority for the purposes of19subsection (5) with respect to the future advances as it does20with respect to the first advance. If a commitment is made21before or while the security interest is so perfected, the22security interest has the same priority with respect to23advances made pursuant thereto. In other cases a perfected24security interest has priority from the date the advance is25made.26 (Source: P.A. 89-364, eff. 1-1-96.) 27 (810 ILCS 5/9-313) (from Ch. 26, par. 9-313) 28 Sec. 9-313. When possession by or delivery to secured 29 party perfects security interest without filing. 30 (a) Perfection by possession or delivery. Except as 31 otherwise provided in subsection (b), a secured party may 32 perfect a security interest in negotiable documents, goods, 33 instruments, money, or tangible chattel paper by taking SB1231 Engrossed -103- LRB9106284WHdv 1 possession of the collateral. A secured party may perfect a 2 security interest in certificated securities by taking 3 delivery of the certificated securities under Section 8-301. 4 (b) Goods covered by certificate of title. With respect 5 to goods covered by a certificate of title issued by this 6 State, a secured party may perfect a security interest in the 7 goods by taking possession of the goods only in the 8 circumstances described in Section 9-316(d). 9 (c) Collateral in possession of person other than 10 debtor. With respect to collateral other than certificated 11 securities and goods covered by a document, a secured party 12 takes possession of collateral in the possession of a person 13 other than the debtor, the secured party, or a lessee of the 14 collateral from the debtor in the ordinary course of the 15 debtor's business, when: 16 (1) the person in possession authenticates a record 17 acknowledging that it holds possession of the collateral 18 for the secured party's benefit; or 19 (2) the person takes possession of the collateral 20 after having authenticated a record acknowledging that it 21 will hold possession of collateral for the secured 22 party's benefit. 23 (d) Time of perfection by possession; continuation of 24 perfection. If perfection of a security interest depends upon 25 possession of the collateral by a secured party, perfection 26 occurs no earlier than the time the secured party takes 27 possession and continues only while the secured party retains 28 possession. 29 (e) Time of perfection by delivery; continuation of 30 perfection. A security interest in a certificated security in 31 registered form is perfected by delivery when delivery of the 32 certificated security occurs under Section 8-301 and remains 33 perfected by delivery until the debtor obtains possession of 34 the security certificate. SB1231 Engrossed -104- LRB9106284WHdv 1 (f) Acknowledgment not required. A person in possession 2 of collateral is not required to acknowledge that it holds 3 possession for a secured party's benefit. 4 (g) Effectiveness of acknowledgment; no duties or 5 confirmation. If a person acknowledges that it holds 6 possession for the secured party's benefit: 7 (1) the acknowledgment is effective under 8 subsection (c) or Section 8-301(a), even if the 9 acknowledgment violates the rights of a debtor; and 10 (2) unless the person otherwise agrees or law other 11 than this Article otherwise provides, the person does not 12 owe any duty to the secured party and is not required to 13 confirm the acknowledgment to another person. 14 (h) Secured party's delivery to person other than 15 debtor. A secured party having possession of collateral does 16 not relinquish possession by delivering the collateral to a 17 person other than the debtor or a lessee of the collateral 18 from the debtor in the ordinary course of the debtor's 19 business if the person was instructed before the delivery or 20 is instructed contemporaneously with the delivery: 21 (1) to hold possession of the collateral for the 22 secured party's benefit; or 23 (2) to redeliver the collateral to the secured 24 party. 25 (i) Effect of delivery under subsection (h); no duties 26 or confirmation. A secured party does not relinquish 27 possession, even if a delivery under subsection (h) violates 28 the rights of a debtor. A person to which collateral is 29 delivered under subsection (h) does not owe any duty to the 30 secured party and is not required to confirm the delivery to 31 another person unless the person otherwise agrees or law 32 other than this Article otherwise provides. 33Priority of Security Interests in Fixtures.34(1) In this Section and in the provisions of Part 4 ofSB1231 Engrossed -105- LRB9106284WHdv 1this Article referring to fixture filing, unless the context2otherwise requires3(a) Goods are "fixtures" when they become so4related to particular real estate that an interest in5them arises under real estate law6(b) A "fixture filing" is the filing in the office7where a mortgage on the real estate would be filed or8recorded of a financing statement covering goods which9are or are to become fixtures and conforming to the10requirements of subsection (5) of Section 9-40211(c) A mortgage is a "construction mortgage" to the12extent that it secures an obligation incurred for the13construction of an improvement on land including the14acquisition cost of the land, if the recorded writing so15indicates.16(2) A security interest under this Article may be17created in goods which are fixtures or may continue in goods18which become fixtures, but no security interest exists under19this Article in ordinary building materials incorporated into20an improvement on land.21(3) This Article does not prevent creation of an22encumbrance upon fixtures pursuant to real estate law.23(4) A perfected security interest in fixtures has24priority over the conflicting interest of an encumbrancer or25owner of the real estate where26(a) the security interest is a purchase money27security interest, the interest of the encumbrancer or28owner arises before the goods become fixtures, the29security interest is perfected by a fixture filing before30the goods become fixtures or within 10 days thereafter,31and the debtor has an interest of record in the real32estate or is in possession of the real estate; or33(b) the security interest is perfected by a fixture34filing before the interest of the encumbrancer or ownerSB1231 Engrossed -106- LRB9106284WHdv 1is of record, the security interest has priority over any2conflicting interest of a predecessor in title of the3encumbrancer or owner, and the debtor has an interest of4record in the real estate or is in possession of the real5estate; or6(c) the fixtures are readily removable factory or7office machines or readily removable replacements of8domestic appliances which are consumer goods, and before9the goods become fixtures the security interest is10perfected by any method permitted by this Article; or11(d) the conflicting interest is a lien on the real12estate obtained by legal or equitable proceedings after13the security interest was perfected by any method14permitted by this Article.15(5) A security interest in fixtures, whether or not16perfected, has priority over the conflicting interest of an17encumbrancer or owner of the real estate where18(a) the encumbrancer or owner has consented in19writing to the security interest or has disclaimed an20interest in the goods as fixtures; or21(b) the debtor has a right to remove the goods as22against the encumbrancer or owner. If the debtor's right23terminates, the priority of the security interest24continues for a reasonable time.25(6) Notwithstanding paragraph (a) of subsection (4) but26otherwise subject to subsections (4) and (5), a security27interest in fixtures is subordinate to a construction28mortgage recorded before the goods become fixtures if the29goods become fixtures before the completion of the30construction. To the extent that it is given to refinance a31construction mortgage, a mortgage has this priority to the32same extent as the construction mortgage.33(7) In cases not within the preceding subsections, a34security interest in fixtures is subordinate to theSB1231 Engrossed -107- LRB9106284WHdv 1conflicting interest of an encumbrancer or owner of the2related real estate who is not the debtor.3(8) When the secured party has priority over all owners4and encumbrancers of the real estate, he may, on default,5subject to the provisions of Part 5, remove his collateral6from the real estate but he must reimburse any encumbrancer7or owner of the real estate who is not the debtor and who has8not otherwise agreed for the cost of repair of any physical9injury, but not for any diminution in value of the real10estate caused by the absence of the goods removed or by any11necessity of replacing them. A person entitled to12reimbursement may refuse permission to remove until the13secured party gives adequate security for the performance of14this obligation.15 (Source: P. A. 78-238; revised 10-31-98.) 16 (810 ILCS 5/9-314) (from Ch. 26, par. 9-314) 17 Sec. 9-314. Perfection by control. 18 (a) Perfection by control. A security interest in 19 investment property, deposit accounts, letter-of-credit 20 rights, or electronic chattel paper may be perfected by 21 control of the collateral under Section 9-104, 9-105, 9-106, 22 or 9-107. 23 (b) Specified collateral: time of perfection by 24 control; continuation of perfection. A security interest in 25 deposit accounts, electronic chattel paper, or 26 letter-of-credit rights is perfected by control under Section 27 9-104, 9-105, or 9-107 when the secured party obtains control 28 and remains perfected by control only while the secured party 29 retains control. 30 (c) Investment property: time of perfection by control; 31 continuation of perfection. A security interest in 32 investment property is perfected by control under Section 33 9-106 from the time the secured party obtains control and SB1231 Engrossed -108- LRB9106284WHdv 1 remains perfected by control until: 2 (1) the secured party does not have control; and 3 (2) one of the following occurs: 4 (A) if the collateral is a certificated 5 security, the debtor has or acquires possession of 6 the security certificate; 7 (B) if the collateral is an uncertificated 8 security, the issuer has registered or registers the 9 debtor as the registered owner; or 10 (C) if the collateral is a security 11 entitlement, the debtor is or becomes the 12 entitlement holder.Accessions.13(1) A security interest in goods which attaches before14they are installed in or affixed to other goods takes15priority as to the goods installed or affixed (called in this16section "accessions") over the claims of all persons to the17whole except as stated in subsection (3) and subject to18Section 9--315(1).19(2) A security interest which attaches to goods after20they become part of a whole is valid against all persons21subsequently acquiring interests in the whole except as22stated in subsection (3) but is invalid against any person23with an interest in the whole at the time the security24interest attaches to the goods who has not in writing25consented to the security interest or disclaimed an interest26in the goods as part of the whole.27(3) The security interests described in subsections (1)28and (2) do not take priority over29(a) a subsequent purchaser for value of any30interest in the whole; or31(b) a creditor with a lien on the whole32subsequently obtained by judicial proceedings; or33(c) a creditor with a prior perfected security34interest in the whole to the extent that he makes subsequentSB1231 Engrossed -109- LRB9106284WHdv 1advances if the subsequent purchase is made, the lien by2judicial proceedings obtained or the subsequent advance under3the prior perfected security interest is made or contracted4for without knowledge of the security interest and before it5is perfected. A purchaser of the whole at a foreclosure sale6other than the holder of a perfected security interest7purchasing at his own foreclosure sale is a subsequent8purchaser within this Section.9(4) When under subsections (1) or (2) and (3) a secured10party has an interest in accessions which has priority over11the claims of all persons who have interests in the whole, he12may on default subject to the provisions of Part 5 remove his13collateral from the whole but he must reimburse any14encumbrancer or owner of the whole who is not the debtor and15who has not otherwise agreed for the cost of repair of any16physical injury but not for any diminution in value of the17whole caused by the absence of the goods removed or by any18necessity for replacing them. A person entitled to19reimbursement may refuse permission to remove until the20secured party gives adequate security for the performance of21this obligation.22 (Source: Laws 1961, p. 2101.) 23 (810 ILCS 5/9-315) (from Ch. 26, par. 9-315) 24 Sec. 9-315. Secured party's rights on disposition of 25 collateral and in proceeds. 26 (a) Disposition of collateral: continuation of security 27 interest or agricultural lien; proceeds. Except as otherwise 28 provided in this Article and in Section 2-403(2): 29 (1) a security interest or agricultural lien 30 continues in collateral notwithstanding sale, lease, 31 license, exchange, or other disposition thereof unless 32 the secured party authorized the disposition free of the 33 security interest or agricultural lien; and SB1231 Engrossed -110- LRB9106284WHdv 1 (2) a security interest attaches to any 2 identifiable proceeds of collateral. 3 (b) When commingled proceeds identifiable. Proceeds 4 that are commingled with other property are identifiable 5 proceeds: 6 (1) if the proceeds are goods, to the extent 7 provided by Section 9-336; and 8 (2) if the proceeds are not goods, to the extent 9 that the secured party identifies the proceeds by a 10 method of tracing, including application of equitable 11 principles, that is permitted under law other than this 12 Article with respect to commingled property of the type 13 involved. 14 (c) Perfection of security interest in proceeds. A 15 security interest in proceeds is a perfected security 16 interest if the security interest in the original collateral 17 was perfected. 18 (d) Continuation of perfection. A perfected security 19 interest in proceeds becomes unperfected on the 21st day 20 after the security interest attaches to the proceeds unless: 21 (1) the following conditions are satisfied: 22 (A) a filed financing statement covers the 23 original collateral; 24 (B) the proceeds are collateral in which a 25 security interest may be perfected by filing in the 26 office in which the financing statement has been 27 filed; and 28 (C) the proceeds are not acquired with cash 29 proceeds; 30 (2) the proceeds are identifiable cash proceeds; or 31 (3) the security interest in the proceeds is 32 perfected other than under subsection (c) when the 33 security interest attaches to the proceeds or within 20 34 days thereafter. SB1231 Engrossed -111- LRB9106284WHdv 1 (e) When perfected security interest in proceeds becomes 2 unperfected. If a filed financing statement covers the 3 original collateral, a security interest in proceeds which 4 remains perfected under subsection (d)(1) becomes unperfected 5 at the later of: 6 (1) when the effectiveness of the filed financing 7 statement lapses under Section 9-515 or is terminated 8 under Section 9-513; or 9 (2) the 21st day after the security interest 10 attaches to the proceeds.Priority when goods are11commingled or processed.12(1) If a security interest in goods was perfected and13subsequently the goods or a part thereof have become part of14a product or mass, the security interest continues in the15product or mass if16(a) the goods are so manufactured, processed,17assembled or commingled that their identity is lost in the18product or mass; or19(b) a financing statement covering the original20goods also covers the product into which the goods have been21manufactured, processed or assembled. In a case to which22paragraph (b) applies, no separate security interest in that23part of the original goods which has been manufactured,24processed or assembled into the product may be claimed under25Section 9--314.26(2) When under subsection (1) more than one security27interest attaches to the product or mass, they rank equally28according to the ratio that the cost of the goods to which29each interest originally attached bears to the cost of the30total product or mass.31 (Source: Laws 1961, p. 2101.) 32 (810 ILCS 5/9-315.01 new) 33 Sec. 9-315.01. Debtor disposing of collateral and SB1231 Engrossed -112- LRB9106284WHdv 1 failing to pay secured party amount due under security 2 agreement; penalties for violation. 3 (1) It is unlawful for a debtor under the terms of a 4 security agreement (a) who has no right of sale or other 5 disposition of the collateral or (b) who has a right of sale 6 or other disposition of the collateral and is to account to 7 the secured party for the proceeds of any sale or other 8 disposition of the collateral, to sell or otherwise dispose 9 of the collateral and willfully and wrongfully to fail to pay 10 the secured party the amount of said proceeds due under the 11 security agreement. Failure to pay such proceeds to the 12 secured party within 10 days after the sale or other 13 disposition of the collateral is prima facie evidence of a 14 willful and wanton failure to pay. 15 (2) An individual convicted of a violation of this 16 Section shall be guilty of a Class 3 felony. 17 (3) A corporation convicted of a violation of this 18 Section shall be guilty of a business offense and shall be 19 fined not less than $2,000 nor more than $10,000. 20 (4) In the event the debtor under the terms of a 21 security agreement is a corporation or a partnership, any 22 officer, director, manager, or managerial agent of the debtor 23 who violates this Section or causes the debtor to violate 24 this Section shall be guilty of a Class 3 felony. 25 (810 ILCS 5/9-315.02 new) 26 Sec. 315.02. Disposal of collateral by debtor to persons 27 other than those previously disclosed to secured 28 party-penalties for violation-defense. 29 (1) Where, pursuant to Section 9-205.1, a secured party 30 has required that before the debtor sells or otherwise 31 disposes of collateral in the debtor's possession he disclose 32 to the secured party the persons to whom he desires to sell 33 or otherwise dispose of such collateral, it is unlawful for SB1231 Engrossed -113- LRB9106284WHdv 1 the debtor to sell or otherwise dispose of the collateral to 2 a person other than a person so disclosed to the secured 3 party. 4 (2) An individual convicted of a violation of this 5 Section shall be guilty of a Class A misdemeanor. 6 (3) A corporation convicted of a violation of this 7 Section shall be guilty of a business offense and shall be 8 fined not less than $2,000 nor more than $10,000. 9 (4) In the event the debtor under the terms of a 10 security agreement is a corporation or a partnership, any 11 officer, director, manager, or managerial agent of the debtor 12 who violates this Section or causes the debtor to violate 13 this Section shall be guilty of a Class A misdemeanor. 14 (5) It is an affirmative defense to a prosecution for 15 the violation of this Section that the debtor has paid to the 16 secured party the proceeds from the sale or other disposition 17 of the collateral within 10 days after such sale or 18 disposition. 19 (810 ILCS 5/9-316) (from Ch. 26, par. 9-316) 20 Sec. 9-316. Continued perfection of security interest 21 following change in governing law. 22 (a) General rule: effect on perfection of change in 23 governing law. A security interest perfected pursuant to the 24 law of the jurisdiction designated in Section 9-301(1) or 25 9-305(c) remains perfected until the earliest of: 26 (1) the time perfection would have ceased under the 27 law of that jurisdiction; 28 (2) the expiration of four months after a change of 29 the debtor's location to another jurisdiction; or 30 (3) the expiration of one year after a transfer of 31 collateral to a person that thereby becomes a debtor and 32 is located in another jurisdiction. 33 (b) Security interest perfected or unperfected under law SB1231 Engrossed -114- LRB9106284WHdv 1 of new jurisdiction. If a security interest described in 2 subsection (a) becomes perfected under the law of the other 3 jurisdiction before the earliest time or event described in 4 that subsection, it remains perfected thereafter. If the 5 security interest does not become perfected under the law of 6 the other jurisdiction before the earliest time or event, it 7 becomes unperfected and is deemed never to have been 8 perfected as against a purchaser of the collateral for value. 9 (c) Possessory security interest in collateral moved to 10 new jurisdiction. A possessory security interest in 11 collateral, other than goods covered by a certificate of 12 title and as-extracted collateral consisting of goods, 13 remains continuously perfected if: 14 (1) the collateral is located in one jurisdiction 15 and subject to a security interest perfected under the 16 law of that jurisdiction; 17 (2) thereafter the collateral is brought into 18 another jurisdiction; and 19 (3) upon entry into the other jurisdiction, the 20 security interest is perfected under the law of the other 21 jurisdiction. 22 (d) Goods covered by certificate of title from this 23 State. Except as otherwise provided in subsection (e), a 24 security interest in goods covered by a certificate of title 25 which is perfected by any method under the law of another 26 jurisdiction when the goods become covered by a certificate 27 of title from this State remains perfected until the security 28 interest would have become unperfected under the law of the 29 other jurisdiction had the goods not become so covered. 30 (e) When subsection (d) security interest becomes 31 unperfected against purchasers. A security interest 32 described in subsection (d) becomes unperfected as against a 33 purchaser of the goods for value and is deemed never to have 34 been perfected as against a purchaser of the goods for value SB1231 Engrossed -115- LRB9106284WHdv 1 if the applicable requirements for perfection under Section 2 9-311(b) or 9-313 are not satisfied before the earlier of: 3 (1) the time the security interest would have 4 become unperfected under the law of the other 5 jurisdiction had the goods not become covered by a 6 certificate of title from this State; or 7 (2) the expiration of four months after the goods 8 had become so covered. 9 (f) Change in jurisdiction of bank, issuer, nominated 10 person, securities intermediary, or commodity intermediary. 11 A security interest in deposit accounts, letter-of-credit 12 rights, or investment property which is perfected under the 13 law of the bank's jurisdiction, the issuer's jurisdiction, a 14 nominated person's jurisdiction, the securities 15 intermediary's jurisdiction, or the commodity intermediary's 16 jurisdiction, as applicable, remains perfected until the 17 earlier of: 18 (1) the time the security interest would have 19 become unperfected under the law of that jurisdiction; or 20 (2) the expiration of four months after a change of 21 the applicable jurisdiction to another jurisdiction. 22 (g) Subsection (f) security interest perfected or 23 unperfected under law of new jurisdiction. If a security 24 interest described in subsection (f) becomes perfected under 25 the law of the other jurisdiction before the earlier of the 26 time or the end of the period described in that subsection, 27 it remains perfected thereafter. If the security interest 28 does not become perfected under the law of the other 29 jurisdiction before the earlier of that time or the end of 30 that period, it becomes unperfected and is deemed never to 31 have been perfected as against a purchaser of the collateral 32 for value.Priority subject to subordination.33Nothing in this Article prevents subordination by34agreement by any person entitled to priority.SB1231 Engrossed -116- LRB9106284WHdv 1 (Source: Laws 1961, p. 2101.) 2 (810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new) 3 SUBPART 3. PRIORITY 4 (810 ILCS 5/9-317) (from Ch. 26, par. 9-317) 5 Sec. 9-317. Interests that take priority over or take 6 free of security interest or agricultural lien. 7 (a) Conflicting security interests and rights of lien 8 creditors. A security interest or agricultural lien is 9 subordinate to the rights of: 10 (1) a person entitled to priority under Section 11 9-322; and 12 (2) except as otherwise provided in subsection (e) 13 or (f), a person that becomes a lien creditor before the 14 earlier of the time: 15 (A) the security interest or agricultural lien 16 is perfected; or 17 (B) one of the conditions specified in Section 18 9-203(b)(3) is met and a financing statement 19 covering the collateral is filed. 20 (b) Buyers that receive delivery. Except as otherwise 21 provided in subsection (e), a buyer, other than a secured 22 party, of tangible chattel paper, documents, goods, 23 instruments, or a security certificate takes free of a 24 security interest or agricultural lien if the buyer gives 25 value and receives delivery of the collateral without 26 knowledge of the security interest or agricultural lien and 27 before it is perfected. 28 (c) Lessees that receive delivery. Except as otherwise 29 provided in subsection (e), a lessee of goods takes free of a 30 security interest or agricultural lien if the lessee gives 31 value and receives delivery of the collateral without 32 knowledge of the security interest or agricultural lien and SB1231 Engrossed -117- LRB9106284WHdv 1 before it is perfected. 2 (d) Licensees and buyers of certain collateral. A 3 licensee of a general intangible or a buyer, other than a 4 secured party, of accounts, electronic chattel paper, general 5 intangibles, or investment property other than a certificated 6 security takes free of a security interest if the licensee or 7 buyer gives value without knowledge of the security interest 8 and before it is perfected. 9 (e) Purchase-money security interest. Except as 10 otherwise provided in Sections 9-320 and 9-321, if a person 11 files a financing statement with respect to a purchase-money 12 security interest before or within 20 days after the debtor 13 receives delivery of the collateral, the security interest 14 takes priority over the rights of a buyer, lessee, or lien 15 creditor which arise between the time the security interest 16 attaches and the time of filing. 17 (f) Public deposits. An unperfected security interest 18 shall take priority over the rights of a lien creditor if (i) 19 the lien creditor is a trustee or receiver of a bank or 20 acting in furtherance of its supervisory authority over such 21 bank and (ii) a security interest is granted by the bank to 22 secure a deposit of public funds with the bank or a 23 repurchase agreement with the bank pursuant to the Government 24 Securities Act of 1986, as amended.Secured party not25obligated on contract of debtor.26The mere existence of a security interest or authority27given to the debtor to dispose of or use collateral does not28impose contract or tort liability upon the secured party for29the debtor's acts or omissions.30 (Source: Laws 1961, p. 2101.) 31 (810 ILCS 5/9-318) (from Ch. 26, par. 9-318) 32 Sec. 9-318. No interest retained in right to payment 33 that is sold; rights and title of seller of account or SB1231 Engrossed -118- LRB9106284WHdv 1 chattel paper with respect to creditors and purchasers. 2 (a) Seller retains no interest. A debtor that has sold 3 an account, chattel paper, payment intangible, or promissory 4 note does not retain a legal or equitable interest in the 5 collateral sold. 6 (b) Deemed rights of debtor if buyer's security interest 7 unperfected. For purposes of determining the rights of 8 creditors of, and purchasers for value of an account or 9 chattel paper from, a debtor that has sold an account or 10 chattel paper, while the buyer's security interest is 11 unperfected, the debtor is deemed to have rights and title to 12 the account or chattel paper identical to those the debtor 13 sold.Defenses Against Assignee; Modification of Contract14After Notification of Assignment; Term Prohibiting Assignment15Ineffective; Identification and Proof of Assignment.16(1) Unless an account debtor has made an enforceable17agreement not to assert defenses or claims arising out of a18sale as provided in Section 9-- 206 the rights of an assignee19are subject to20(a) all the terms of the contract between the21account debtor and assignor and any defense or claim arising22therefrom; and23(b) any other defense or claim of the account24debtor against the assignor which accrues before the account25debtor receives notification of the assignment.26(2) So far as the right to payment or a part thereof27under an assigned contract has not been fully earned by28performance, and notwithstanding notification of the29assignment, any modification of or substitution for the30contract made in good faith and in accordance with reasonable31commercial standards is effective against an assignee unless32the account debtor has otherwise agreed but the assignee33acquires corresponding rights under the modified or34substituted contract. The assignment may provide that suchSB1231 Engrossed -119- LRB9106284WHdv 1modification or substitution is a breach by the assignor.2(3) The account debtor is authorized to pay the assignor3until the account debtor receives notification that the4amount due or to become due has been assigned and that5payment is to be made to the assignee. A notification which6does not reasonably identify the rights assigned is7ineffective. If requested by the account debtor, the assignee8must seasonably furnish reasonable proof that the assignment9has been made and unless he does so the account debtor may10pay the assignor.11(4) A term in any contract between an account debtor and12an assignor is ineffective if it prohibits assignment of an13account or prohibits creation of a security interest in a14general intangible for money due or to become due or requires15the account debtor's consent to such assignment or security16interest.17 (Source: P. A. 77-2810.) 18 (810 ILCS 5/9-319 new) 19 Sec. 9-319. Rights and title of consignee with respect 20 to creditors and purchasers. 21 (a) Consignee has consignor's rights. Except as 22 otherwise provided in subsection (b), for purposes of 23 determining the rights of creditors of, and purchasers for 24 value of goods from, a consignee, while the goods are in the 25 possession of the consignee, the consignee is deemed to have 26 rights and title to the goods identical to those the 27 consignor had or had power to transfer. 28 (b) Applicability of other law. For purposes of 29 determining the rights of a creditor of a consignee, law 30 other than this Article determines the rights and title of a 31 consignee while goods are in the consignee's possession if, 32 under this Part, a perfected security interest held by the 33 consignor would have priority over the rights of the SB1231 Engrossed -120- LRB9106284WHdv 1 creditor. 2 (810 ILCS 5/9-320 new) 3 Sec. 9-320. Buyer of goods and farm products. 4 (a) Buyer in ordinary course of business. Except as 5 otherwise provided in subsections (e) and (f), a buyer in the 6 ordinary course of business takes free of a security interest 7 created by the buyer's seller, even if the security interest 8 is perfected and the buyer knows of its existence. 9 (b) Buyer of consumer goods. Except as otherwise 10 provided in subsection (e), a buyer of goods from a person 11 who used or bought the goods for use primarily for personal, 12 family, or household purposes takes free of a security 13 interest, even if perfected, if the buyer buys: 14 (1) without knowledge of the security interest; 15 (2) for value; 16 (3) primarily for the buyer's personal, family, or 17 household purposes; and 18 (4) before the filing of a financing statement 19 covering the goods. 20 (c) Effectiveness of filing for subsection (b). To the 21 extent that it affects the priority of a security interest 22 over a buyer of goods under subsection (b), the period of 23 effectiveness of a filing made in the jurisdiction in which 24 the seller is located is governed by Section 9-316(a) and 25 (b). 26 (d) Buyer in ordinary course of business at wellhead or 27 minehead. A buyer in ordinary course of business buying oil, 28 gas, or other minerals at the wellhead or minehead or after 29 extraction takes free of an interest arising out of an 30 encumbrance. 31 (e) Possessory security interest not affected. 32 Subsections (a) and (b) do not affect a security interest in 33 goods in the possession of the secured party under Section SB1231 Engrossed -121- LRB9106284WHdv 1 9-313. 2 (f) Buyer of farm products. 3 (1) A buyer of farm products takes subject to a 4 security interest created by the seller if: 5 (A) within one year before the sale of the 6 farm products, the buyer has received from the 7 secured party or the seller written notice of the 8 security interest in a record organized according to 9 farm products that: 10 (i) in an original or reproduced copy 11 thereof; 12 (ii) contains: (a) the name and address 13 of the secured party; (b) the name and address 14 of the person indebted to the secured party; 15 (c) the social security number of the debtor 16 or, in the case of a debtor doing business 17 other than as an individual, the Internal 18 Revenue Service taxpayer identification number 19 of such debtor; (d) a description of the farm 20 products subject to the security interest 21 created by the debtor, including the amount of 22 such products where applicable, crop year, 23 county, and a reasonable description of the 24 property; 25 (iii) must be amended in writing, within 26 3 months, similarly signed and transmitted, to 27 reflect material changes; 28 (iv) will lapse on either the expiration 29 period of the statement or the transmission of 30 a notice signed by the secured party that the 31 statement has lapsed, whichever occurs first; 32 and 33 (v) sets forth any payment obligations 34 imposed on the buyer by the secured party as SB1231 Engrossed -122- LRB9106284WHdv 1 conditions for waiver or release of the 2 security interest; and 3 (B) the buyer has failed to perform the 4 payment obligations. 5 (2) For the purposes of this subsection (f), a 6 buyer of farm products has received notice from the 7 secured party or seller when written notice of the 8 security interest is sent to the buyer by registered or 9 certified mail. 10 (810 ILCS 5/9-320.1 new) 11 Sec. 9-320.1. Liability of commission merchant or 12 selling agent engaged in sale of livestock or other farm 13 products to holder of security interest. 14 (a) A commission merchant or selling agent who sells a 15 farm product for others shall be subject to a security 16 interest created by the seller in such farm product if: 17 (1) within one year before the sale of the farm 18 products, the buyer has received from the secured party 19 or the seller written notice of the security interest in 20 a record that: 21 (A) is an original or reproduced copy thereof; 22 (B) contains: (i) the name and address of the 23 secured party; (ii) the name and address of the 24 person indebted to the secured party; (iii) the 25 social security number of the debtor or, in case of 26 a debtor doing business other than as an individual, 27 the Internal Revenue Service taxpayer identification 28 number of such debtor; (iv) a description of the 29 farm products subject to the security interest 30 created by the debtor, including the amount of such 31 products where applicable, crop year, county, and a 32 reasonable description of the property; 33 (C) must be amended in writing, within 3 SB1231 Engrossed -123- LRB9106284WHdv 1 months, similarly signed and transmitted, to reflect 2 material changes; 3 (D) will lapse on either the expiration period 4 of the statement or the transmission of a notice 5 signed by the secured party that the statement has 6 lapsed, whichever occurs first; and 7 (E) sets forth any payment obligations imposed 8 on the buyer by the secured party as conditions for 9 waiver or release of the security interest; and 10 (2) the commission merchant or selling agent has 11 failed to perform the payment obligations. 12 (b) For the purposes of this Section, a commission 13 merchant or selling agent has received notice from the 14 secured party or seller when written notice of the security 15 interest is sent to the commission merchant or selling agent 16 by registered or certified mail. 17 (810 ILCS 5/9-320.2 new) 18 Sec. 9-320.2. Notice to seller of farm products. A 19 commission merchant or selling agent who sells farm products 20 for others, and any person buying farm products in the 21 ordinary course of business from a person engaged in farming 22 operations, shall post at each licensed location where the 23 merchant, agent, or person buying farm products in the 24 ordinary course of business does business a notice that shall 25 read as follows: 26 "NOTICE TO SELLERS OF FARM PRODUCTS 27 It is a criminal offense to sell farm products subject to 28 a security interest without making payment to the secured 29 party. You should notify the purchaser if there is a 30 security interest in the farm products you are selling.". 31 The notice shall be posted in a conspicuous manner and 32 shall be in contrasting type, large enough to be read from a 33 distance of 10 feet. SB1231 Engrossed -124- LRB9106284WHdv 1 (810 ILCS 5/9-321 new) 2 Sec. 9-321. Licensee of general intangible and lessee of 3 goods in ordinary course of business. 4 (a) "Licensee in ordinary course of business." In this 5 Section, "licensee in ordinary course of business" means a 6 person that becomes a licensee of a general intangible in 7 good faith, without knowledge that the license violates the 8 rights of another person in the general intangible, and in 9 the ordinary course from a person in the business of 10 licensing general intangibles of that kind. A person becomes 11 a licensee in the ordinary course if the license to the 12 person comports with the usual or customary practices in the 13 kind of business in which the licensor is engaged or with the 14 licensor's own usual or customary practices. 15 (b) Rights of licensee in ordinary course of business. 16 A licensee in ordinary course of business takes its rights 17 under a nonexclusive license free of a security interest in 18 the general intangible created by the licensor, even if the 19 security interest is perfected and the licensee knows of its 20 existence. 21 (c) Rights of lessee in ordinary course of business. A 22 lessee in ordinary course of business takes its leasehold 23 interest free of a security interest in the goods created by 24 the lessor, even if the security interest is perfected and 25 the lessee knows of its existence. 26 (810 ILCS 5/9-322 new) 27 Sec. 9-322. Priorities among conflicting security 28 interests in and agricultural liens on same collateral. 29 (a) General priority rules. Except as otherwise 30 provided in this Section, priority among conflicting security 31 interests and agricultural liens in the same collateral is 32 determined according to the following rules: 33 (1) Conflicting perfected security interests and SB1231 Engrossed -125- LRB9106284WHdv 1 agricultural liens rank according to priority in time of 2 filing or perfection. Priority dates from the earlier of 3 the time a filing covering the collateral is first made 4 or the security interest or agricultural lien is first 5 perfected, if there is no period thereafter when there is 6 neither filing nor perfection. 7 (2) A perfected security interest or agricultural 8 lien has priority over a conflicting unperfected security 9 interest or agricultural lien. 10 (3) The first security interest or agricultural 11 lien to attach or become effective has priority if 12 conflicting security interests and agricultural liens are 13 unperfected. 14 (b) Time of perfection: proceeds and supporting 15 obligations. For the purposes of subsection (a)(1): 16 (1) the time of filing or perfection as to a 17 security interest in collateral is also the time of 18 filing or perfection as to a security interest in 19 proceeds; and 20 (2) the time of filing or perfection as to a 21 security interest in collateral supported by a supporting 22 obligation is also the time of filing or perfection as to 23 a security interest in the supporting obligation. 24 (c) Special priority rules: proceeds and supporting 25 obligations. Except as otherwise provided in subsection (f), 26 a security interest in collateral which qualifies for 27 priority over a conflicting security interest under Section 28 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a 29 conflicting security interest in: 30 (1) any supporting obligation for the collateral; 31 and 32 (2) proceeds of the collateral if: 33 (A) the security interest in proceeds is 34 perfected; SB1231 Engrossed -126- LRB9106284WHdv 1 (B) the proceeds are cash proceeds or of the 2 same type as the collateral; and 3 (C) in the case of proceeds that are proceeds 4 of proceeds, all intervening proceeds are cash 5 proceeds, proceeds of the same type as the 6 collateral, or an account relating to the 7 collateral. 8 (d) First-to-file priority rule for certain collateral. 9 Subject to subsection (e) and except as otherwise provided in 10 subsection (f), if a security interest in chattel paper, 11 deposit accounts, negotiable documents, instruments, 12 investment property, or letter-of-credit rights is perfected 13 by a method other than filing, conflicting perfected security 14 interests in proceeds of the collateral rank according to 15 priority in time of filing. 16 (e) Applicability of subsection (d). Subsection (d) 17 applies only if the proceeds of the collateral are not cash 18 proceeds, chattel paper, negotiable documents, instruments, 19 investment property, or letter-of-credit rights. 20 (f) Limitations on subsections (a) through (e). 21 Subsections (a) through (e) are subject to: 22 (1) subsection (g) and the other provisions of this 23 Part; 24 (2) Section 4-210 with respect to a security 25 interest of a collecting bank; 26 (3) Section 5-118 with respect to a security 27 interest of an issuer or nominated person; and 28 (4) Section 9-110 with respect to a security 29 interest arising under Article 2 or 2A. 30 (g) Priority under agricultural lien statute. A 31 perfected agricultural lien on collateral has priority over a 32 conflicting security interest in or agricultural lien on the 33 same collateral if the statute creating the agricultural lien 34 so provides. SB1231 Engrossed -127- LRB9106284WHdv 1 (810 ILCS 5/9-323 new) 2 Sec. 9-323. Future advances. 3 (a) When priority based on time of advance. Except as 4 otherwise provided in subsection (c), for purposes of 5 determining the priority of a perfected security interest 6 under Section 9-322(a)(1), perfection of the security 7 interest dates from the time an advance is made to the extent 8 that the security interest secures an advance that: 9 (1) is made while the security interest is 10 perfected only: 11 (A) under Section 9-309 when it attaches; or 12 (B) temporarily under Section 9-312(e), (f), 13 or (g); and 14 (2) is not made pursuant to a commitment entered 15 into before or while the security interest is perfected 16 by a method other than under Section 9-309 or 9-312(e), 17 (f), or (g). 18 (b) Lien creditor. Except as otherwise provided in 19 subsection (c), a security interest is subordinate to the 20 rights of a person that becomes a lien creditor to the extent 21 that the security interest secures an advance made more than 22 45 days after the person becomes a lien creditor unless the 23 advance is made: 24 (1) without knowledge of the lien; or 25 (2) pursuant to a commitment entered into without 26 knowledge of the lien. 27 (c) Buyer of receivables. Subsections (a) and (b) do 28 not apply to a security interest held by a secured party that 29 is a buyer of accounts, chattel paper, payment intangibles, 30 or promissory notes or a consignor. 31 (d) Buyer of goods. Except as otherwise provided in 32 subsection (e), a buyer of goods other than a buyer in 33 ordinary course of business takes free of a security interest 34 to the extent that it secures advances made after the earlier SB1231 Engrossed -128- LRB9106284WHdv 1 of: 2 (1) the time the secured party acquires knowledge 3 of the buyer's purchase; or 4 (2) 45 days after the purchase. 5 (e) Advances made pursuant to commitment: priority of 6 buyer of goods. Subsection (d) does not apply if the advance 7 is made pursuant to a commitment entered into without 8 knowledge of the buyer's purchase and before the expiration 9 of the 45-day period. 10 (f) Lessee of goods. Except as otherwise provided in 11 subsection (g), a lessee of goods, other than a lessee in 12 ordinary course of business, takes the leasehold interest 13 free of a security interest to the extent that it secures 14 advances made after the earlier of: 15 (1) the time the secured party acquires knowledge 16 of the lease; or 17 (2) 45 days after the lease contract becomes 18 enforceable. 19 (g) Advances made pursuant to commitment: priority of 20 lessee of goods. Subsection (f) does not apply if the 21 advance is made pursuant to a commitment entered into without 22 knowledge of the lease and before the expiration of the 23 45-day period. 24 (810 ILCS 5/9-324 new) 25 Sec. 9-324. Priority of purchase-money security 26 interests. 27 (a) General rule: purchase-money priority. Except as 28 otherwise provided in subsection (g), a perfected 29 purchase-money security interest in goods other than 30 inventory or livestock has priority over a conflicting 31 security interest in the same goods, and, except as otherwise 32 provided in Section 9-327, a perfected security interest in 33 its identifiable proceeds also has priority, if the SB1231 Engrossed -129- LRB9106284WHdv 1 purchase-money security interest is perfected when the debtor 2 receives possession of the collateral or within 20 days 3 thereafter. 4 (b) Inventory purchase-money priority. Subject to 5 subsection (c) and except as otherwise provided in subsection 6 (g), a perfected purchase-money security interest in 7 inventory has priority over a conflicting security interest 8 in the same inventory, has priority over a conflicting 9 security interest in chattel paper or an instrument 10 constituting proceeds of the inventory and in proceeds of the 11 chattel paper, if so provided in Section 9-330, and, except 12 as otherwise provided in Section 9-327, also has priority in 13 identifiable cash proceeds of the inventory to the extent the 14 identifiable cash proceeds are received on or before the 15 delivery of the inventory to a buyer, if: 16 (1) the purchase-money security interest is 17 perfected when the debtor receives possession of the 18 inventory; 19 (2) the purchase-money secured party sends an 20 authenticated notification to the holder of the 21 conflicting security interest; 22 (3) the holder of the conflicting security interest 23 receives the notification within five years before the 24 debtor receives possession of the inventory; and 25 (4) the notification states that the person sending 26 the notification has or expects to acquire a 27 purchase-money security interest in inventory of the 28 debtor and describes the inventory. 29 (c) Holders of conflicting inventory security interests 30 to be notified. Subsections (b)(2) through (4) apply only if 31 the holder of the conflicting security interest had filed a 32 financing statement covering the same types of inventory: 33 (1) if the purchase-money security interest is 34 perfected by filing, before the date of the filing; or SB1231 Engrossed -130- LRB9106284WHdv 1 (2) if the purchase-money security interest is 2 temporarily perfected without filing or possession under 3 Section 9-312(f), before the beginning of the 20-day 4 period thereunder. 5 (d) Livestock purchase-money priority. Subject to 6 subsection (e) and except as otherwise provided in subsection 7 (g), a perfected purchase-money security interest in 8 livestock that are farm products has priority over a 9 conflicting security interest in the same livestock, and, 10 except as otherwise provided in Section 9-327, a perfected 11 security interest in their identifiable proceeds and 12 identifiable products in their unmanufactured states also has 13 priority, if: 14 (1) the purchase-money security interest is 15 perfected when the debtor receives possession of the 16 livestock; 17 (2) the purchase-money secured party sends an 18 authenticated notification to the holder of the 19 conflicting security interest; 20 (3) the holder of the conflicting security interest 21 receives the notification within six months before the 22 debtor receives possession of the livestock; and 23 (4) the notification states that the person sending 24 the notification has or expects to acquire a 25 purchase-money security interest in livestock of the 26 debtor and describes the livestock. 27 (e) Holders of conflicting livestock security interests 28 to be notified. Subsections (d)(2) through (4) apply only if 29 the holder of the conflicting security interest had filed a 30 financing statement covering the same types of livestock: 31 (1) if the purchase-money security interest is 32 perfected by filing, before the date of the filing; or 33 (2) if the purchase-money security interest is 34 temporarily perfected without filing or possession under SB1231 Engrossed -131- LRB9106284WHdv 1 Section 9-312(f), before the beginning of the 20-day 2 period thereunder. 3 (f) Software purchase-money priority. Except as 4 otherwise provided in subsection (g), a perfected 5 purchase-money security interest in software has priority 6 over a conflicting security interest in the same collateral, 7 and, except as otherwise provided in Section 9-327, a 8 perfected security interest in its identifiable proceeds also 9 has priority, to the extent that the purchase-money security 10 interest in the goods in which the software was acquired for 11 use has priority in the goods and proceeds of the goods under 12 this Section. 13 (g) Conflicting purchase-money security interests. If 14 more than one security interest qualifies for priority in the 15 same collateral under subsection (a), (b), (d), or (f): 16 (1) a security interest securing an obligation 17 incurred as all or part of the price of the collateral 18 has priority over a security interest securing an 19 obligation incurred for value given to enable the debtor 20 to acquire rights in or the use of collateral; and 21 (2) in all other cases, Section 9-322(a) applies to 22 the qualifying security interests. 23 (810 ILCS 5/9-325 new) 24 Sec. 9-325. Priority of security interests in 25 transferred collateral. 26 (a) Subordination of security interest in transferred 27 collateral. Except as otherwise provided in subsection (b), a 28 security interest created by a debtor is subordinate to a 29 security interest in the same collateral created by another 30 person if: 31 (1) the debtor acquired the collateral subject to 32 the security interest created by the other person; 33 (2) the security interest created by the other SB1231 Engrossed -132- LRB9106284WHdv 1 person was perfected when the debtor acquired the 2 collateral; and 3 (3) there is no period thereafter when the security 4 interest is unperfected. 5 (b) Limitation of subsection (a) subordination. 6 Subsection (a) subordinates a security interest only if the 7 security interest: 8 (1) otherwise would have priority solely under 9 Section 9-322(a) or 9-324; or 10 (2) arose solely under Section 2-711(3) or 11 2A-508(5). 12 (810 ILCS 5/9-326 new) 13 Sec. 9-326. Priority of security interests created by 14 new debtor. 15 (a) Subordination of security interest created by new 16 debtor. Subject to subsection (b), a security interest 17 created by a new debtor which is perfected by a filed 18 financing statement that is effective solely under Section 19 9-508 in collateral in which a new debtor has or acquires 20 rights is subordinate to a security interest in the same 21 collateral which is perfected other than by a filed financing 22 statement that is effective solely under Section 9-508. 23 (b) Priority under other provisions; multiple original 24 debtors. The other provisions of this Part determine the 25 priority among conflicting security interests in the same 26 collateral perfected by filed financing statements that are 27 effective solely under Section 9-508. However, if the 28 security agreements to which a new debtor became bound as 29 debtor were not entered into by the same original debtor, the 30 conflicting security interests rank according to priority in 31 time of the new debtor's having become bound. 32 (810 ILCS 5/9-327 new) SB1231 Engrossed -133- LRB9106284WHdv 1 Sec. 9-327. Priority of security interests in deposit 2 account. The following rules govern priority among 3 conflicting security interests in the same deposit account: 4 (1) A security interest held by a secured party having 5 control of the deposit account under Section 9-104 has 6 priority over a conflicting security interest held by a 7 secured party that does not have control. 8 (2) Except as otherwise provided in paragraphs (3) and 9 (4), security interests perfected by control under Section 10 9-314 rank according to priority in time of obtaining 11 control. 12 (3) Except as otherwise provided in paragraph (4), a 13 security interest held by the bank with which the deposit 14 account is maintained has priority over a conflicting 15 security interest held by another secured party. 16 (4) A security interest perfected by control under 17 Section 9-104(a)(3) has priority over a security interest 18 held by the bank with which the deposit account is 19 maintained. 20 (810 ILCS 5/9-328 new) 21 Sec. 9-328. Priority of security interests in investment 22 property. The following rules govern priority among 23 conflicting security interests in the same investment 24 property: 25 (1) A security interest held by a secured party having 26 control of investment property under Section 9-106 has 27 priority over a security interest held by a secured party 28 that does not have control of the investment property. 29 (2) Except as otherwise provided in paragraphs (3) and 30 (4), conflicting security interests held by secured parties 31 each of which has control under Section 9-106 rank according 32 to priority in time of: 33 (A) if the collateral is a security, obtaining SB1231 Engrossed -134- LRB9106284WHdv 1 control; 2 (B) if the collateral is a security entitlement 3 carried in a securities account and: 4 (i) if the secured party obtained control 5 under Section 8-106(d)(1), the secured party's 6 becoming the person for which the securities account 7 is maintained; 8 (ii) if the secured party obtained control 9 under Section 8-106(d)(2), the securities 10 intermediary's agreement to comply with the secured 11 party's entitlement orders with respect to security 12 entitlements carried or to be carried in the 13 securities account; or 14 (iii) if the secured party obtained control 15 through another person under Section 8-106(d)(3), 16 the time on which priority would be based under this 17 paragraph if the other person were the secured 18 party; or 19 (C) if the collateral is a commodity contract 20 carried with a commodity intermediary, the satisfaction 21 of the requirement for control specified in Section 22 9-106(b)(2) with respect to commodity contracts carried 23 or to be carried with the commodity intermediary. 24 (3) A security interest held by a securities 25 intermediary in a security entitlement or a securities 26 account maintained with the securities intermediary has 27 priority over a conflicting security interest held by another 28 secured party. 29 (4) A security interest held by a commodity intermediary 30 in a commodity contract or a commodity account maintained 31 with the commodity intermediary has priority over a 32 conflicting security interest held by another secured party. 33 (5) A security interest in a certificated security in 34 registered form which is perfected by taking delivery under SB1231 Engrossed -135- LRB9106284WHdv 1 Section 9-313(a) and not by control under Section 9-314 has 2 priority over a conflicting security interest perfected by a 3 method other than control. 4 (6) Conflicting security interests created by a broker, 5 securities intermediary, or commodity intermediary which are 6 perfected without control under Section 9-106 rank equally. 7 (7) In all other cases, priority among conflicting 8 security interests in investment property is governed by 9 Sections 9-322 and 9-323. 10 (810 ILCS 5/9-329 new) 11 Sec. 9-329. Priority of security interests in 12 letter-of-credit right. The following rules govern priority 13 among conflicting security interests in the same 14 letter-of-credit right: 15 (1) A security interest held by a secured party 16 having control of the letter-of-credit right under 17 Section 9-107 has priority to the extent of its control 18 over a conflicting security interest held by a secured 19 party that does not have control. 20 (2) Security interests perfected by control under 21 Section 9-314 rank according to priority in time of 22 obtaining control. 23 (810 ILCS 5/9-330 new) 24 Sec. 9-330. Priority of purchaser of chattel paper or 25 instrument. 26 (a) Purchaser's priority: security interest claimed 27 merely as proceeds. A purchaser of chattel paper has 28 priority over a security interest in the chattel paper which 29 is claimed merely as proceeds of inventory subject to a 30 security interest if: 31 (1) in good faith and in the ordinary course of the 32 purchaser's business, the purchaser gives new value and SB1231 Engrossed -136- LRB9106284WHdv 1 takes possession of the chattel paper or obtains control 2 of the chattel paper under Section 9-105; and 3 (2) the chattel paper does not indicate that it has 4 been assigned to an identified assignee other than the 5 purchaser. 6 (b) Purchaser's priority: other security interests. A 7 purchaser of chattel paper has priority over a security 8 interest in the chattel paper which is claimed other than 9 merely as proceeds of inventory subject to a security 10 interest if the purchaser gives new value and takes 11 possession of the chattel paper or obtains control of the 12 chattel paper under Section 9-105 in good faith, in the 13 ordinary course of the purchaser's business, and without 14 knowledge that the purchase violates the rights of the 15 secured party. 16 (c) Chattel paper purchaser's priority in proceeds. 17 Except as otherwise provided in Section 9-327, a purchaser 18 having priority in chattel paper under subsection (a) or (b) 19 also has priority in proceeds of the chattel paper to the 20 extent that: 21 (1) Section 9-322 provides for priority in the 22 proceeds; or 23 (2) the proceeds consist of the specific goods 24 covered by the chattel paper or cash proceeds of the 25 specific goods, even if the purchaser's security interest 26 in the proceeds is unperfected. 27 (d) Instrument purchaser's priority. Except as 28 otherwise provided in Section 9-331(a), a purchaser of an 29 instrument has priority over a security interest in the 30 instrument perfected by a method other than possession if the 31 purchaser gives value and takes possession of the instrument 32 in good faith and without knowledge that the purchase 33 violates the rights of the secured party. 34 (e) Holder of purchase-money security interest gives new SB1231 Engrossed -137- LRB9106284WHdv 1 value. For purposes of subsections (a) and (b), the holder of 2 a purchase-money security interest in inventory gives new 3 value for chattel paper constituting proceeds of the 4 inventory. 5 (f) Indication of assignment gives knowledge. For 6 purposes of subsections (b) and (d), if chattel paper or an 7 instrument indicates that it has been assigned to an 8 identified secured party other than the purchaser, a 9 purchaser of the chattel paper or instrument has knowledge 10 that the purchase violates the rights of the secured party. 11 (810 ILCS 5/9-331 new) 12 Sec. 9-331. Priority of rights of purchasers of 13 instruments, documents, and securities under other Articles; 14 priority of interests in financial assets and security 15 entitlements under Article 8. 16 (a) Rights under Articles 3, 7, and 8 not limited. This 17 Article does not limit the rights of a holder in due course 18 of a negotiable instrument, a holder to which a negotiable 19 document of title has been duly negotiated, or a protected 20 purchaser of a security. These holders or purchasers take 21 priority over an earlier security interest, even if 22 perfected, to the extent provided in Articles 3, 7, and 8. 23 (b) Protection under Article 8. This Article does not 24 limit the rights of or impose liability on a person to the 25 extent that the person is protected against the assertion of 26 a claim under Article 8. 27 (c) Filing not notice. Filing under this Article does 28 not constitute notice of a claim or defense to the holders, 29 or purchasers, or persons described in subsections (a) and 30 (b). 31 (810 ILCS 5/9-332 new) 32 Sec. 9-332. Transfer of money; transfer of funds from SB1231 Engrossed -138- LRB9106284WHdv 1 deposit account. 2 (a) Transferee of money. A transferee of money takes 3 the money free of a security interest unless the transferee 4 acts in collusion with the debtor in violating the rights of 5 the secured party. 6 (b) Transferee of funds from deposit account. A 7 transferee of funds from a deposit account takes the funds 8 free of a security interest in the deposit account unless the 9 transferee acts in collusion with the debtor in violating the 10 rights of the secured party. 11 (810 ILCS 5/9-333 new) 12 Sec. 9-333. Priority of certain liens arising by 13 operation of law. 14 (a) "Possessory lien." In this Section, "possessory 15 lien" means an interest, other than a security interest or an 16 agricultural lien: 17 (1) which secures payment or performance of an 18 obligation for services or materials furnished with 19 respect to goods by a person in the ordinary course of 20 the person's business; 21 (2) which is created by statute or rule of law in 22 favor of the person; and 23 (3) whose effectiveness depends on the person's 24 possession of the goods. 25 (b) Priority of possessory lien. A possessory lien on 26 goods has priority over a security interest in the goods 27 unless the lien is created by a statute that expressly 28 provides otherwise. 29 (810 ILCS 5/9-334 new) 30 Sec. 9-334. Priority of security interests in fixtures 31 and crops. 32 (a) Security interest in fixtures under this Article. A SB1231 Engrossed -139- LRB9106284WHdv 1 security interest under this Article may be created in goods 2 that are fixtures or may continue in goods that become 3 fixtures. A security interest does not exist under this 4 Article in ordinary building materials incorporated into an 5 improvement on land. 6 (b) Security interest in fixtures under real-property 7 law. This Article does not prevent creation of an 8 encumbrance upon fixtures under real property law. 9 (c) General rule: subordination of security interest in 10 fixtures. In cases not governed by subsections (d) through 11 (h), a security interest in fixtures is subordinate to a 12 conflicting interest of an encumbrancer or owner of the 13 related real property other than the debtor. 14 (d) Fixtures purchase-money priority. Except as 15 otherwise provided in subsection (h), a perfected security 16 interest in fixtures has priority over a conflicting interest 17 of an encumbrancer or owner of the real property if the 18 debtor has an interest of record in or is in possession of 19 the real property and: 20 (1) the security interest is a purchase-money 21 security interest; 22 (2) the interest of the encumbrancer or owner 23 arises before the goods become fixtures; and 24 (3) the security interest is perfected by a fixture 25 filing before the goods become fixtures or within 20 days 26 thereafter. 27 (e) Priority of security interest in fixtures over 28 interests in real property. A perfected security interest in 29 fixtures has priority over a conflicting interest of an 30 encumbrancer or owner of the real property if: 31 (1) the debtor has an interest of record in the 32 real property or is in possession of the real property 33 and the security interest: 34 (A) is perfected by a fixture filing before SB1231 Engrossed -140- LRB9106284WHdv 1 the interest of the encumbrancer or owner is of 2 record; and 3 (B) has priority over any conflicting interest 4 of a predecessor in title of the encumbrancer or 5 owner; 6 (2) before the goods become fixtures, the security 7 interest is perfected by any method permitted by this 8 Article and the fixtures are readily removable: 9 (A) factory or office machines; 10 (B) equipment that is not primarily used or 11 leased for use in the operation of the real 12 property; or 13 (C) replacements of domestic appliances that 14 are consumer goods; 15 (3) the conflicting interest is a lien on the real 16 property obtained by legal or equitable proceedings after 17 the security interest was perfected by any method 18 permitted by this Article; or 19 (4) the security interest is: 20 (A) created in a manufactured home in a 21 manufactured-home transaction; and 22 (B) perfected pursuant to a statute described 23 in Section 9-311(a)(2). 24 (f) Priority based on consent, disclaimer, or right to 25 remove. A security interest in fixtures, whether or not 26 perfected, has priority over a conflicting interest of an 27 encumbrancer or owner of the real property if: 28 (1) the encumbrancer or owner has, in an 29 authenticated record, consented to the security interest 30 or disclaimed an interest in the goods as fixtures; or 31 (2) the debtor has a right to remove the goods as 32 against the encumbrancer or owner. 33 (g) Continuation of subsection (f)(2) priority. The 34 priority of the security interest under subsection (f)(2) SB1231 Engrossed -141- LRB9106284WHdv 1 continues for a reasonable time if the debtor's right to 2 remove the goods as against the encumbrancer or owner 3 terminates. 4 (h) Priority of construction mortgage. A mortgage is a 5 construction mortgage to the extent that it secures an 6 obligation incurred for the construction of an improvement on 7 land, including the acquisition cost of the land, if a 8 recorded record of the mortgage so indicates. Except as 9 otherwise provided in subsections (e) and (f), a security 10 interest in fixtures is subordinate to a construction 11 mortgage if a record of the mortgage is recorded before the 12 goods become fixtures and the goods become fixtures before 13 the completion of the construction. A mortgage has this 14 priority to the same extent as a construction mortgage to the 15 extent that it is given to refinance a construction mortgage. 16 (i) Priority of security interest in crops. 17 (1) Subject to Section 9-322(g), a perfected 18 security interest in crops growing on real property has 19 priority over: 20 (A) a conflicting interest of an encumbrancer 21 or owner of the real property; and 22 (B) the rights of a holder of an obligation 23 secured by a collateral assignment of beneficial 24 interest in a land trust, including rights by virtue 25 of an equitable lien. 26 (2) For purposes of this subsection: 27 (A) "Collateral assignment of beneficial 28 interest" means any pledge or assignment of the 29 beneficial interest in a land trust to a person to 30 secure a debt to other obligation. 31 (B) "Land trust" means any trust arrangement 32 under which the legal and equitable title to real 33 estate is held by a trustee, the interest of the 34 beneficiary of the trust is personal property, and SB1231 Engrossed -142- LRB9106284WHdv 1 the beneficiary or any person designated in writing 2 by the beneficiary has (i) the exclusive power to 3 direct or control the trustee in dealing with the 4 title to the trust property, (ii) the exclusive 5 control of the management, operation, renting, and 6 selling of the trust property, and (iii) the 7 exclusive right to the earnings, avails, and 8 proceeds of trust property. 9 (810 ILCS 5/9-335 new) 10 Sec. 9-335. Accessions. 11 (a) Creation of security interest in accession. A 12 security interest may be created in an accession and 13 continues in collateral that becomes an accession. 14 (b) Perfection of security interest. If a security 15 interest is perfected when the collateral becomes an 16 accession, the security interest remains perfected in the 17 collateral. 18 (c) Priority of security interest. Except as otherwise 19 provided in subsection (d), the other provisions of this Part 20 determine the priority of a security interest in an 21 accession. 22 (d) Compliance with certificate-of-title statute. A 23 security interest in an accession is subordinate to a 24 security interest in the whole which is perfected by 25 compliance with the requirements of a certificate-of-title 26 statute under Section 9-311(b). 27 (e) Removal of accession after default. After default, 28 subject to Part 6, a secured party may remove an accession 29 from other goods if the security interest in the accession 30 has priority over the claims of every person having an 31 interest in the whole. 32 (f) Reimbursement following removal. A secured party 33 that removes an accession from other goods under subsection SB1231 Engrossed -143- LRB9106284WHdv 1 (e) shall promptly reimburse any holder of a security 2 interest or other lien on, or owner of, the whole or of the 3 other goods, other than the debtor, for the cost of repair of 4 any physical injury to the whole or the other goods. The 5 secured party need not reimburse the holder or owner for any 6 diminution in value of the whole or the other goods caused by 7 the absence of the accession removed or by any necessity for 8 replacing it. A person entitled to reimbursement may refuse 9 permission to remove until the secured party gives adequate 10 assurance for the performance of the obligation to reimburse. 11 (810 ILCS 5/9-336 new) 12 Sec. 9-336. Commingled goods. 13 (a) "Commingled goods." In this Section, "commingled 14 goods" means goods that are physically united with other 15 goods in such a manner that their identity is lost in a 16 product or mass. 17 (b) No security interest in commingled goods as such. A 18 security interest does not exist in commingled goods as such. 19 However, a security interest may attach to a product or mass 20 that results when goods become commingled goods. 21 (c) Attachment of security interest to product or mass. 22 If collateral becomes commingled goods, a security interest 23 attaches to the product or mass. 24 (d) Perfection of security interest. If a security 25 interest in collateral is perfected before the collateral 26 becomes commingled goods, the security interest that attaches 27 to the product or mass under subsection (c) is perfected. 28 (e) Priority of security interest. Except as otherwise 29 provided in subsection (f), the other provisions of this Part 30 determine the priority of a security interest that attaches 31 to the product or mass under subsection (c). 32 (f) Conflicting security interests in product or mass 33 If more than one security interest attaches to the product or SB1231 Engrossed -144- LRB9106284WHdv 1 mass under subsection (c), the following rules determine 2 priority: 3 (1) A security interest that is perfected under 4 subsection (d) has priority over a security interest that 5 is unperfected at the time the collateral becomes 6 commingled goods. 7 (2) If more than one security interest is perfected 8 under subsection (d), the security interests rank equally 9 in proportion to the value of the collateral at the time 10 it became commingled goods. 11 (810 ILCS 5/9-337 new) 12 Sec. 9-337. Priority of security interests in goods 13 covered by certificate of title. If, while a security 14 interest in goods is perfected by any method under the law of 15 another jurisdiction, this State issues a certificate of 16 title that does not show that the goods are subject to the 17 security interest or contain a statement that they may be 18 subject to security interests not shown on the certificate: 19 (1) a buyer of the goods, other than a person in 20 the business of selling goods of that kind, takes free of 21 the security interest if the buyer gives value and 22 receives delivery of the goods after issuance of the 23 certificate and without knowledge of the security 24 interest; and 25 (2) the security interest is subordinate to a 26 conflicting security interest in the goods that attaches, 27 and is perfected under Section 9-311(b), after issuance 28 of the certificate and without the conflicting secured 29 party's knowledge of the security interest. 30 (810 ILCS 5/9-338 new) 31 Sec. 9-338. Priority of security interest or 32 agricultural lien perfected by filed financing statement SB1231 Engrossed -145- LRB9106284WHdv 1 providing certain incorrect information. If a security 2 interest or agricultural lien is perfected by a filed 3 financing statement providing information described in 4 Section 9-516(b)(5) which is incorrect at the time the 5 financing statement is filed: 6 (1) the security interest or agricultural lien is 7 subordinate to a conflicting perfected security interest 8 in the collateral to the extent that the holder of the 9 conflicting security interest gives value in reasonable 10 reliance upon the incorrect information; and 11 (2) a purchaser, other than a secured party, of the 12 collateral takes free of the security interest or 13 agricultural lien to the extent that, in reasonable 14 reliance upon the incorrect information, the purchaser 15 gives value and, in the case of chattel paper, documents, 16 goods, instruments, or a security certificate, receives 17 delivery of the collateral. 18 (810 ILCS 5/9-339 new) 19 Sec. 9-339. Priority subject to subordination. This 20 Article does not preclude subordination by agreement by a 21 person entitled to priority. 22 (810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new) 23 SUBPART 4. RIGHTS OF BANK 24 (810 ILCS 5/9-340 new) 25 Sec. 9-340. Effectiveness of right of recoupment or 26 set-off against deposit account. 27 (a) Exercise of recoupment or set-off. Except as 28 otherwise provided in subsection (c), a bank with which a 29 deposit account is maintained may exercise any right of 30 recoupment or set-off against a secured party that holds a 31 security interest in the deposit account. SB1231 Engrossed -146- LRB9106284WHdv 1 (b) Recoupment or set-off not affected by security 2 interest. Except as otherwise provided in subsection (c), the 3 application of this Article to a security interest in a 4 deposit account does not affect a right of recoupment or 5 set-off of the secured party as to a deposit account 6 maintained with the secured party. 7 (c) When set-off ineffective. The exercise by a bank of 8 a set-off against a deposit account is ineffective against a 9 secured party that holds a security interest in the deposit 10 account which is perfected by control under Section 11 9-104(a)(3), if the set-off is based on a claim against the 12 debtor. 13 (810 ILCS 5/9-341 new) 14 Sec. 9-341. Bank's rights and duties with respect to 15 deposit account. Except as otherwise provided in Section 16 9-340(c), and unless the bank otherwise agrees in an 17 authenticated record, a bank's rights and duties with respect 18 to a deposit account maintained with the bank are not 19 terminated, suspended, or modified by: 20 (1) the creation, attachment, or perfection of a 21 security interest in the deposit account; 22 (2) the bank's knowledge of the security interest; 23 or 24 (3) the bank's receipt of instructions from the 25 secured party. 26 (810 ILCS 5/9-342 new) 27 Sec. 9-342. Bank's right to refuse to enter into or 28 disclose existence of control agreement. This Article does 29 not require a bank to enter into an agreement of the kind 30 described in Section 9-104(a)(2), even if its customer so 31 requests or directs. A bank that has entered into such an 32 agreement is not required to confirm the existence of the SB1231 Engrossed -147- LRB9106284WHdv 1 agreement to another person unless requested to do so by its 2 customer. 3 (810 ILCS 5/Art. 9, Part 4 heading) 4 PART 4. RIGHTS OF THIRD PARTIESFILING5 (810 ILCS 5/9-401) (from Ch. 26, par. 9-401) 6 Sec. 9-401. Alienability of debtor's rights. 7 (a) Other law governs alienability; exceptions. Except 8 as otherwise provided in subsection (b) and Sections 9-406, 9 9-407, 9-408, and 9-409, whether a debtor's rights in 10 collateral may be voluntarily or involuntarily transferred is 11 governed by law other than this Article. 12 (b) Agreement does not prevent transfer. An agreement 13 between the debtor and secured party which prohibits a 14 transfer of the debtor's rights in collateral or makes the 15 transfer a default does not prevent the transfer from taking 16 effect.Place of Filing; Erroneous Filing; Removal of17Collateral.18(1) The proper place to file in order to perfect a19security interest is as follows:20(a) when the collateral is consumer goods, then in21the office of the recorder in the county of the debtor's22residence or if the debtor is not a resident of this23State then in the office of the Recorder of Deeds in the24county where the goods are kept;25(b) when the collateral is timber to be cut or is26minerals or the like (including oil and gas) or accounts27subject to subsection (5) of Section 9-103, or when the28financing statement is filed as a fixture filing (Section299-313) and the collateral is goods which are or are to30become fixtures, then in the office where a mortgage on31the real estate would be filed or recorded;32(c) in all other cases, in the office of theSB1231 Engrossed -148- LRB9106284WHdv 1Secretary of State.2(2) A filing which is made in good faith in an improper3place or not in all of the places required by this section is4nevertheless effective with regard to any collateral as to5which the filing complied with the requirements of this6Article and is also effective with regard to collateral7covered by the financing statement against any person who has8knowledge of the contents of such financing statement.9(3) A filing which is made in the proper place in this10State continues effective even though the debtor's residence11or place of business or the location of the collateral or its12use, whichever controlled the original filing, is thereafter13changed.14(4) The rules stated in Section 9-103 determine whether15filing is necessary in this State.16(5) Notwithstanding the preceding subsections, and17subject to subsection (3) of Section 9-302, the proper place18to file in order to perfect a security interest in19collateral, including fixtures, of a transmitting utility is20the office of the Secretary of State. This filing constitutes21a fixture filing (Section 9-313) as to the collateral22described therein which is or is to become fixtures.23(6) For the purposes of this Section, the residence of24an organization is its place of business if it has one or its25chief executive office if it has more than one place of26business.27 (Source: P.A. 90-300, eff. 1-1-98.) 28 (810 ILCS 5/9-401A) 29 Sec. 9-401A. (Blank).Continuation of certain financing30statements filed before January 1, 1998. The following rules31apply to a financing statement or continuation statement that32was properly filed before January 1, 1998 in the office of a33county recorder, but which, if filed on or after January 1,SB1231 Engrossed -149- LRB9106284WHdv 11998, is required by Section 9-401 to be filed in the office2of the Secretary of State:3(1) The financing statement shall remain effective until4it lapses as provided in Section 9-403.5(2) The effectiveness of the financing statement may be6continued only by filing a continuation statement in the7office of the Secretary of State that provides the name and8address of the debtor and secured party, indicates the county9where the financing statement is filed, complies with the10requirements of Section 9-403, and either:11(A) indicates the types or describes the items of12collateral included in the original financing statement13as modified by any releases or amendments; or14(B) has attached a copy of the originally filed15financing statement together with amendments,16assignments, and releases affecting it.17A continuation statement filed as provided in this item18(2) may be further continued by a continuation statement that19complies with the requirements of Section 9-403.20(3) The financing statement may be terminated, assigned,21released, or amended only by an appropriate filing in the22office of the county recorder where it is filed, except that23if the financing statement has been continued as provided in24item (2) of this Section, it may thereafter be terminated,25assigned, released, or amended only by an appropriate filing26in the office of the Secretary of State.27 (Source: P.A. 90-300, eff. 1-1-98.) 28 (810 ILCS 5/9-402) (from Ch. 26, par. 9-402) 29 Sec. 9-402. Secured party not obligated on contract of 30 debtor or in tort. The existence of a security interest, 31 agricultural lien, or authority given to a debtor to dispose 32 of or use collateral, without more, does not subject a 33 secured party to liability in contract or tort for the SB1231 Engrossed -150- LRB9106284WHdv 1 debtor's acts or omissions.Formal requisites of financing2statement; amendments; mortgage as financing statement.3(1) A financing statement is sufficient if it gives the4names of the debtor and the secured party, is signed by the5debtor, gives an address of the secured party from which6information concerning the security interest may be obtained,7gives a mailing address of the debtor and contains a8statement indicating the types, or describing the items, of9collateral. A financing statement may be filed before a10security agreement is made or a security interest otherwise11attaches. When a financing statement filed prior to January121, 1996, covers crops growing or to be grown, the statement13must also contain a legal description of the real estate14concerned. If a financing statement covers crops growing or15to be grown and includes a description of the real estate16concerned, the description is sufficient if it includes the17quarter section, section, township and range, and the name of18a record owner if other than the debtor, of the real estate19concerned. When the financing statement covers timber to be20cut or covers minerals or the like (including oil and gas) or21accounts subject to subsection (5) of Section 9-103, or when22the financing statement is filed as a fixture filing (Section239-313) and the collateral is goods which are or are to become24fixtures, the statement must also comply with subsection (5).25A copy of the security agreement is sufficient as a financing26statement if it contains the above information and is signed27by the debtor. A carbon, photographic or other reproduction28of a security agreement or a financing statement is29sufficient as a financing statement if the security agreement30so provides or if the original has been filed in this State.31(2) A financing statement which otherwise complies with32subsection (1) is sufficient when it is signed by the secured33party instead of the debtor if it is filed to perfect a34security interest inSB1231 Engrossed -151- LRB9106284WHdv 1(a) collateral already subject to a security2interest in another jurisdiction when it is brought into3this State, or when the debtor's location is changed to4this State. Such a financing statement must state that5the collateral was brought into this State or that the6debtor's location was changed to this State under such7circumstances; or8(b) proceeds under Section 9-306 if the security9interest in the original collateral was perfected. Such a10financing statement must describe the original11collateral; or12(c) collateral as to which the filing has lapsed;13or14(d) collateral acquired after a change of name,15identity or corporate structure of the debtor (subsection16(7).17(3) A form substantially as follows is sufficient to18comply with subsection (1):19Name of debtor (or assignor) .......................20Address .......................................21Name of secured party (or assignee) ...........22Address .......................................231. This financing statement covers the following24types (or items) of property:25(Describe) .........................................262. (Blank).273. (If applicable) The above goods are to become28fixtures on *29*Where appropriate substitute either "The above30timber is standing on ...." or "The above minerals or the31like (including oil and gas) or accounts will be financed32at the wellhead or minehead of the well or mine located33on ...."34(Describe Real Estate) .............................SB1231 Engrossed -152- LRB9106284WHdv 1and this financing statement is to be filed in the real2estate records. (If the debtor does not have an interest3of record) The name of a record owner is ................44. (If products of collateral are claimed) Products5of the collateral are also covered.6Signature of Debtor (or Assignor) ..................7Signature of Secured Party (or Assignee) ...........8(use whichever is applicable)9(4) A financing statement may be amended by filing a10writing signed by both the debtor and the secured party. An11amendment does not extend the period of effectiveness of a12financing statement. If any amendment adds collateral, it is13effective as to the added collateral only from the filing14date of the amendment. In this Article, unless the context15otherwise requires, the term "financing statement" means the16original financing statement and any amendments.17(5) A financing statement covering timber to be cut or18covering minerals or the like (including oil and gas) or19accounts subject to subsection (5) of Section 9-103, or a20financing statement filed as a fixture filing (Section 9-313)21where the debtor is not a transmitting utility, must show22that it covers this type of collateral, must recite that it23is to be filed in the real estate records, and the financing24statement must contain a description of the real estate. If25the debtor does not have an interest of record in the real26estate, the financing statement must show the name of a27record owner.28(6) A mortgage is effective as a financing statement29filed as a fixture filing from the date of its recording if30(a) the goods are described in the mortgage by item31or type,32(b) the goods are or are to become fixtures related33to the real estate described in the mortgage,34(c) the mortgage complies with the requirements forSB1231 Engrossed -153- LRB9106284WHdv 1a financing statement in this Section other than a2recital that it is to be filed in the real estate3records, and4(d) the mortgage is duly recorded.5No fee with reference to the financing statement is6required other than the regular recording and satisfaction7fees with respect to the mortgage.8(7) A financing statement sufficiently shows the name of9the debtor if it gives the individual, partnership or10corporate name of the debtor, whether or not it adds other11trade names or names of partners. Where the debtor so changes12his name or in the case of an organization its name, identity13or corporate structure that a filed financing statement14becomes seriously misleading, the filing is not effective to15perfect a security interest in collateral acquired by the16debtor more than 4 months after the change, unless a new17appropriate financing statement is filed before the18expiration of that time. A filed financing statement remains19effective with respect to collateral transferred by the20debtor even though the secured party knows of or consents to21the transfer.22(8) A financing statement substantially complying with23the requirements of this Section is effective even though it24contains minor errors which are not seriously misleading.25 (Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.) 26 (810 ILCS 5/9-403) (from Ch. 26, par. 9-403) 27 Sec. 9-403. Agreement not to assert defenses against 28 assignee. 29 (a) "Value." In this Section, "value" has the meaning 30 provided in Section 3-303(a). 31 (b) Agreement not to assert claim or defense. Except as 32 otherwise provided in this Section, an agreement between an 33 account debtor and an assignor not to assert against an SB1231 Engrossed -154- LRB9106284WHdv 1 assignee any claim or defense that the account debtor may 2 have against the assignor is enforceable by an assignee that 3 takes an assignment: 4 (1) for value; 5 (2) in good faith; 6 (3) without notice of a claim of a property or 7 possessory right to the property assigned; and 8 (4) without notice of a defense or claim in 9 recoupment of the type that may be asserted against a 10 person entitled to enforce a negotiable instrument under 11 Section 3-305(a). 12 (c) When subsection (b) not applicable. Subsection (b) 13 does not apply to defenses of a type that may be asserted 14 against a holder in due course of a negotiable instrument 15 under Section 3-305(b). 16 (d) Omission of required statement in consumer 17 transaction. In a consumer transaction, if a record 18 evidences the account debtor's obligation, law other than 19 this Article requires that the record include a statement to 20 the effect that the rights of an assignee are subject to 21 claims or defenses that the account debtor could assert 22 against the original obligee, and the record does not include 23 such a statement: 24 (1) the record has the same effect as if the record 25 included such a statement; and 26 (2) the account debtor may assert against an 27 assignee those claims and defenses that would have been 28 available if the record included such a statement. 29 (e) Rule for individual under other law. This Section 30 is subject to law other than this Article which establishes a 31 different rule for an account debtor who is an individual and 32 who incurred the obligation primarily for personal, family, 33 or household purposes. 34 (f) Other law not displaced. Except as otherwise SB1231 Engrossed -155- LRB9106284WHdv 1 provided in subsection (d), this Section does not displace 2 law other than this Article which gives effect to an 3 agreement by an account debtor not to assert a claim or 4 defense against an assignee.What constitutes filing;5duration of filing; effect of lapsed filing; duties of filing6officer; fees.7(1) Presentation for filing of a financing statement and8tender of the filing fee or acceptance of the statement by9the filing officer constitutes filing under this Article.10(2) Except as provided in subsection (6) a filed11financing statement is effective for a period of 5 years from12the date of filing. The effectiveness of a filed financing13statement lapses on the expiration of the 5 year period14unless a continuation statement is filed prior to the lapse.15If a security interest perfected by filing exists at the time16insolvency proceedings are commenced by or against the17debtor, the security interest remains perfected until18termination of the insolvency proceedings and thereafter for19a period of 60 days or until expiration of the 5 year period,20whichever occurs later. Upon lapse the security interest21becomes unperfected, unless it is perfected without filing.22If the security interest becomes unperfected upon lapse, it23is deemed to have been unperfected as against a person who24became a purchaser or lien creditor before lapse.25(3) A continuation statement may be filed by the secured26party within 6 months prior to the expiration of the 5 year27period specified in subsection (2). Any such continuation28statement must be signed by the secured party, identify the29original statement by file number and state that the original30statement is still effective. A continuation statement signed31by a person other than the secured party of record must be32accompanied by a separate written statement of assignment33signed by the secured party of record and complying with34subsection (2) of Section 9-405, including payment of theSB1231 Engrossed -156- LRB9106284WHdv 1required fee. Upon timely filing of the continuation2statement, the effectiveness of the original statement is3continued for 5 years after the last date to which the filing4was effective whereupon it lapses in the same manner as5provided in subsection (2) unless another continuation6statement is filed prior to such lapse. Succeeding7continuation statements may be filed in the same manner to8continue the effectiveness of the original statement. Unless9a statute on disposition of public records provides10otherwise, the filing officer may remove a lapsed statement11from the files and destroy it immediately if he has retained12a microfilm or other photographic record, or in other cases13after one year after the lapse. The filing officer shall so14arrange matters by physical annexation of financing15statements to continuation statements or other related16filings, or by other means, that if he physically destroys17the financing statements of a period more than 5 years past,18those which have been continued by a continuation statement19or which are still effective under subsection (6) shall be20retained.21(4) Except as provided in subsection (7) a filing22officer shall mark each statement with a file number and with23the date and hour of filing and shall hold the statement or a24microfilm or other photographic copy thereof for public25inspection. In addition the filing officer shall index the26statement according to the name of the debtor and shall note27in the index the file number and the address of the debtor28given in the statement.29(5) The uniform fee for filing and indexing and for30stamping a copy furnished by the secured party to show the31date and place of filing for an original financing statement,32amended statement, or for a continuation statement shall be33$20.34(6) If the debtor is a transmitting utility (subsectionSB1231 Engrossed -157- LRB9106284WHdv 1(5) of Section 9-401 and a filed financing statement so2states, it is effective until a termination statement is3filed. A real estate mortgage which is effective as a fixture4filing under subsection (6) of Section 9-402 remains5effective as a fixture filing until the mortgage is released6or satisfied of record or its effectiveness otherwise7terminates as to the real estate.8(7) When a financing statement covers timber to be cut9or covers minerals or the like (including oil and gas) or10accounts subject to subsection (5) of Section 9-103, or is11filed as a fixture filing, the filing officer shall index it12under the names of the debtor and any owner of record shown13on the financing statement in the same fashion as if they14were the mortgagors in a mortgage of the real estate15described, and, to the extent that the law of this State16provides for indexing of mortgages under the name of the17mortgagee, under the name of the secured party as if he were18the mortgagee thereunder, or where indexing is by description19in the same fashion as if the financing statement were a20mortgage of the real estate described.21(8) For financing statements filed on or after January221, 1998 as to a debtor who is a resident of the State of23Illinois, if the collateral is equipment used in farming24operations, farm products, or accounts or general intangibles25arising from the sale of farm products by a farmer, the26secured party shall, within 30 days after filing with the27office of the Secretary of State, remit to the office of the28recorder in the county of the debtor's residence a fee of $1029together with a copy of the financing statement filed in the30office of the Secretary of State. This fee is in addition to31payment of the fee provided in subsection (5) of this Section32and is imposed to defray the cost of converting the county33recorder's document storage system to computers or34micrographics. The copy of the financing statement providedSB1231 Engrossed -158- LRB9106284WHdv 1to the office of the recorder shall be for informational2purposes only and shall not be for filing with the office of3the recorder nor shall the provision of the informational4copy be subject to imposition of any filing fee under Section53-5018 of the Counties Code or otherwise. The provisions of6this subsection (8) other than this sentence, are inoperative7after the earlier of (i) July 1, 1999 or (ii) the effective8date of a change to the Illinois Uniform Commercial Code9which adopts a recommendation by the National Conference of10Commissioners on Uniform State Laws to amend Section 9-401 of11this Code to make the office of the Secretary of State the12proper place to file a financing statement described in this13subsection (8).14(9) The failure to send an informational copy of a15financing statement to the appropriate office of the recorder16or to pay the fee as set forth in subsection (8) shall not in17any manner affect the existence, validity, perfection,18priority, or enforceability of the security interest of the19secured party.20 (Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98; 21 revised 10-31-98.) 22 (810 ILCS 5/9-404) (from Ch. 26, par. 9-404) 23 Sec. 9-404. Rights acquired by assignee; claims and 24 defenses against assignee. 25 (a) Assignee's rights subject to terms, claims, and 26 defenses; exceptions. Unless an account debtor has made an 27 enforceable agreement not to assert defenses or claims, and 28 subject to subsections (b) through (e), the rights of an 29 assignee are subject to: 30 (1) all terms of the agreement between the account 31 debtor and assignor and any defense or claim in 32 recoupment arising from the transaction that gave rise to 33 the contract; and SB1231 Engrossed -159- LRB9106284WHdv 1 (2) any other defense or claim of the account 2 debtor against the assignor which accrues before the 3 account debtor receives a notification of the assignment 4 authenticated by the assignor or the assignee. 5 (b) Account debtor's claim reduces amount owed to 6 assignee. Subject to subsection (c) and except as otherwise 7 provided in subsection (d), the claim of an account debtor 8 against an assignor may be asserted against an assignee under 9 subsection (a) only to reduce the amount the account debtor 10 owes. 11 (c) Rule for individual under other law. This Section 12 is subject to law other than this Article which establishes a 13 different rule for an account debtor who is an individual and 14 who incurred the obligation primarily for personal, family, 15 or household purposes. 16 (d) Omission of required statement in consumer 17 transaction. In a consumer transaction, if a record 18 evidences the account debtor's obligation, law other than 19 this Article requires that the record include a statement to 20 the effect that the account debtor's recovery against an 21 assignee with respect to claims and defenses against the 22 assignor may not exceed amounts paid by the account debtor 23 under the record, and the record does not include such a 24 statement, the extent to which a claim of an account debtor 25 against the assignor may be asserted against an assignee is 26 determined as if the record included such a statement. 27 (e) Inapplicability to health-care-insurance receivable. 28 This Section does not apply to an assignment of a 29 health-care-insurance receivable.Termination Statement;30Duties of Filing Officer.31(1) If a financing statement covering consumer goods is32filed on or after the effective date of this amendatory Act33of 1972, then within one month or within 10 days following34written demand by the debtor after there is no outstandingSB1231 Engrossed -160- LRB9106284WHdv 1secured obligation and no commitment to make advances, incur2obligations or otherwise give value, the secured party must3file with each filing officer with whom the financing4statement was filed, a termination statement to the effect5that he no longer claims a security interest under the6financing statement, which shall be identified by file7number. In other cases whenever there is no outstanding8secured obligation and no commitment to make advances, incur9obligations or otherwise give value, the secured party must10on written demand by the debtor send the debtor, for each11filing officer with whom the financing statement was filed, a12termination statement to the effect that he no longer claims13a security interest under the financing statement, which14shall be identified by file number. A termination statement15signed by a person other than the secured party of record16must be accompanied by a separate written statement of17assignment signed by the secured party of record and18complying with subsection (2) of Section 9-405, including19payment of the required fee. If the affected secured party20fails to file such a termination statement as required by21this subsection, or to send such a termination statement22within 10 days after proper demand therefor, he shall be23liable to the debtor for $100 and in addition for any loss24caused to the debtor by such failure.25(2) On presentation to the filing officer of such a26termination statement he must note it in the index. If he has27received the termination statement in duplicate, he shall28return one copy of the termination statement to the secured29party stamped to show the time of receipt thereof. If the30filing officer has a microfilm or other photographic record31of the financing statement, and of any related continuation32statement, statement of assignment and statement of release,33he may remove the originals from the files at any time after34receipt of the termination statement, or if he has no suchSB1231 Engrossed -161- LRB9106284WHdv 1record, he may remove them from the files at any time after2one year after receipt of the termination statement.3 (Source: P.A. 89-503, eff. 1-1-97.) 4 (810 ILCS 5/9-405) (from Ch. 26, par. 9-405) 5 Sec. 9-405. Modification of assigned contract. 6 (a) Effect of modification on assignee. A modification 7 of or substitution for an assigned contract is effective 8 against an assignee if made in good faith. The assignee 9 acquires corresponding rights under the modified or 10 substituted contract. The assignment may provide that the 11 modification or substitution is a breach of contract by the 12 assignor. This subsection is subject to subsections (b) 13 through (d). 14 (b) Applicability of subsection (a). Subsection (a) 15 applies to the extent that: 16 (1) the right to payment or a part thereof under an 17 assigned contract has not been fully earned by 18 performance; or 19 (2) the right to payment or a part thereof has been 20 fully earned by performance and the account debtor has 21 not received notification of the assignment under Section 22 9-406(a). 23 (c) Rule for individual under other law. This Section 24 is subject to law other than this Article which establishes a 25 different rule for an account debtor who is an individual and 26 who incurred the obligation primarily for personal, family, 27 or household purposes. 28 (d) Inapplicability to health-care-insurance receivable. 29 This Section does not apply to an assignment of a 30 health-care-insurance receivable.Assignment of Security31Interest; Duties of Filing Officer; Fees.32(1) A financing statement may disclose an assignment of33a security interest in the collateral described in theSB1231 Engrossed -162- LRB9106284WHdv 1financing statement by indication in the financing statement2of the name and address of the assignee or by an assignment3itself or a copy thereof on the face or back of the4statement. On presentation to the filing officer of such a5financing statement the filing officer shall mark the same as6provided in Section 9-403 (4). The uniform fee for filing,7indexing and furnishing filing data for a financing statement8so indicating an assignment shall be $20.9(2) A secured party may assign of record all or a part10of his rights under a financing statement by the filing in11the place where the original financing statement was filed of12a separate written statement of assignment signed by the13secured party of record and setting forth the name of the14secured party of record and the debtor, the file number and15the date of filing of the financing statement and the name16and address of the assignee and containing a description of17the collateral assigned. A copy of the assignment is18sufficient as a separate statement if it complies with the19preceding sentence. On presentation to the filing officer of20such a separate statement, the filing officer shall mark such21separate statement with the date and hour of the filing. He22shall note the assignment on the index of the financing23statement, or in the case of a fixture filing, or a filing24covering timber to be cut, or covering minerals or the like25(including oil and gas) or accounts subject to subsection (5)26of Section 9-103, he shall index the assignment under the27name of the assignor as grantor and, to the extent that the28law of this State provides for indexing the assignment of a29mortgage under the name of the assignee, he shall index the30assignment of the financing statement under the name of the31assignee. The uniform fee for filing, indexing and furnishing32filing data about such a separate statement of assignment33shall be $20. Notwithstanding the provisions of this34subsection, an assignment of record of a security interest inSB1231 Engrossed -163- LRB9106284WHdv 1a fixture contained in a mortgage effective as a fixture2filing (subsection (6) of Section 9-402 may be made only by3an assignment of the mortgage in the manner provided by the4law of this State other than this Act.5(3) After the disclosure or filing of an assignment6under this Section, the assignee is the secured party of7record.8 (Source: P.A. 89-503, eff. 1-1-97.) 9 (810 ILCS 5/9-406) (from Ch. 26, par. 9-406) 10 Sec. 9-406. Discharge of account debtor; notification of 11 assignment; identification and proof of assignment; 12 restrictions on assignment of accounts, chattel paper, 13 payment intangibles, and promissory notes ineffective. 14 (a) Discharge of account debtor; effect of notification. 15 Subject to subsections (b) through (i), an account debtor on 16 an account, chattel paper, or a payment intangible may 17 discharge its obligation by paying the assignor until, but 18 not after, the account debtor receives a notification, 19 authenticated by the assignor or the assignee, that the 20 amount due or to become due has been assigned and that 21 payment is to be made to the assignee. After receipt of the 22 notification, the account debtor may discharge its obligation 23 by paying the assignee and may not discharge the obligation 24 by paying the assignor. 25 (b) When notification ineffective. Subject to 26 subsection (h), notification is ineffective under subsection 27 (a): 28 (1) if it does not reasonably identify the rights 29 assigned; 30 (2) to the extent that an agreement between an 31 account debtor and a seller of a payment intangible 32 limits the account debtor's duty to pay a person other 33 than the seller and the limitation is effective under law SB1231 Engrossed -164- LRB9106284WHdv 1 other than this Article; or 2 (3) at the option of an account debtor, if the 3 notification notifies the account debtor to make less 4 than the full amount of any installment or other periodic 5 payment to the assignee, even if: 6 (A) only a portion of the account, chattel 7 paper, or payment intangible has been assigned to 8 that assignee; 9 (B) a portion has been assigned to another 10 assignee; or 11 (C) the account debtor knows that the 12 assignment to that assignee is limited. 13 (c) Proof of assignment. Subject to subsection (h), if 14 requested by the account debtor, an assignee shall seasonably 15 furnish reasonable proof that the assignment has been made. 16 Unless the assignee complies, the account debtor may 17 discharge its obligation by paying the assignor, even if the 18 account debtor has received a notification under subsection 19 (a). 20 (d) Term restricting assignment generally ineffective. 21 Except as otherwise provided in subsection (e) and Sections 22 2A-303 and 9-407, and subject to subsection (h), a term in an 23 agreement between an account debtor and an assignor or in a 24 promissory note is ineffective to the extent that it: 25 (1) prohibits, restricts, or requires the consent 26 of the account debtor or person obligated on the 27 promissory note to the assignment or transfer of, or the 28 creation, attachment, perfection, or enforcement of a 29 security interest in, the account, chattel paper, payment 30 intangible, or promissory note; or 31 (2) provides that the assignment or transfer or the 32 creation, attachment, perfection, or enforcement of the 33 security interest may give rise to a default, breach, 34 right of recoupment, claim, defense, termination, right SB1231 Engrossed -165- LRB9106284WHdv 1 of termination, or remedy under the account, chattel 2 paper, payment intangible, or promissory note. 3 (e) Inapplicability of subsection (d) to certain sales. 4 Subsection (d) does not apply to the sale of a payment 5 intangible or promissory note. 6 (f) Legal restrictions on assignment generally 7 ineffective. Except as otherwise provided in Sections 2A-303 8 and 9-407 and subject to subsections (h) and (i), a rule of 9 law, statute, or regulation that prohibits, restricts, or 10 requires the consent of a government, governmental body or 11 official, or account debtor to the assignment or transfer of, 12 or creation of a security interest in, an account or chattel 13 paper is ineffective to the extent that the rule of law, 14 statute, or regulation: 15 (1) prohibits, restricts, or requires the consent 16 of the government, governmental body or official, or 17 account debtor to the assignment or transfer of, or the 18 creation, attachment, perfection, or enforcement of a 19 security interest in the account or chattel paper; or 20 (2) provides that the assignment or transfer or the 21 creation, attachment, perfection, or enforcement of the 22 security interest may give rise to a default, breach, 23 right of recoupment, claim, defense, termination, right 24 of termination, or remedy under the account or chattel 25 paper. 26 (g) Subsection (b)(3) not waivable. Subject to 27 subsection (h), an account debtor may not waive or vary its 28 option under subsection (b)(3). 29 (h) Rule for individual under other law. This Section 30 is subject to law other than this Article which establishes a 31 different rule for an account debtor who is an individual and 32 who incurred the obligation primarily for personal, family, 33 or household purposes. 34 (i) Inapplicability to health-care-insurance receivable. SB1231 Engrossed -166- LRB9106284WHdv 1 This Section does not apply to an assignment of a 2 health-care-insurance receivable. 3Release of Collateral; Duties of Filing Officer; Fees. A4secured party of record may by his signed statement release5all or a part of any collateral described in a filed6financing statement. The statement of release is sufficient7if it contains a description of the collateral being8released, the name and address of the debtor, the name and9address of the secured party, and the file number of the10financing statement. A statement of release signed by a11person other than the secured party of record must be12accompanied by a separate written statement of assignment13signed by the secured party of record and complying with14subsection (2) of Section 9-405, including payment of the15required fee. Upon presentation of such a statement of16release to the filing officer he shall mark the statement17with the hour and date of filing and shall note the same upon18the margin of the index of the filing of the financing19statement. The uniform fee for filing and noting such a20statement of release shall be $20.21 (Source: P.A. 89-503, eff. 1-1-97.) 22 (810 ILCS 5/9-407) (from Ch. 26, par. 9-407) 23 Sec. 9-407. Restrictions on creation or enforcement of 24 security interest in leasehold interest or in lessor's 25 residual interest. 26 (a) Term restricting assignment generally ineffective. 27 Except as otherwise provided in subsection (b), a term in a 28 lease agreement is ineffective to the extent that it: 29 (1) prohibits, restricts, or requires the consent 30 of a party to the lease to the assignment or transfer or 31 the creation, attachment, perfection, or enforcement of a 32 security interest in an interest of a party under the 33 lease contract or in the lessor's residual interest in SB1231 Engrossed -167- LRB9106284WHdv 1 the goods; or 2 (2) provides that the assignment or transfer or the 3 creation, attachment, perfection, or enforcement of the 4 security interest may give rise to a default, breach, 5 right of recoupment, claim, defense, termination, right 6 of termination, or remedy under the lease. 7 (b) Effectiveness of certain terms. Except as otherwise 8 provided in Section 2A-303(7), a term described in subsection 9 (a)(2) is effective to the extent that there is: 10 (1) a transfer by the lessee of the lessee's right 11 of possession or use of the goods in violation of the 12 term; or 13 (2) a delegation of a material performance of 14 either party to the lease contract in violation of the 15 term. 16 (c) Security interest not material impairment. The 17 creation, attachment, perfection, or enforcement of a 18 security interest in the lessor's interest under the lease 19 contract or the lessor's residual interest in the goods is 20 not a transfer that materially impairs the lessee's prospect 21 of obtaining return performance or materially changes the 22 duty of or materially increases the burden or risk imposed on 23 the lessee within the purview of Section 2A-303(4) unless, 24 and then only to the extent that, enforcement actually 25 results in a delegation of material performance of the 26 lessor.Information from Filing Officer; Fees.27(1) If the person filing any financing statement,28termination statement, statement of assignment, or statement29of release, furnishes the filing officer a copy thereof, the30filing officer shall upon request note upon the copy the file31number and date and hour of the filing of the original and32deliver or send the copy to such person.33(2) Upon request of any person, the filing officer shall34issue his certificate showing whether there is on file on theSB1231 Engrossed -168- LRB9106284WHdv 1date and hour stated therein, any presently effective2financing statement naming a particular debtor and any3statement of assignment thereof and if there is, giving the4date and hour of filing of each such statement and the names5and addresses of each secured party therein. The uniform fee6for such a certificate shall be $10 per name searched. Upon7request the filing officer shall furnish a copy of any filed8financing statement or statement of assignment for a uniform9fee of $1.00 per page.10 (Source: P.A. 86-343.) 11 (810 ILCS 5/9-408) (from Ch. 26, par. 9-408) 12 Sec. 9-408. Restrictions on assignment of promissory 13 notes, health-care-insurance receivables, and certain general 14 intangibles ineffective. 15 (a) Term restricting assignment generally ineffective. 16 Except as otherwise provided in subsection (b), a term in a 17 promissory note or in an agreement between an account debtor 18 and a debtor which relates to a health-care-insurance 19 receivable or a general intangible, including a contract, 20 permit, license, or franchise, and which term prohibits, 21 restricts, or requires the consent of the person obligated on 22 the promissory note or the account debtor to, the assignment 23 or transfer of, or creation, attachment, or perfection of a 24 security interest in, the promissory note, 25 health-care-insurance receivable, or general intangible, is 26 ineffective to the extent that the term: 27 (1) would impair the creation, attachment, or 28 perfection of a security interest; or 29 (2) provides that the assignment or transfer or the 30 creation, attachment, or perfection of the security 31 interest may give rise to a default, breach, right of 32 recoupment, claim, defense, termination, right of 33 termination, or remedy under the promissory note, SB1231 Engrossed -169- LRB9106284WHdv 1 health-care-insurance receivable, or general intangible. 2 (b) Applicability of subsection (a) to sales of certain 3 rights to payment. Subsection (a) applies to a security 4 interest in a payment intangible or promissory note only if 5 the security interest arises out of a sale of the payment 6 intangible or promissory note. 7 (c) Legal restrictions on assignment generally 8 ineffective. A rule of law, statute, or regulation that 9 prohibits, restricts, or requires the consent of a 10 government, governmental body or official, person obligated 11 on a promissory note, or account debtor to the assignment or 12 transfer of, or creation of a security interest in, a 13 promissory note, health-care-insurance receivable, or general 14 intangible, including a contract, permit, license, or 15 franchise between an account debtor and a debtor, is 16 ineffective to the extent that the rule of law, statute, or 17 regulation: 18 (1) would impair the creation, attachment, or 19 perfection of a security interest; or 20 (2) provides that the assignment or transfer or the 21 creation, attachment, or perfection of the security 22 interest may give rise to a default, breach, right of 23 recoupment, claim, defense, termination, right of 24 termination, or remedy under the promissory note, 25 health-care-insurance receivable, or general intangible. 26 (d) Limitation on ineffectiveness under subsections (a) 27 and (c). To the extent that a term in a promissory note or in 28 an agreement between an account debtor and a debtor which 29 relates to a health-care-insurance receivable or general 30 intangible or a rule of law, statute, or regulation described 31 in subsection (c) would be effective under law other than 32 this Article but is ineffective under subsection (a) or (c), 33 the creation, attachment, or perfection of a security 34 interest in the promissory note, health-care-insurance SB1231 Engrossed -170- LRB9106284WHdv 1 receivable, or general intangible: 2 (1) is not enforceable against the person obligated 3 on the promissory note or the account debtor; 4 (2) does not impose a duty or obligation on the 5 person obligated on the promissory note or the account 6 debtor; 7 (3) does not require the person obligated on the 8 promissory note or the account debtor to recognize the 9 security interest, pay or render performance to the 10 secured party, or accept payment or performance from the 11 secured party; 12 (4) does not entitle the secured party to use or 13 assign the debtor's rights under the promissory note, 14 health-care-insurance receivable, or general intangible, 15 including any related information or materials furnished 16 to the debtor in the transaction giving rise to the 17 promissory note, health-care-insurance receivable, or 18 general intangible; 19 (5) does not entitle the secured party to use, 20 assign, possess, or have access to any trade secrets or 21 confidential information of the person obligated on the 22 promissory note or the account debtor; and 23 (6) does not entitle the secured party to enforce 24 the security interest in the promissory note, 25 health-care-insurance receivable, or general intangible. 26Financing Statements Covering Consigned or Leased Goods.27A consignor or lessor of goods may file a financing28statement using the terms "consignor," "consignee," "lessor,"29"lessee" or the like instead of the terms specified in30Section 9-402. The provisions of this part shall apply as31appropriate to such a financing statement but its filing32shall not of itself be a factor in determining whether or not33the consignment or lease is intended as security (Section341-201 (37). However, if it is determined for other reasonsSB1231 Engrossed -171- LRB9106284WHdv 1that the consignment or lease is so intended, a security2interest of the consignor or lessor which attaches to the3consigned or leased goods is perfected by such filing.4 (Source: P. A. 78-238.) 5 (810 ILCS 5/9-409 new) 6 Sec. 9-409. Restrictions on assignment of 7 letter-of-credit rights ineffective. 8 (a) Term or law restricting assignment generally 9 ineffective. A term in a letter of credit or a rule of law, 10 statute, regulation, custom, or practice applicable to the 11 letter of credit which prohibits, restricts, or requires the 12 consent of an applicant, issuer, or nominated person to a 13 beneficiary's assignment of or creation of a security 14 interest in a letter-of-credit right is ineffective to the 15 extent that the term or rule of law, statute, regulation, 16 custom, or practice: 17 (1) would impair the creation, attachment, or 18 perfection of a security interest in the letter-of-credit 19 right; or 20 (2) provides that the assignment or the creation, 21 attachment, or perfection of the security interest may 22 give rise to a default, breach, right of recoupment, 23 claim, defense, termination, right of termination, or 24 remedy under the letter-of-credit right. 25 (b) Limitation on ineffectiveness under subsection (a). 26 To the extent that a term in a letter of credit is 27 ineffective under subsection (a) but would be effective under 28 law other than this Article or a custom or practice 29 applicable to the letter of credit, to the transfer of a 30 right to draw or otherwise demand performance under the 31 letter of credit, or to the assignment of a right to proceeds 32 of the letter of credit, the creation, attachment, or 33 perfection of a security interest in the letter-of-credit SB1231 Engrossed -172- LRB9106284WHdv 1 right: 2 (1) is not enforceable against the applicant, 3 issuer, nominated person, or transferee beneficiary; 4 (2) imposes no duties or obligations on the 5 applicant, issuer, nominated person, or transferee 6 beneficiary; and 7 (3) does not require the applicant, issuer, 8 nominated person, or transferee beneficiary to recognize 9 the security interest, pay or render performance to the 10 secured party, or accept payment or other performance 11 from the secured party. 12 (810 ILCS 5/9-410) 13 Sec. 9-410. (Blank).Disposition of fees. Of the total14money collected for each filing with the Secretary of State15of an original financing statement, amended statement,16continuation, assignment, or for a release of collateral, $1217of the filing fee shall be paid into the Secretary of State18Special Services Fund. The remaining $8 shall be deposited19into the General Revenue Fund in the State Treasury.20 (Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.) 21 (810 ILCS 5/Art. 9, Part 5 heading) 22 PART 5. FILINGDEFAULT23 (810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new) 24 SUBPART 1. FILING OFFICE; CONTENTS AND 25 EFFECTIVENESS OF FINANCING STATEMENT 26 (810 ILCS 5/9-501) (from Ch. 26, par. 9-501) 27 Sec. 9-501. Filing office. 28 (a) Filing offices. Except as otherwise provided in 29 subsection (b), if the local law of this State governs 30 perfection of a security interest or agricultural lien, the SB1231 Engrossed -173- LRB9106284WHdv 1 office in which to file a financing statement to perfect the 2 security interest or agricultural lien is: 3 (1) the office designated for the filing or 4 recording of a record of a mortgage on the related real 5 property, if: 6 (A) the collateral is as-extracted collateral 7 or timber to be cut; or 8 (B) the financing statement is filed as a 9 fixture filing and the collateral is goods that are 10 or are to become fixtures; or 11 (2) the office of the Secretary of State in all 12 other cases, including a case in which the collateral is 13 goods that are or are to become fixtures and the 14 financing statement is not filed as a fixture filing. 15 (b) Filing office for transmitting utilities. The 16 office in which to file a financing statement to perfect a 17 security interest in collateral, including fixtures, of a 18 transmitting utility is the office of the Secretary of State. 19 The financing statement also constitutes a fixture filing as 20 to the collateral indicated in the financing statement which 21 is or is to become fixtures.Default; procedure when security22agreement covers both real and personal property.23(1) When a debtor is in default under a security24agreement, a secured party has the rights and remedies25provided in this Part and except as limited by subsection (3)26those provided in the security agreement. He may reduce his27claim to judgment, foreclose or otherwise enforce the28security interest by any available judicial procedure. If the29collateral is documents the secured party may proceed either30as to the documents or as to the goods covered thereby. A31secured party in possession has the rights, remedies and32duties provided in Section 9-207. The rights and remedies33referred to in this subsection are cumulative.34(2) After default, the debtor has the rights andSB1231 Engrossed -174- LRB9106284WHdv 1remedies provided in this Part, those provided in the2security agreement and those provided in Section 9-207.3(3) To the extent that they give rights to the debtor4and impose duties on the secured party, the rules stated in5the subsections referred to below may not be waived or varied6except as provided with respect to compulsory disposition of7collateral (subsection (3) of Section 9-504 and Section 9-5058and with respect to redemption of collateral (Section 9-506)9but the parties may by agreement determine the standards by10which the fulfillment of these rights and duties is to be11measured if such standards are not manifestly unreasonable:12(a) subsection (2) of Section 9-502 and subsection13(2) of Section 9-504 insofar as they require accounting14for surplus proceeds of collateral;15(b) subsection (3) of Section 9-504 and subsection16(1) of Section 9-505 which deal with disposition of17collateral;18(c) subsection (2) of Section 9-505 which deals19with acceptance of collateral as discharge of obligation;20(d) Section 9-506 which deals with redemption of21collateral; and22(e) subsection (1) of Section 9-507 which deals23with the secured party's liability for failure to comply24with this Part.25(4) If the security agreement covers both real and26personal property, the secured party may proceed under this27Part as to the personal property or he may proceed as to both28the real and the personal property in accordance with his29rights and remedies in respect to the real property in which30case the provisions of this Part do not apply.31(5) When a secured party has reduced his claim to32judgment the lien of any levy which may be made upon his33collateral by virtue of such judgment shall relate back to34the date of the perfection of the security interest in suchSB1231 Engrossed -175- LRB9106284WHdv 1collateral. A judicial sale, pursuant to such judgment, is a2foreclosure of the security interest by judicial procedure3within the meaning of this Section, and the secured party may4purchase at the sale and thereafter hold the collateral free5of any other requirements of this Article.6 (Source: P.A. 84-546; revised 10-31-98.) 7 (810 ILCS 5/9-502) (from Ch. 26, par. 9-502) 8 Sec. 9-502. Contents of financing statement; record of 9 mortgage as financing statement; time of filing financing 10 statement. 11 (a) Sufficiency of financing statement. Subject to 12 subsection (b), a financing statement is sufficient only if 13 it: 14 (1) provides the name of the debtor; 15 (2) provides the name of the secured party or a 16 representative of the secured party; and 17 (3) indicates the collateral covered by the 18 financing statement. 19 (b) Real-property-related financing statements. Except 20 as otherwise provided in Section 9-501(b), to be sufficient, 21 a financing statement that covers as-extracted collateral or 22 timber to be cut, or which is filed as a fixture filing and 23 covers goods that are or are to become fixtures, must satisfy 24 subsection (a) and also: 25 (1) indicate that it covers this type of 26 collateral; 27 (2) indicate that it is to be filed in the real 28 property records; 29 (3) provide a description of the real property to 30 which the collateral is related sufficient to give 31 constructive notice of a mortgage under the law of this 32 State if the description were contained in a record of 33 the mortgage of the real property; and SB1231 Engrossed -176- LRB9106284WHdv 1 (4) if the debtor does not have an interest of 2 record in the real property, provide the name of a record 3 owner. 4 (c) Record of mortgage as financing statement. A record 5 of a mortgage is effective, from the date of recording, as a 6 financing statement filed as a fixture filing or as a 7 financing statement covering as-extracted collateral or 8 timber to be cut only if: 9 (1) the record indicates the goods or accounts that 10 it covers; 11 (2) the goods are or are to become fixtures related 12 to the real property described in the record or the 13 collateral is related to the real property described in 14 the record and is as-extracted collateral or timber to be 15 cut; 16 (3) the record satisfies the requirements for a 17 financing statement in this Section other than an 18 indication that it is to be filed in the real property 19 records; and 20 (4) the record is recorded. 21 (d) Filing before security agreement or attachment. A 22 financing statement may be filed before a security agreement 23 is made or a security interest otherwise attaches.Collection24Rights of Secured Party.25(1) When so agreed and in any event on default the26secured party is entitled to notify an account debtor or the27obligor on an instrument to make payment to him whether or28not the assignor was theretofore making collections on the29collateral, and also to take control of any proceeds to which30he is entitled under Section 9-306.31(2) A secured party who by agreement is entitled to32charge back uncollected collateral or otherwise to full or33limited recourse against the debtor and who undertakes to34collect from the account debtors or obligors must proceed inSB1231 Engrossed -177- LRB9106284WHdv 1a commercially reasonable manner and may deduct his2reasonable expenses of realization from the collections. If3the security agreement secures an indebtedness, the secured4party must account to the debtor for any surplus, and unless5otherwise agreed, the debtor is liable for any deficiency.6But, if the underlying transaction was a sale of accounts or7chattel paper, the debtor is entitled to any surplus or is8liable for any deficiency only if the security agreement so9provides.10 (Source: P.A. 77-2810.) 11 (810 ILCS 5/9-503) (from Ch. 26, par. 9-503) 12 Sec. 9-503. Name of debtor and secured party. 13 (a) Sufficiency of debtor's name. A financing statement 14 sufficiently provides the name of the debtor: 15 (1) if the debtor is a registered organization, 16 only if the financing statement provides the name of the 17 debtor indicated on the public record of the debtor's 18 jurisdiction of organization which shows the debtor to 19 have been organized; 20 (2) if the debtor is a decedent's estate, only if 21 the financing statement provides the name of the decedent 22 and indicates that the debtor is an estate; 23 (3) if the debtor is a trust or a trustee acting 24 with respect to property held in trust, only if the 25 financing statement: 26 (A) provides the name specified for the trust 27 in its organic documents or, if no name is 28 specified, provides the name of the settlor and 29 additional information sufficient to distinguish the 30 debtor from other trusts having one or more of the 31 same settlors; and 32 (B) indicates, in the debtor's name or 33 otherwise, that the debtor is a trust or is a SB1231 Engrossed -178- LRB9106284WHdv 1 trustee acting with respect to property held in 2 trust; and 3 (4) in other cases: 4 (A) if the debtor has a name, only if it 5 provides the individual or organizational name of 6 the debtor; and 7 (B) if the debtor does not have a name, only 8 if it provides the names of the partners, members, 9 associates, or other persons comprising the debtor. 10 (b) Additional debtor-related information. A financing 11 statement that provides the name of the debtor in accordance 12 with subsection (a) is not rendered ineffective by the 13 absence of: 14 (1) a trade name or other name of the debtor; or 15 (2) unless required under subsection (a)(4)(B), 16 names of partners, members, associates, or other persons 17 comprising the debtor. 18 (c) Debtor's trade name insufficient. A financing 19 statement that provides only the debtor's trade name does not 20 sufficiently provide the name of the debtor. 21 (d) Representative capacity. Failure to indicate the 22 representative capacity of a secured party or representative 23 of a secured party does not affect the sufficiency of a 24 financing statement. 25 (e) Multiple debtors and secured parties. A financing 26 statement may provide the name of more than one debtor and 27 the name of more than one secured party.Secured party's28right to take possession after default.29Unless otherwise agreed a secured party has on default30the right to take possession of the collateral. In taking31possession a secured party may proceed without judicial32process if this can be done without breach of the peace or33may proceed by action.34If the security agreement so provides the secured partySB1231 Engrossed -179- LRB9106284WHdv 1may require the debtor to assemble the collateral and make it2available to the secured party at a place to be designated by3the secured party which is reasonably convenient to both4parties. Without removal a secured party may render equipment5unusable, and may dispose of collateral on the debtor's6premises under Section 9--504.7 (Source: Laws 1961, p. 2101.) 8 (810 ILCS 5/9-504) (from Ch. 26, par. 9-504) 9 Sec. 9-504. Indication of collateral. A financing 10 statement sufficiently indicates the collateral that it 11 covers if the financing statement provides: 12 (1) a description of the collateral pursuant to 13 Section 9-108; or 14 (2) an indication that the financing statement 15 covers all assets or all personal property. 16Secured Party's Right to Dispose of Collateral After17Default; Effect of Disposition.18(1) A secured party after default may sell, lease or19otherwise dispose of any or all of the collateral in its then20condition or following any commercially reasonable21preparation or processing. Any sale of goods is subject to22the Article on Sales (Article 2). The proceeds of disposition23shall be applied in the order following to24(a) the reasonable expenses of retaking, holding,25preparing for sale or lease, selling, leasing and the like26and, to the extent provided for in the agreement and not27prohibited by law, the reasonable attorneys' fees and legal28expenses incurred by the secured party;29(b) the satisfaction of indebtedness secured by the30security interest under which the disposition is made;31(c) the satisfaction of indebtedness secured by any32subordinate security interest in the collateral if written33notification of demand therefor is received beforeSB1231 Engrossed -180- LRB9106284WHdv 1distribution of the proceeds is completed. If requested by2the secured party, the holder of a subordinate security3interest must seasonably furnish reasonable proof of his4interest, and unless he does so, the secured party need not5comply with his demand.6(2) If the security interest secures an indebtedness,7the secured party must account to the debtor for any surplus,8and, unless otherwise agreed, the debtor is liable for any9deficiency. But if the underlying transaction was a sale of10accounts or chattel paper, the debtor is entitled to any11surplus or is liable for any deficiency only if the security12agreement so provides.13(3) Disposition of the collateral may be by public or14private proceedings and may be made by way of one or more15contracts. Sale or other disposition may be as a unit or in16parcels and at any time and place and on any terms but every17aspect of the disposition including the method, manner, time,18place and terms must be commercially reasonable. Unless19collateral is perishable or threatens to decline speedily in20value or is of a type customarily sold on a recognized21market, reasonable notification of the time and place of any22public sale or reasonable notification of the time after23which any private sale or other intended disposition is to be24made shall be sent by the secured party to the debtor, if he25has not signed after default a statement renouncing or26modifying his right to notification of sale. In the case of27consumer goods no other notification need be sent. In other28cases notification shall be sent to any other secured party29from whom the secured party has received (before sending his30notification to the debtor or before the debtor's31renunciation of his rights) written notice of a claim of an32interest in the collateral. The secured party may buy at any33public sale and if the collateral is of a type customarily34sold in a recognized market or is of a type which is theSB1231 Engrossed -181- LRB9106284WHdv 1subject of widely distributed standard price quotations he2may buy at private sale.3(4) When collateral is disposed of by a secured party4after default, the disposition transfers to a purchaser for5value all of the debtor's rights therein, discharges the6security interest under which it is made and any security7interest or lien subordinate thereto. The purchaser takes8free of all such rights and interests even though the secured9party fails to comply with the requirements of this Part or10of any judicial proceedings11(a) in the case of a public sale, if the purchaser12has no knowledge of any defects in the sale and if he does13not buy in collusion with the secured party, other bidders or14the person conducting the sale; or15(b) in any other case, if the purchaser acts in16good faith.17(5) A person who is liable to a secured party under a18guaranty, indorsement, repurchase agreement or the like and19who receives a transfer of collateral from the secured party20or is subrogated to his rights has thereafter the rights and21duties of the secured party. Such a transfer of collateral is22not a sale or disposition of the collateral under this23Article.24 (Source: P. A. 78-238.) 25 (810 ILCS 5/9-505) (from Ch. 26, par. 9-505) 26 Sec. 9-505. Filing and compliance with other statutes and 27 treaties for consignments, leases, other bailments, and other 28 transactions. 29 (a) Use of terms other than "debtor" and "secured 30 party." A consignor, lessor, or other bailor of goods, a 31 licensor, or a buyer of a payment intangible or promissory 32 note may file a financing statement, or may comply with a 33 statute or treaty described in Section 9-311(a), using the SB1231 Engrossed -182- LRB9106284WHdv 1 terms "consignor", "consignee", "lessor", "lessee", "bailor", 2 "bailee", "licensor", "licensee", "owner", "registered 3 owner", "buyer", "seller", or words of similar import, 4 instead of the terms "secured party" and "debtor". 5 (b) Effect of financing statement under subsection (a). 6 This part applies to the filing of a financing statement 7 under subsection (a) and, as appropriate, to compliance that 8 is equivalent to filing a financing statement under Section 9 9-311(b), but the filing or compliance is not of itself a 10 factor in determining whether the collateral secures an 11 obligation. If it is determined for another reason that the 12 collateral secures an obligation, a security interest held by 13 the consignor, lessor, bailor, licensor, owner, or buyer 14 which attaches to the collateral is perfected by the filing 15 or compliance.Compulsory Disposition of Collateral;16Acceptance of the Collateral as Discharge of Obligation.17(1) If the debtor has paid 60% of the cash price in the18case of a purchase money security interest in consumer goods19or 60% of the loan in the case of another security interest20in consumer goods, and has not signed after default a21statement renouncing or modifying his rights under this Part22a secured party who has taken possession of collateral must23dispose of it under Section 9--504 and if he fails to do so24within 90 days after he takes possession the debtor at his25option may recover in conversion or under Section 9--507(1)26on secured party's liability.27(2) In any other case involving consumer goods or any28other collateral a secured party in possession may, after29default, propose to retain the collateral in satisfaction of30the obligation. Written notice of such proposal shall be sent31to the debtor if he has not signed after default a statement32renouncing or modifying his rights under this subsection. In33the case of consumer goods no other notice need be given. In34other cases notice shall be sent to any other secured partySB1231 Engrossed -183- LRB9106284WHdv 1from whom the secured party has received (before sending his2notice to the debtor or before the debtor's renunciation of3his rights) written notice of a claim of an interest in the4collateral. If the secured party receives objection in5writing from a person entitled to receive notification within6twenty-one days after the notice was sent, the secured party7must dispose of the collateral under Section 9-504. In the8absence of such written objection the secured party may9retain the collateral in satisfaction of the debtor's10obligation.11 (Source: P.A. 77-2810.) 12 (810 ILCS 5/9-506) (from Ch. 26, par. 9-506) 13 Sec. 9-506. Effect of errors or omissions. 14 (a) Minor errors and omissions. A financing statement 15 substantially satisfying the requirements of this Part is 16 effective, even if it has minor errors or omissions, unless 17 the errors or omissions make the financing statement 18 seriously misleading. 19 (b) Financing statement seriously misleading. Except as 20 otherwise provided in subsection (c), a financing statement 21 that fails sufficiently to provide the name of the debtor in 22 accordance with Section 9-503(a) is seriously misleading. 23 (c) Financing statement not seriously misleading. If a 24 search of the records of the filing office under the debtor's 25 correct name, using the filing office's standard search 26 logic, if any, would disclose a financing statement that 27 fails sufficiently to provide the name of the debtor in 28 accordance with Section 9-503(a), the name provided does not 29 make the financing statement seriously misleading. 30 (d) "Debtor's correct name." For purposes of Section 31 9-508(b), the "debtor's correct name" in subsection (c) means 32 the correct name of the new debtor.Debtor's right to redeem33collateral.SB1231 Engrossed -184- LRB9106284WHdv 1At any time before the secured party has disposed of2collateral or entered into a contract for its disposition3under Section 9--504 or before the obligation has been4discharged under Section 9--505(2) the debtor or any other5secured party may unless otherwise agreed in writing after6default redeem the collateral by tendering fulfillment of all7obligations secured by the collateral as well as the expenses8reasonably incurred by the secured party in retaking, holding9and preparing the collateral for disposition, in arranging10for the sale, and to the extent provided in the agreement and11not prohibited by law, his reasonable attorneys' fees and12legal expenses.13 (Source: Laws 1961, p. 2101.) 14 (810 ILCS 5/9-507) (from Ch. 26, par. 9-507) 15 Sec. 9-507. Effect of certain events on effectiveness of 16 financing statement. 17 (a) Disposition. A filed financing statement remains 18 effective with respect to collateral that is sold, exchanged, 19 leased, licensed, or otherwise disposed of and in which a 20 security interest or agricultural lien continues, even if the 21 secured party knows of or consents to the disposition. 22 (b) Information becoming seriously misleading. Except 23 as otherwise provided in subsection (c) and Section 9-508, a 24 financing statement is not rendered ineffective if, after the 25 financing statement is filed, the information provided in the 26 financing statement becomes seriously misleading under 27 Section 9-506. 28 (c) Change in debtor's name. If a debtor so changes its 29 name that a filed financing statement becomes 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 debtor 33 before, or within four months after, the change; and SB1231 Engrossed -185- LRB9106284WHdv 1 (2) the financing statement is not effective to 2 perfect a security interest in collateral acquired by the 3 debtor more than four months after the change, unless an 4 amendment to the financing statement which renders the 5 financing statement not seriously misleading is filed 6 within four months after the change.Secured party's7liability for failure to comply with this part.8(1) If it is established that the secured party is not9proceeding in accordance with the provisions of this Part10disposition may be ordered or restrained on appropriate terms11and conditions. If the disposition has occurred the debtor or12any person entitled to notification or whose security13interest has been made known to the secured party prior to14the disposition has a right to recover from the secured party15any loss caused by a failure to comply with the provisions of16this Part. If the collateral is consumer goods, the debtor in17an individual action has a right to recover in any event an18amount not less than the credit service charge plus 10% of19the principal amount of the debt or the time price20differential plus 10% of the cash price.21(2) The fact that a better price could have been22obtained by a sale at a different time or in a different23method from that selected by the secured party is not of24itself sufficient to establish that the sale was not made in25a commercially reasonable manner. If the secured party either26sells the collateral in the usual manner in any recognized27market therefor or if he sells at the price current in such28market at the time of his sale or if he has otherwise sold in29conformity with reasonable commercial practices among dealers30in the type of property sold he has sold in a commercially31reasonable manner. The principles stated in the two preceding32sentences with respect to sales also apply as may be33appropriate to other types of disposition. A disposition34which has been approved in any judicial proceeding or by anySB1231 Engrossed -186- LRB9106284WHdv 1bona fide creditors' committee or representative of creditors2shall conclusively be deemed to be commercially reasonable,3but this sentence does not indicate that any such approval4must be obtained in any case nor does it indicate that any5disposition not so approved is not commercially reasonable.6 (Source: P.A. 90-214, eff. 7-25-97.) 7 (810 ILCS 5/9-508 new) 8 Sec. 9-508. Effectiveness of financing statement if new 9 debtor becomes bound by security agreement. 10 (a) Financing statement naming original debtor. Except 11 as otherwise provided in this Section, a filed financing 12 statement naming an original debtor is effective to perfect a 13 security interest in collateral in which a new debtor has or 14 acquires rights to the extent that the financing statement 15 would have been effective had the original debtor acquired 16 rights in the collateral. 17 (b) Financing statement becoming seriously misleading. 18 If the difference between the name of the original debtor and 19 that of the new debtor causes a filed financing statement 20 that is effective under subsection (a) to be seriously 21 misleading under Section 9-506: 22 (1) the financing statement is effective to perfect 23 a security interest in collateral acquired by the new 24 debtor before, and within four months after, the new 25 debtor becomes bound under Section 9-203(d); and 26 (2) the financing statement is not effective to 27 perfect a security interest in collateral acquired by the 28 new debtor more than four months after the new debtor 29 becomes bound under Section 9-203(d) unless an initial 30 financing statement providing the name of the new debtor 31 is filed before the expiration of that time. 32 (c) When Section not applicable. This Section does not 33 apply to collateral as to which a filed financing statement SB1231 Engrossed -187- LRB9106284WHdv 1 remains effective against the new debtor under Section 2 9-507(a). 3 (810 ILCS 5/9-509 new) 4 Sec. 9-509. Persons entitled to file a record. 5 (a) Person entitled to file record. A person may file 6 an initial financing statement, amendment that adds 7 collateral covered by a financing statement, or amendment 8 that adds a debtor to a financing statement only if: 9 (1) the debtor authorizes the filing in an 10 authenticated record or pursuant to subsection (b) or 11 (c); or 12 (2) the person holds an agricultural lien that has 13 become effective at the time of filing and the financing 14 statement covers only collateral in which the person 15 holds an agricultural lien. 16 (b) Security agreement as authorization. By 17 authenticating or becoming bound as debtor by a security 18 agreement, a debtor or new debtor authorizes the filing of an 19 initial financing statement, and an amendment, covering: 20 (1) the collateral described in the security 21 agreement; and 22 (2) property that becomes collateral under Section 23 9-315(a)(2), whether or not the security agreement 24 expressly covers proceeds. 25 (c) Acquisition of collateral as authorization. By 26 acquiring collateral in which a security interest or 27 agricultural lien continues under Section 9-315(a)(1), a 28 debtor authorizes the filing of an initial financing 29 statement, and an amendment, covering the collateral and 30 property that becomes collateral under Section 9-315(a)(2). 31 (d) Person entitled to file certain amendments. A 32 person may file an amendment other than an amendment that 33 adds collateral covered by a financing statement or an SB1231 Engrossed -188- LRB9106284WHdv 1 amendment that adds a debtor to a financing statement only 2 if: 3 (1) the secured party of record authorizes the 4 filing; or 5 (2) the amendment is a termination statement for a 6 financing statement as to which the secured party of 7 record has failed to file or send a termination statement 8 as required by Section 9-513(a) or (c), the debtor 9 authorizes the filing, and the termination statement 10 indicates that the debtor authorized it to be filed. 11 (e) Multiple secured parties of record. If there is 12 more than one secured party of record for a financing 13 statement, each secured party of record may authorize the 14 filing of an amendment under subsection (d). 15 (810 ILCS 5/9-510 new) 16 Sec. 9-510. Effectiveness of filed record. 17 (a) Filed record effective if authorized. A filed 18 record is effective only to the extent that it was filed by a 19 person that may file it under Section 9-509. 20 (b) Authorization by one secured party of record. A 21 record authorized by one secured party of record does not 22 affect the financing statement with respect to another 23 secured party of record. 24 (c) Continuation statement not timely filed. A 25 continuation statement that is not filed within the six-month 26 period prescribed by Section 9-515(d) is ineffective. 27 (810 ILCS 5/9-511 new) 28 Sec. 9-511. Secured party of record. 29 (a) Secured party of record. A secured party of record 30 with respect to a financing statement is a person whose name 31 is provided as the name of the secured party or a 32 representative of the secured party in an initial financing SB1231 Engrossed -189- LRB9106284WHdv 1 statement that has been filed. If an initial financing 2 statement is filed under Section 9-514(a), the assignee named 3 in the initial financing statement is the secured party of 4 record with respect to the financing statement. 5 (b) Amendment naming secured party of record. If an 6 amendment of a financing statement which provides the name of 7 a person as a secured party or a representative of a secured 8 party is filed, the person named in the amendment is a 9 secured party of record. If an amendment is filed under 10 Section 9-514(b), the assignee named in the amendment is a 11 secured party of record. 12 (c) Amendment deleting secured party of record. A 13 person remains a secured party of record until the filing of 14 an amendment of the financing statement which deletes the 15 person. 16 (810 ILCS 5/9-512 new) 17 Sec. 9-512. Amendment of financing statement. 18 (a) Amendment of information in financing statement. 19 Subject to Section 9-509, a person may add or delete 20 collateral covered by, continue or terminate the 21 effectiveness of, or, subject to subsection (e), otherwise 22 amend the information provided in, a financing statement by 23 filing an amendment that: 24 (1) identifies, by its file number, the initial 25 financing statement to which the amendment relates; and 26 (2) if the amendment relates to an initial 27 financing statement filed or recorded in a filing office 28 described in Section 9-501(a)(1), provides the date and 29 time that the initial financing statement was filed and 30 the information specified in Section 9-502(b). 31 (b) Period of effectiveness not affected. Except as 32 otherwise provided in Section 9-515, the filing of an 33 amendment does not extend the period of effectiveness of the SB1231 Engrossed -190- LRB9106284WHdv 1 financing statement. 2 (c) Effectiveness of amendment adding collateral. A 3 financing statement that is amended by an amendment that adds 4 collateral is effective as to the added collateral only from 5 the date of the filing of the amendment. 6 (d) Effectiveness of amendment adding debtor. A 7 financing statement that is amended by an amendment that adds 8 a debtor is effective as to the added debtor only from the 9 date of the filing of the amendment. 10 (e) Certain amendments ineffective. An amendment is 11 ineffective to the extent it: 12 (1) purports to delete all debtors and fails to 13 provide the name of a debtor to be covered by the 14 financing statement; or 15 (2) purports to delete all secured parties of 16 record and fails to provide the name of a new secured 17 party of record. 18 (810 ILCS 5/9-513 new) 19 Sec. 9-513. Termination statement. 20 (a) Consumer goods. A secured party shall cause the 21 secured party of record for a financing statement to file a 22 termination statement for the financing statement if the 23 financing statement covers consumer goods and: 24 (1) there is no obligation secured by the 25 collateral covered by the financing statement and no 26 commitment to make an advance, incur an obligation, or 27 otherwise give value; or 28 (2) the debtor did not authorize the filing of the 29 initial financing statement. 30 (b) Time for compliance with subsection (a). To comply 31 with subsection (a), a secured party shall cause the secured 32 party of record to file the termination statement: 33 (1) within one month after there is no obligation SB1231 Engrossed -191- LRB9106284WHdv 1 secured by the collateral covered by the financing 2 statement and no commitment to make an advance, incur an 3 obligation, or otherwise give value; or 4 (2) if earlier, within 20 days after the secured 5 party receives an authenticated demand from a debtor. 6 (c) Other collateral. In cases not governed by 7 subsection (a), within 20 days after a secured party receives 8 an authenticated demand from a debtor, the secured party 9 shall cause the secured party of record for a financing 10 statement to send to the debtor a termination statement for 11 the financing statement or file the termination statement in 12 the filing office if: 13 (1) except in the case of a financing statement 14 covering accounts or chattel paper that has been sold or 15 goods that are the subject of a consignment, there is no 16 obligation secured by the collateral covered by the 17 financing statement and no commitment to make an advance, 18 incur an obligation, or otherwise give value; 19 (2) the financing statement covers accounts or 20 chattel paper that has been sold but as to which the 21 account debtor or other person obligated has discharged 22 its obligation; 23 (3) the financing statement covers goods that were 24 the subject of a consignment to the debtor but are not in 25 the debtor's possession; or 26 (4) the debtor did not authorize the filing of the 27 initial financing statement. 28 (d) Effect of filing termination statement. Except as 29 otherwise provided in Section 9-510, upon the filing of a 30 termination statement with the filing office, the financing 31 statement to which the termination statement relates ceases 32 to be effective. Except as otherwise provided in Section 33 9-510, for purposes of Sections 9-519(g), 9-522(a), and 34 9-523(c) the filing with the filing office of a termination SB1231 Engrossed -192- LRB9106284WHdv 1 statement relating to a financing statement that indicates 2 that the debtor is a transmitting utility also causes the 3 effectiveness of the financing statement to lapse. 4 (810 ILCS 5/9-514 new) 5 Sec. 9-514. Assignment of powers of secured party of 6 record. 7 (a) Assignment reflected on initial financing statement. 8 Except as otherwise provided in subsection (c), an initial 9 financing statement may reflect an assignment of all of the 10 secured party's power to authorize an amendment to the 11 financing statement by providing the name and mailing address 12 of the assignee as the name and address of the secured party. 13 (b) Assignment of filed financing statement. Except as 14 otherwise provided in subsection (c), a secured party of 15 record may assign of record all or part of its power to 16 authorize an amendment to a financing statement by filing in 17 the filing office an amendment of the financing statement 18 which: 19 (1) identifies, by its file number, the initial 20 financing statement to which it relates; 21 (2) provides the name of the assignor; and 22 (3) provides the name and mailing address of the 23 assignee. 24 (c) Assignment of record of mortgage. An assignment of 25 record of a security interest in a fixture covered by a 26 record of a mortgage which is effective as a financing 27 statement filed as a fixture filing under Section 9-502(c) 28 may be made only by an assignment of record of the mortgage 29 in the manner provided by law of this State other than the 30 Uniform Commercial Code. 31 (810 ILCS 5/9-515 new) 32 Sec. 9-515. Duration and effectiveness of financing SB1231 Engrossed -193- LRB9106284WHdv 1 statement; effect of lapsed financing statement. 2 (a) Five-year effectiveness. Except as otherwise 3 provided in subsections (b), (e), (f), and (g), a filed 4 financing statement is effective for a period of five years 5 after the date of filing. 6 (b) Public-finance or manufactured-home transaction. 7 Except as otherwise provided in subsections (e), (f), and 8 (g), an initial financing statement filed in connection with 9 a public-finance transaction or manufactured-home transaction 10 is effective for a period of 30 years after the date of 11 filing if it indicates that it is filed in connection with a 12 public-finance transaction or manufactured-home transaction. 13 (c) Lapse and continuation of financing statement. The 14 effectiveness of a filed financing statement lapses on the 15 expiration of the period of its effectiveness unless before 16 the lapse a continuation statement is filed pursuant to 17 subsection (d). Upon lapse, a financing statement ceases to 18 be effective and any security interest or agricultural lien 19 that was perfected by the financing statement becomes 20 unperfected, unless the security interest is perfected 21 otherwise. If the security interest or agricultural lien 22 becomes unperfected upon lapse, it is deemed never to have 23 been perfected as against a purchaser of the collateral for 24 value. 25 (d) When continuation statement may be filed. A 26 continuation statement may be filed only within six months 27 before the expiration of the five-year period specified in 28 subsection (a) or the 30-year period specified in subsection 29 (b), whichever is applicable. 30 (e) Effect of filing continuation statement. Except as 31 otherwise provided in Section 9-510, upon timely filing of a 32 continuation statement, the effectiveness of the initial 33 financing statement continues for a period of five years 34 commencing on the day on which the financing statement would SB1231 Engrossed -194- LRB9106284WHdv 1 have become ineffective in the absence of the filing. Upon 2 the expiration of the five-year period, the financing 3 statement lapses in the same manner as provided in subsection 4 (c), unless, before the lapse, another continuation statement 5 is filed pursuant to subsection (d). Succeeding continuation 6 statements may be filed in the same manner to continue the 7 effectiveness of the initial financing statement. 8 (f) Transmitting utility financing statement. If a 9 debtor is a transmitting utility and a filed financing 10 statement so indicates, the financing statement is effective 11 until a termination statement is filed. 12 (g) Record of mortgage as financing statement. A record 13 of a mortgage that is effective as a financing statement 14 filed as a fixture filing under Section 9-502(c) remains 15 effective as a financing statement filed as a fixture filing 16 until the mortgage is released or satisfied of record or its 17 effectiveness otherwise terminates as to the real property. 18 (810 ILCS 5/9-516 new) 19 Sec. 9-516. What constitutes filing; effectiveness of 20 filing. 21 (a) What constitutes filing. Except as otherwise 22 provided in subsection (b), communication of a record to a 23 filing office and tender of the filing fee or acceptance of 24 the record by the filing office constitutes filing. 25 (b) Refusal to accept record; filing does not occur. 26 Filing does not occur with respect to a record that a filing 27 office refuses to accept because: 28 (1) the record is not communicated by a method or 29 medium of communication authorized by the filing office; 30 (2) an amount equal to or greater than the 31 applicable filing fee is not tendered; 32 (3) the filing office is unable to index the record 33 because: SB1231 Engrossed -195- LRB9106284WHdv 1 (A) in the case of an initial financing 2 statement, the record does not provide a name for 3 the debtor; 4 (B) in the case of an amendment or correction 5 statement, the record: 6 (i) does not identify the initial 7 financing statement as required by Section 8 9-512 or 9-518, as applicable; or 9 (ii) identifies an initial financing 10 statement whose effectiveness has lapsed under 11 Section 9-515; 12 (C) in the case of an initial financing 13 statement that provides the name of a debtor 14 identified as an individual or an amendment that 15 provides a name of a debtor identified as an 16 individual which was not previously provided in the 17 financing statement to which the record relates, the 18 record does not identify the debtor's last name; or 19 (D) in the case of a record filed or recorded 20 in the filing office described in Section 21 9-501(a)(1), the record does not provide a 22 sufficient description of the real property to which 23 it relates; 24 (4) in the case of an initial financing statement 25 or an amendment that adds a secured party of record, the 26 record does not provide a name and mailing address for 27 the secured party of record; 28 (5) in the case of an initial financing statement 29 or an amendment that provides a name of a debtor which 30 was not previously provided in the financing statement to 31 which the amendment relates, the record does not: 32 (A) provide a mailing address for the debtor; 33 (B) indicate whether the debtor is an 34 individual or an organization; or SB1231 Engrossed -196- LRB9106284WHdv 1 (C) if the financing statement indicates that 2 the debtor is an organization, provide: 3 (i) a type of organization for the 4 debtor; 5 (ii) a jurisdiction of organization for 6 the debtor; or 7 (iii) an organizational identification 8 number for the debtor or indicate that the 9 debtor has none; 10 (6) in the case of an assignment reflected in an 11 initial financing statement under Section 9-514(a) or an 12 amendment filed under Section 9-514(b), the record does 13 not provide a name and mailing address for the assignee; 14 or 15 (7) in the case of a continuation statement, the 16 record is not filed within the six-month period 17 prescribed by Section 9-515(d). 18 (c) Rules applicable to subsection (b). For purposes of 19 subsection (b): 20 (1) a record does not provide information if the 21 filing office is unable to read or decipher the 22 information; and 23 (2) a record that does not indicate that it is an 24 amendment or identify an initial financing statement to 25 which it relates, as required by Section 9-512, 9-514, or 26 9-518, is an initial financing statement. 27 (d) Refusal to accept record; record effective as filed 28 record. A record that is communicated to the filing office 29 with tender of the filing fee, but which the filing office 30 refuses to accept for a reason other than one set forth in 31 subsection (b), is effective as a filed record except as 32 against a purchaser of the collateral which gives value in 33 reasonable reliance upon the absence of the record from the 34 files. SB1231 Engrossed -197- LRB9106284WHdv 1 (810 ILCS 5/9-517 new) 2 Sec. 9-517. Effect of indexing errors. The failure of 3 the filing office to index a record correctly does not affect 4 the effectiveness of the filed record. 5 (810 ILCS 5/9-518 new) 6 Sec. 9-518. Claim concerning inaccurate or wrongfully 7 filed record. 8 (a) Correction statement. A person may file in the 9 filing office a correction statement with respect to a record 10 indexed there under the person's name if the person believes 11 that the record is inaccurate or was wrongfully filed. 12 (b) Sufficiency of correction statement. A correction 13 statement must: 14 (1) identify the record to which it relates by: 15 (A) the file number assigned to the initial 16 financing statement to which the record relates; and 17 (B) if the correction statement relates to a 18 record filed or recorded in a filing office 19 described in Section 9-501(a)(1), the date and time 20 that the initial financing statement was filed and 21 the information specified in Section 9-502(b); 22 (2) indicate that it is a correction statement; and 23 (3) provide the basis for the person's belief that 24 the record is inaccurate and indicate the manner in which 25 the person believes the record should be amended to cure 26 any inaccuracy or provide the basis for the person's 27 belief that the record was wrongfully filed. 28 (c) Record not affected by correction statement. The 29 filing of a correction statement does not affect the 30 effectiveness of an initial financing statement or other 31 filed record. 32 (810 ILCS 5/Art. 9, Part 5, Subpart 2 heading new) SB1231 Engrossed -198- LRB9106284WHdv 1 SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE 2 (810 ILCS 5/9-519 new) 3 Sec. 9-519. Numbering, maintaining, and indexing 4 records; communicating information provided in records. 5 (a) Filing office duties. For each record filed in a 6 filing office, the filing office shall: 7 (1) assign a unique number to the filed record; 8 (2) create a record that bears the number assigned 9 to the filed record and the date and time of filing; 10 (3) maintain the filed record for public 11 inspection; and 12 (4) index the filed record in accordance with 13 subsections (c), (d), and (e). 14 (b) File number. A file number assigned after January 15 1, 2002, must include a digit that: 16 (1) is mathematically derived from or related to 17 the other digits of the file number; and 18 (2) aids the filing office in determining whether a 19 number communicated as the file number includes a 20 single-digit or transpositional error. 21 (c) Indexing: general. Except as otherwise provided in 22 subsections (d) and (e), the filing office shall: 23 (1) index an initial financing statement according 24 to the name of the debtor and index all filed records 25 relating to the initial financing statement in a manner 26 that associates with one another an initial financing 27 statement and all filed records relating to the initial 28 financing statement; and 29 (2) index a record that provides a name of a debtor 30 which was not previously provided in the financing 31 statement to which the record relates also according to 32 the name that was not previously provided. 33 (d) Indexing: real-property-related financing SB1231 Engrossed -199- LRB9106284WHdv 1 statement. If a financing statement is filed as a fixture 2 filing or covers as-extracted collateral or timber to be cut, 3 it must be filed for record and the filing office shall index 4 it: 5 (1) under the names of the debtor and of each owner 6 of record shown on the financing statement as if they 7 were the mortgagors under a mortgage of the real property 8 described; and 9 (2) to the extent that the law of this State 10 provides for indexing of records of mortgages under the 11 name of the mortgagee, under the name of the secured 12 party as if the secured party were the mortgagee 13 thereunder, or, if indexing is by description, as if the 14 financing statement were a record of a mortgage of the 15 real property described. 16 (e) Indexing: real-property-related assignment. If a 17 financing statement is filed as a fixture filing or covers 18 as-extracted collateral or timber to be cut, the filing 19 office shall index an assignment filed under Section 9-514(a) 20 or an amendment filed under Section 9-514(b): 21 (1) under the name of the assignor as grantor; and 22 (2) to the extent that the law of this State 23 provides for indexing a record of the assignment of a 24 mortgage under the name of the assignee, under the name 25 of the assignee. 26 (f) Retrieval and association capability. The filing 27 office shall maintain a capability: 28 (1) to retrieve a record by the name of the debtor 29 and by the file number assigned to the initial financing 30 statement to which the record relates; and 31 (2) to associate and retrieve with one another an 32 initial financing statement and each filed record 33 relating to the initial financing statement. 34 (g) Removal of debtor's name. The filing office may not SB1231 Engrossed -200- LRB9106284WHdv 1 remove a debtor's name from the index until one year after 2 the effectiveness of a financing statement naming the debtor 3 lapses under Section 9-515 with respect to all secured 4 parties of record. 5 (h) Timeliness of filing office performance. The filing 6 office shall perform the acts required by subsections (a) 7 through (e) at the time and in the manner prescribed by 8 filing-office rule, but not later than two business days 9 after the filing office receives the record in question. 10 (i) Inapplicability to real-property-related filing 11 office. Subsections (b) and (h) do not apply to a filing 12 office described in Section 9-501(a)(1). 13 (810 ILCS 5/9-520 new) 14 Sec. 9-520. Acceptance and refusal to accept record. 15 (a) Mandatory refusal to accept record. A filing office 16 shall refuse to accept a record for filing for a reason set 17 forth in Section 9-516(b) and may refuse to accept a record 18 for filing only for a reason set forth in Section 9-516(b). 19 (b) Communication concerning refusal. If a filing 20 office refuses to accept a record for filing, it shall 21 communicate to the person that presented the record the fact 22 of and reason for the refusal and the date and time the 23 record would have been filed had the filing office accepted 24 it. The communication must be made at the time and in the 25 manner prescribed by filing-office rule, but in the case of a 26 filing office described in Section 9-501(a)(2), in no event 27 more than two business days after the filing office receives 28 the record. 29 (c) When filed financing statement effective. A filed 30 financing statement satisfying Section 9-502(a) and (b) is 31 effective, even if the filing office is required to refuse to 32 accept it for filing under subsection (a). However, Section 33 9-338 applies to a filed financing statement providing SB1231 Engrossed -201- LRB9106284WHdv 1 information described in Section 9-516(b)(5) which is 2 incorrect at the time the financing statement is filed. 3 (d) Separate application to multiple debtors. If a 4 record communicated to a filing office provides information 5 that relates to more than one debtor, this Part applies as to 6 each debtor separately. 7 (810 ILCS 5/9-521 new) 8 Sec. 9-521. Uniform form of written financing statement 9 and amendment. 10 (a) Initial financing statement form. A filing office 11 that accepts written records may not refuse to accept a 12 written initial financing statement in the form and format 13 set forth in the final official text of the 1999 revisions to 14 Article 9 of the Uniform Commercial Code promulgated by the 15 American Law Institute and the National Conference of 16 Commissioners on Uniform State Laws, except for a reason set 17 forth in Section 9-516(b). 18 (b) Amendment form. A filing office that accepts 19 written records may not refuse to accept a written record in 20 the form and format set forth in the final official text of 21 the 1999 revisions to Article 9 of the Uniform Commercial 22 Code promulgated by the American Law Institute and the 23 National Conference of Commissioners on Uniform State Laws, 24 except for a reason set forth in Section 9-516(b). 25 (810 ILCS 5/9-522 new) 26 Sec. 9-522. Maintenance and destruction of records. 27 (a) Post-lapse maintenance and retrieval of information. 28 The filing office shall maintain a record of the information 29 provided in a filed financing statement for at least one year 30 after the effectiveness of the financing statement has lapsed 31 under Section 9-515 with respect to all secured parties of 32 record. The record must be retrievable by using the name of SB1231 Engrossed -202- LRB9106284WHdv 1 the debtor and: 2 (1) if the record was filed in the filing office 3 described in Section 9-501(a)(1), by using the file 4 number assigned to the initial financing statement to 5 which the record relates and the date and time that the 6 record was filed or recorded; or 7 (2) if the record was filed in the filing office 8 described in Section 9-501(a)(2), by using the file 9 number assigned to the initial financing statement to 10 which the record relates. 11 (b) Destruction of written records. Except to the 12 extent that a statute governing disposition of public records 13 provides otherwise, the filing office immediately may destroy 14 any written record evidencing a financing statement. However, 15 if the filing office destroys a written record, it shall 16 maintain another record of the financing statement which 17 complies with subsection (a). 18 (810 ILCS 5/9-523 new) 19 Sec. 9-523. Information from filing office; sale or 20 license of records. 21 (a) Acknowledgment of filing written record. If a 22 person that files a written record requests an acknowledgment 23 of the filing, the filing office shall send to the person an 24 image of the record showing the number assigned to the record 25 pursuant to Section 9-519(a)(1) and the date and time of the 26 filing of the record. However, if the person furnishes a 27 copy of the record to the filing office, the filing office 28 may instead: 29 (1) note upon the copy the number assigned to the 30 record pursuant to Section 9-519(a)(1) and the date and 31 time of the filing of the record; and 32 (2) send the copy to the person. 33 (b) Acknowledgment of filing other record. If a person SB1231 Engrossed -203- LRB9106284WHdv 1 files a record other than a written record, the filing office 2 shall communicate to the person an acknowledgment that 3 provides: 4 (1) the information in the record; 5 (2) the number assigned to the record pursuant to 6 Section 9-519(a)(1); and 7 (3) the date and time of the filing of the record. 8 (c) Communication of requested information. The filing 9 office shall communicate or otherwise make available in a 10 record the following information to any person that requests 11 it: 12 (1) whether there is on file on a date and time 13 specified by the filing office, but not a date earlier 14 than three business days before the filing office 15 receives the request, any financing statement that: 16 (A) designates a particular debtor or, if the 17 request so states, designates a particular debtor at 18 the address specified in the request; 19 (B) has not lapsed under Section 9-515 with 20 respect to all secured parties of record; and 21 (C) if the request so states, has lapsed under 22 Section 9-515 and a record of which is maintained by 23 the filing office under Section 9-522(a); 24 (2) the date and time of filing of each financing 25 statement; and 26 (3) the information provided in each financing 27 statement. 28 (d) Medium for communicating information. In complying 29 with its duty under subsection (c), the filing office may 30 communicate information in any medium. However, if 31 requested, the filing office shall communicate information by 32 issuing a record that can be admitted into evidence in the 33 courts of this State without extrinsic evidence of its 34 authenticity. SB1231 Engrossed -204- LRB9106284WHdv 1 (e) Timeliness of filing office performance. The filing 2 office shall perform the acts required by subsections (a) 3 through (d) at the time and in the manner prescribed by 4 filing-office rule, but in the case of a filing office 5 described in Section 9-501(a)(2), not later than two business 6 days after the filing office receives the request. 7 (f) Public availability of records. At least weekly, 8 the Secretary of State shall offer to sell or license to the 9 public on a nonexclusive basis, in bulk, copies of all 10 records filed in it under this Part, in every medium from 11 time to time available to the filing office. 12 (810 ILCS 5/9-524 new) 13 Sec. 9-524. Delay by filing office. Delay by the filing 14 office beyond a time limit prescribed by this Part is excused 15 if: 16 (1) the delay is caused by interruption of 17 communication or computer facilities, war, emergency 18 conditions, failure of equipment, or other circumstances 19 beyond control of the filing office; and 20 (2) the filing office exercises reasonable 21 diligence under the circumstances. 22 (810 ILCS 5/9-525 new) 23 Sec. 9-525. Fees. 24 (a) Initial financing statement or other record: general 25 rule. Except as otherwise provided in subsection (e), the fee 26 for filing and indexing a record under this Part, other than 27 an initial financing statement of the kind described in 28 subsection (b), is: 29 (1) $20 if the record is communicated in writing 30 and consists of one or two pages; 31 (2) $20 if the record is communicated in writing 32 and consists of more than two pages; and SB1231 Engrossed -205- LRB9106284WHdv 1 (3) $20 if the record is communicated by another 2 medium authorized by filing-office rule. 3 (b) Initial financing statement: public-finance and 4 manufactured-housing transactions. Except as otherwise 5 provided in subsection (e), the fee for filing and indexing 6 an initial financing statement of the following kind is: 7 (1) $20 if the financing statement indicates that 8 it is filed in connection with a public-finance 9 transaction; 10 (2) $20 if the financing statement indicates that 11 it is filed in connection with a manufactured-home 12 transaction. 13 (c) Number of names. The number of names required to be 14 indexed does not affect the amount of the fee in subsections 15 (a) and (b). 16 (d) Response to information request. The fee for 17 responding to a request for information from the filing 18 office, including for issuing a certificate showing 19 communicating whether there is on file any financing 20 statement naming a particular debtor, is: 21 (1) $10 if the request is communicated in writing; 22 and 23 (2) $10 if the request is communicated by another 24 medium authorized by filing-office rule. 25 (e) Record of mortgage. This Section does not require a 26 fee with respect to a record of a mortgage which is effective 27 as a financing statement filed as a fixture filing or as a 28 financing statement covering as-extracted collateral or 29 timber to be cut under Section 9-502(c). However, the 30 recording and satisfaction fees that otherwise would be 31 applicable to the record of the mortgage apply. 32 (810 ILCS 5/9-526 new) 33 Sec. 9-526. Filing-office rules. SB1231 Engrossed -206- LRB9106284WHdv 1 (a) Adoption of filing-office rules. The Secretary of 2 State shall adopt and publish rules to implement this 3 Article. The filing-office rules must be: 4 (1) consistent with this Article; and 5 (2) adopted and published in accordance with the 6 Illinois Administrative Procedure Act. 7 (b) Harmonization of rules. To keep the filing-office 8 rules and practices of the filing office in harmony with the 9 rules and practices of filing offices in other jurisdictions 10 that enact substantially this Part, and to keep the 11 technology used by the filing office compatible with the 12 technology used by filing offices in other jurisdictions that 13 enact substantially this Part, the Secretary of State, so far 14 as is consistent with the purposes, policies, and provisions 15 of this Article, in adopting, amending, and repealing 16 filing-office rules, shall: 17 (1) consult with filing offices in other 18 jurisdictions that enact substantially this Part; and 19 (2) consult the most recent version of the Model 20 Rules promulgated by the International Association of 21 Corporate Administrators or any successor organization; 22 and 23 (3) take into consideration the rules and practices 24 of, and the technology used by, filing offices in other 25 jurisdictions that enact substantially this Part. 26 (810 ILCS 5/9-527 new) 27 Sec. 9-527. Duty to report. The Secretary of State 28 shall report annually to the Governor and Legislature on the 29 operation of the filing office. The report must contain a 30 statement of the extent to which: 31 (1) the filing-office rules are not in harmony with 32 the rules of filing offices in other jurisdictions that 33 enact substantially this Part and the reasons for these SB1231 Engrossed -207- LRB9106284WHdv 1 variations; and 2 (2) the filing-office rules are not in harmony with 3 the most recent version of the Model Rules promulgated by 4 the International Association of Corporate 5 Administrators, or any successor organization, and the 6 reasons for these variations. 7 (810 ILCS 5/Art. 9, Part 6 heading new) 8 PART 6. DEFAULT 9 (810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new) 10 SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST 11 (810 ILCS 5/9-601 new) 12 Sec. 9-601. Rights after default; judicial enforcement; 13 consignor or buyer of accounts, chattel paper, payment 14 intangibles, or promissory notes. 15 (a) Rights of secured party after default. After 16 default, a secured party has the rights provided in this Part 17 and, except as otherwise provided in Section 9-602, those 18 provided by agreement of the parties. A secured party: 19 (1) may reduce a claim to judgment, foreclose, or 20 otherwise enforce the claim, security interest, or 21 agricultural lien by any available judicial procedure; 22 and 23 (2) if the collateral is documents, may proceed 24 either as to the documents or as to the goods they cover. 25 (b) Rights and duties of secured party in possession or 26 control. A secured party in possession of collateral or 27 control of collateral under Section 9-104, 9-105, 9-106, or 28 9-107 has the rights and duties provided in Section 9-207. 29 (c) Rights cumulative; simultaneous exercise. The 30 rights under subsections (a) and (b) are cumulative and may 31 be exercised simultaneously. SB1231 Engrossed -208- LRB9106284WHdv 1 (d) Rights of debtor and obligor. Except as otherwise 2 provided in subsection (g) and Section 9-605, after default, 3 a debtor and an obligor have the rights provided in this Part 4 and by agreement of the parties. 5 (e) Lien of levy after judgment. If a secured party has 6 reduced its claim to judgment, the lien of any levy that may 7 be made upon the collateral by virtue of a judgment relates 8 back to the earliest of: 9 (1) the date of perfection of the security interest 10 or agricultural lien in the collateral; 11 (2) the date of filing a financing statement 12 covering the collateral; or 13 (3) any date specified in a statute under which the 14 agricultural lien was created. 15 (f) Execution sale. A sale pursuant to a judgment is a 16 foreclosure of the security interest or agricultural lien by 17 judicial procedure within the meaning of this Section. A 18 secured party may purchase at the sale and thereafter hold 19 the collateral free of any other requirements of this 20 Article. 21 (g) Consignor or buyer of certain rights to payment. 22 Except as otherwise provided in Section 9-607(c), this Part 23 imposes no duties upon a secured party that is a consignor or 24 is a buyer of accounts, chattel paper, payment intangibles, 25 or promissory notes. 26 (810 ILCS 5/9-602 new) 27 Sec. 9-602. Waiver and variance of rights and duties. 28 Except as otherwise provided in Section 9-624, to the extent 29 that they give rights to a debtor or obligor and impose 30 duties on a secured party, the debtor or obligor may not 31 waive or vary the rules stated in the following listed 32 Sections: 33 (1) Section 9-207(b)(4)(C), which deals with use SB1231 Engrossed -209- LRB9106284WHdv 1 and operation of the collateral by the secured party; 2 (2) Section 9-210, which deals with requests for an 3 accounting and requests concerning a list of collateral 4 and statement of account; 5 (3) Section 9-607(c), which deals with collection 6 and enforcement of collateral; 7 (4) Sections 9-608(a) and 9-615(c) to the extent 8 that they deal with application or payment of noncash 9 proceeds of collection, enforcement, or disposition; 10 (5) Sections 9-608(a) and 9-615(d) to the extent 11 that they require accounting for or payment of surplus 12 proceeds of collateral; 13 (6) Section 9-609 to the extent that it imposes 14 upon a secured party that takes possession of collateral 15 without judicial process the duty to do so without breach 16 of the peace; 17 (7) Sections 9-610(b), 9-611, 9-613, and 9-614, 18 which deal with disposition of collateral; 19 (8) Section 9-615(f), which deals with calculation 20 of a deficiency or surplus when a disposition is made to 21 the secured party, a person related to the secured party, 22 or a secondary obligor; 23 (9) Section 9-616, which deals with explanation of 24 the calculation of a surplus or deficiency; 25 (10) Sections 9-620, 9-621, and 9-622, which deal 26 with acceptance of collateral in satisfaction of 27 obligation; 28 (11) Section 9-623, which deals with redemption of 29 collateral; 30 (12) Section 9-624, which deals with permissible 31 waivers; and 32 (13) Sections 9-625 and 9-626, which deal with the 33 secured party's liability for failure to comply with this 34 Article. SB1231 Engrossed -210- LRB9106284WHdv 1 (810 ILCS 5/9-603 new) 2 Sec. 9-603. Agreement on standards concerning rights and 3 duties. 4 (a) Agreed standards. The parties may determine by 5 agreement the standards measuring the fulfillment of the 6 rights of a debtor or obligor and the duties of a secured 7 party under a rule stated in Section 9-602 if the standards 8 are not manifestly unreasonable. 9 (b) Agreed standards inapplicable to breach of peace. 10 Subsection (a) does not apply to the duty under Section 9-609 11 to refrain from breaching the peace. 12 (810 ILCS 5/9-604 new) 13 Sec. 9-604. Procedure if security agreement covers real 14 property or fixtures. 15 (a) Enforcement: personal and real property. If a 16 security agreement covers both personal and real property, a 17 secured party may proceed: 18 (1) under this Part as to the personal property 19 without prejudicing any rights with respect to the real 20 property; or 21 (2) as to both the personal property and the real 22 property in accordance with the rights with respect to 23 the real property, in which case the other provisions of 24 this Part do not apply. 25 (b) Enforcement: fixtures. Subject to subsection (c), 26 if a security agreement covers goods that are or become 27 fixtures, a secured party may proceed: 28 (1) under this Part; or 29 (2) in accordance with the rights with respect to 30 real property, in which case the other provisions of this 31 Part do not apply. 32 (c) Removal of fixtures. Subject to the other 33 provisions of this Part, if a secured party holding a SB1231 Engrossed -211- LRB9106284WHdv 1 security interest in fixtures has priority over all owners 2 and encumbrancers of the real property, the secured party, 3 after default, may remove the collateral from the real 4 property. 5 (d) Injury caused by removal. A secured party that 6 removes collateral shall promptly reimburse any encumbrancer 7 or owner of the real property, other than the debtor, for the 8 cost of repair of any physical injury caused by the removal. 9 The secured party need not reimburse the encumbrancer or 10 owner for any diminution in value of the real property caused 11 by the absence of the goods removed or by any necessity of 12 replacing them. A person entitled to reimbursement may 13 refuse permission to remove until the secured party gives 14 adequate assurance for the performance of the obligation to 15 reimburse. 16 (810 ILCS 5/9-605 new) 17 Sec. 9-605. Unknown debtor or secondary obligor. A 18 secured party does not owe a duty based on its status as 19 secured party: 20 (1) to a person that is a debtor or obligor, unless 21 the secured party knows: 22 (A) that the person is a debtor or obligor; 23 (B) the identity of the person; and 24 (C) how to communicate with the person; or 25 (2) to a secured party or lienholder that has filed 26 a financing statement against a person, unless the 27 secured party knows: 28 (A) that the person is a debtor; and 29 (B) the identity of the person. 30 (810 ILCS 5/9-606 new) 31 Sec. 9-606. Time of default for agricultural lien. For 32 purposes of this Part, a default occurs in connection with an SB1231 Engrossed -212- LRB9106284WHdv 1 agricultural lien at the time the secured party becomes 2 entitled to enforce the lien in accordance with the statute 3 under which it was created. 4 (810 ILCS 5/9-607 new) 5 Sec. 9-607. Collection and enforcement by secured party. 6 (a) Collection and enforcement generally. If so agreed, 7 and in any event after default, a secured party: 8 (1) may notify an account debtor or other person 9 obligated on collateral to make payment or otherwise 10 render performance to or for the benefit of the secured 11 party; 12 (2) may take any proceeds to which the secured 13 party is entitled under Section 9-315; 14 (3) may enforce the obligations of an account 15 debtor or other person obligated on collateral and 16 exercise the rights of the debtor with respect to the 17 obligation of the account debtor or other person 18 obligated on collateral to make payment or otherwise 19 render performance to the debtor, and with respect to any 20 property that secures the obligations of the account 21 debtor or other person obligated on the collateral; 22 (4) if it holds a security interest in a deposit 23 account perfected by control under Section 9-104(a)(1), 24 may apply the balance of the deposit account to the 25 obligation secured by the deposit account; and 26 (5) if it holds a security interest in a deposit 27 account perfected by control under Section 9-104(a)(2) or 28 (3), may instruct the bank to pay the balance of the 29 deposit account to or for the benefit of the secured 30 party. 31 (b) Nonjudicial enforcement of mortgage. If necessary 32 to enable a secured party to exercise under subsection (a)(3) 33 the right of a debtor to enforce a mortgage nonjudicially, SB1231 Engrossed -213- LRB9106284WHdv 1 the secured party may record in the office in which a record 2 of the mortgage is recorded: 3 (1) a copy of the security agreement that creates 4 or provides for a security interest in the obligation 5 secured by the mortgage; and 6 (2) the secured party's sworn affidavit in 7 recordable form stating that: 8 (A) a default has occurred; and 9 (B) the secured party is entitled to enforce 10 the mortgage nonjudicially. 11 (c) Commercially reasonable collection and enforcement. 12 A secured party shall proceed in a commercially reasonable 13 manner if the secured party: 14 (1) undertakes to collect from or enforce an 15 obligation of an account debtor or other person obligated 16 on collateral; and 17 (2) is entitled to charge back uncollected 18 collateral or otherwise to full or limited recourse 19 against the debtor or a secondary obligor. 20 (d) Expenses of collection and enforcement. A secured 21 party may deduct from the collections made pursuant to 22 subsection (c) reasonable expenses of collection and 23 enforcement, including reasonable attorney's fees and legal 24 expenses incurred by the secured party. 25 (e) Duties to secured party not affected. This Section 26 does not determine whether an account debtor, bank, or other 27 person obligated on collateral owes a duty to a secured 28 party. 29 (810 ILCS 5/9-608 new) 30 Sec. 9-608. Application of proceeds of collection or 31 enforcement; liability for deficiency and right to surplus. 32 (a) Application of proceeds, surplus, and deficiency if 33 obligation secured. If a security interest or agricultural SB1231 Engrossed -214- LRB9106284WHdv 1 lien secures payment or performance of an obligation, the 2 following rules apply: 3 (1) A secured party shall apply or pay over for 4 application the cash proceeds of collection or 5 enforcement under Section 9-607 in the following order 6 to: 7 (A) the reasonable expenses of collection and 8 enforcement and, to the extent provided for by 9 agreement and not prohibited by law, reasonable 10 attorney's fees and legal expenses incurred by the 11 secured party; 12 (B) the satisfaction of obligations secured by 13 the security interest or agricultural lien under 14 which the collection or enforcement is made; and 15 (C) the satisfaction of obligations secured by 16 any subordinate security interest in or other lien 17 on the collateral subject to the security interest 18 or agricultural lien under which the collection or 19 enforcement is made if the secured party receives an 20 authenticated demand for proceeds before 21 distribution of the proceeds is completed. 22 (2) If requested by a secured party, a holder of a 23 subordinate security interest or other lien shall furnish 24 reasonable proof of the interest or lien within a 25 reasonable time. Unless the holder complies, the secured 26 party need not comply with the holder's demand under 27 paragraph (1)(C). 28 (3) A secured party need not apply or pay over for 29 application noncash proceeds of collection and 30 enforcement under Section 9-607 unless the failure to do 31 so would be commercially unreasonable. A secured party 32 that applies or pays over for application noncash 33 proceeds shall do so in a commercially reasonable manner. 34 (4) A secured party shall account to and pay a SB1231 Engrossed -215- LRB9106284WHdv 1 debtor for any surplus, and the obligor is liable for any 2 deficiency. 3 (b) No surplus or deficiency in sales of certain rights 4 to payment. If the underlying transaction is a sale of 5 accounts, chattel paper, payment intangibles, or promissory 6 notes, the debtor is not entitled to any surplus, and the 7 obligor is not liable for any deficiency. 8 (810 ILCS 5/9-609 new) 9 Sec. 9-609. Secured party's right to take possession 10 after default. 11 (a) Possession; rendering equipment unusable; 12 disposition on debtor's premises. After default, a secured 13 party: 14 (1) may take possession of the collateral; and 15 (2) without removal, may render equipment unusable 16 and dispose of collateral on a debtor's premises under 17 Section 9-610. 18 (b) Judicial and nonjudicial process. A secured party 19 may proceed under subsection (a): 20 (1) pursuant to judicial process; or 21 (2) without judicial process, if it proceeds 22 without breach of the peace. 23 (c) Assembly of collateral. If so agreed, and in any 24 event after default, a secured party may require the debtor 25 to assemble the collateral and make it available to the 26 secured party at a place to be designated by the secured 27 party which is reasonably convenient to both parties. 28 (810 ILCS 5/9-610 new) 29 Sec. 9-610. Disposition of collateral after default. 30 (a) Disposition after default. After default, a secured 31 party may sell, lease, license, or otherwise dispose of any 32 or all of the collateral in its present condition or SB1231 Engrossed -216- LRB9106284WHdv 1 following any commercially reasonable preparation or 2 processing. 3 (b) Commercially reasonable disposition. Every aspect 4 of a disposition of collateral, including the method, manner, 5 time, place, and other terms, must be commercially 6 reasonable. If commercially reasonable, a secured party may 7 dispose of collateral by public or private proceedings, by 8 one or more contracts, as a unit or in parcels, and at any 9 time and place and on any terms. 10 (c) Purchase by secured party. A secured party may 11 purchase collateral: 12 (1) at a public disposition; or 13 (2) at a private disposition only if the collateral 14 is of a kind that is customarily sold on a recognized 15 market or the subject of widely distributed standard 16 price quotations. 17 (d) Warranties on disposition. A contract for sale, 18 lease, license, or other disposition includes the warranties 19 relating to title, possession, quiet enjoyment, and the like 20 which by operation of law accompany a voluntary disposition 21 of property of the kind subject to the contract. 22 (e) Disclaimer of warranties. A secured party may 23 disclaim or modify warranties under subsection (d): 24 (1) in a manner that would be effective to disclaim 25 or modify the warranties in a voluntary disposition of 26 property of the kind subject to the contract of 27 disposition; or 28 (2) by communicating to the purchaser a record 29 evidencing the contract for disposition and including an 30 express disclaimer or modification of the warranties. 31 (f) Record sufficient to disclaim warranties. A record 32 is sufficient to disclaim warranties under subsection (e) if 33 it indicates "There is no warranty relating to title, 34 possession, quiet enjoyment, or the like in this disposition" SB1231 Engrossed -217- LRB9106284WHdv 1 or uses words of similar import. 2 (810 ILCS 5/9-611 new) 3 Sec. 9-611. Notification before disposition of 4 collateral. 5 (a) "Notification date." In this Section, "notification 6 date" means the earlier of the date on which: 7 (1) a secured party sends to the debtor and any 8 secondary obligor an authenticated notification of 9 disposition; or 10 (2) the debtor and any secondary obligor waive the 11 right to notification. 12 (b) Notification of disposition required. Except as 13 otherwise provided in subsection (d), a secured party that 14 disposes of collateral under Section 9-610 shall send to the 15 persons specified in subsection (c) a reasonable 16 authenticated notification of disposition. 17 (c) Persons to be notified. To comply with subsection 18 (b), the secured party shall send an authenticated 19 notification of disposition to: 20 (1) the debtor; 21 (2) any secondary obligor; and 22 (3) if the collateral is other than consumer goods: 23 (A) any other person from which the secured 24 party has received, before the notification date, an 25 authenticated notification of a claim of an interest 26 in the collateral; 27 (B) any other secured party or lienholder 28 that, 10 days before the notification date, held a 29 security interest in or other lien on the collateral 30 perfected by the filing of a financing statement 31 that: 32 (i) identified the collateral; 33 (ii) was indexed under the debtor's name SB1231 Engrossed -218- LRB9106284WHdv 1 as of that date; and 2 (iii) was filed in the office in which to 3 file a financing statement against the debtor 4 covering the collateral as of that date; and 5 (C) any other secured party that, 10 days 6 before the notification date, held a security 7 interest in the collateral perfected by compliance 8 with a statute, regulation, or treaty described in 9 Section 9-311(a). 10 (d) Subsection (b) inapplicable: perishable collateral; 11 recognized market. Subsection (b) does not apply if the 12 collateral is perishable or threatens to decline speedily in 13 value or is of a type customarily sold on a recognized 14 market. 15 (e) Compliance with subsection (c)(3)(B). A secured 16 party complies with the requirement for notification 17 prescribed by subsection (c)(3)(B) if: 18 (1) not later than 20 days or earlier than 30 days 19 before the notification date, the secured party requests, 20 in a commercially reasonable manner, information 21 concerning financing statements indexed under the 22 debtor's name in the office indicated in subsection 23 (c)(3)(B); and 24 (2) before the notification date, the secured 25 party: 26 (A) did not receive a response to the request 27 for information; or 28 (B) received a response to the request for 29 information and sent an authenticated notification 30 of disposition to each secured party or other 31 lienholder named in that response whose financing 32 statement covered the collateral. 33 (810 ILCS 5/9-612 new) SB1231 Engrossed -219- LRB9106284WHdv 1 Sec. 9-612. Timeliness of notification before 2 disposition of collateral. 3 (a) Reasonable time is question of fact. Except as 4 otherwise provided in subsection (b), whether a notification 5 is sent within a reasonable time is a question of fact. The 6 limitation of the rule in subsection (b) to transactions 7 other than consumer-goods transactions is intended to leave 8 to the court the determination of the proper rules in 9 consumer-goods transactions. The court may not infer from 10 that limitation the nature of the proper rule in 11 consumer-goods transactions and may continue to apply 12 established approaches. 13 (b) 10-day period sufficient in non-consumer 14 transaction. In a transaction other than a consumer 15 transaction, a notification of disposition sent after default 16 and 10 days or more before the earliest time of disposition 17 set forth in the notification is sent within a reasonable 18 time before the disposition. 19 (810 ILCS 5/9-613 new) 20 Sec. 9-613. Contents and form of notification before 21 disposition of collateral: general. Except in a 22 consumer-goods transaction, the following rules apply: 23 (1) The contents of a notification of disposition 24 are sufficient if the notification: 25 (A) describes the debtor and the secured 26 party; 27 (B) describes the collateral that is the 28 subject of the intended disposition; 29 (C) states the method of intended disposition; 30 (D) states that the debtor is entitled to an 31 accounting of the unpaid indebtedness and states the 32 charge, if any, for an accounting; and 33 (E) states the time and place of a public SB1231 Engrossed -220- LRB9106284WHdv 1 disposition or the time after which any other 2 disposition is to be made. 3 (2) Whether the contents of a notification that 4 lacks any of the information specified in paragraph (1) 5 are nevertheless sufficient is a question of fact. 6 (3) The contents of a notification providing 7 substantially the information specified in paragraph (1) 8 are sufficient, even if the notification is accompanied 9 by or combined other notification or includes: 10 (A) information not specified by that 11 paragraph; or 12 (B) minor errors that are not seriously 13 misleading. 14 (4) A particular phrasing of the notification is 15 not required. 16 (5) The following form of notification and the form 17 appearing in Section 9-614(4), when completed, each 18 provides sufficient information: 19 NOTIFICATION OF DISPOSITION OF COLLATERAL 20 To: ..................................... (Name of 21 debtor, obligor, or other person to which the 22 notification is sent) 23 From: ................................... (Name, 24 address, and telephone number of secured party) 25 Name of Debtor(s): ..................... (Include 26 only if debtor(s) are not an addressee) 27 For a public disposition: 28 We will sell or lease or license, as applicable, the 29 ............................ (describe collateral) to the 30 highest qualified bidder in public as follows: 31 Day and Date: ................................... 32 Time: ........................................... 33 Place: .......................................... SB1231 Engrossed -221- LRB9106284WHdv 1 For a private disposition: 2 We will sell (or lease or license, as applicable) 3 the ........................... (describe collateral) 4 privately sometime after ................ (day and date). 5 You are entitled to an accounting of the unpaid 6 indebtedness secured by the property that we intend to 7 sell or lease or license, as applicable for a charge of 8 $................. You may request an accounting by 9 calling us at .................. (telephone number). 10 (810 ILCS 5/9-614 new) 11 Sec. 9-614. Contents and form of notification before 12 disposition of collateral: consumer-goods transaction. In a 13 consumer-goods transaction, the following rules apply: 14 (1) A notification of disposition must provide the 15 following information: 16 (A) the information specified in Section 17 9-613(1); 18 (B) a description of any liability for a 19 deficiency of the person to which the notification 20 is sent; 21 (C) a telephone number from which the amount 22 that must be paid to the secured party to redeem the 23 collateral under Section 9-623 is available; and 24 (D) a telephone number or mailing address from 25 which additional information concerning the 26 disposition and the obligation secured is available. 27 (2) A particular phrasing of the notification is 28 not required. 29 (3) The contents of a notification providing 30 substantially the information specified in paragraph (1) 31 are sufficient, even if the notification: 32 (A) is accompanied by or combined with other 33 notifications; SB1231 Engrossed -222- LRB9106284WHdv 1 (B) includes information not specified by that 2 paragraph; or 3 (C) includes minor errors that are not 4 seriously misleading. 5 (4) The following form of notification, when 6 completed, provides sufficient information: 7 ............. (Name and address of secured party) 8 ............. (Date) 9 NOTICE OF OUR PLAN TO SELL PROPERTY 10 ...................................................... 11 (Name and address of any obligor who is also a debtor) 12 Subject: .................................. 13 (Identification of Transaction) 14 We have your ..................... (describe 15 collateral), because you broke promises in our agreement. 16 For a public disposition: 17 We will sell ....................... (describe 18 collateral) at public sale. A sale could include a lease 19 or license. The sale will be held as follows: 20 Date: ................................ 21 Time: ................................ 22 Place: ................................ 23 You may attend the sale and bring bidders if you 24 want. 25 For a private disposition: 26 We will sell ........................... (describe 27 collateral) at private sale sometime after 28 .................... (date). A sale could include a 29 lease or license. 30 The money that we get from the sale (after paying 31 our costs) will reduce the amount you owe. If we get 32 less money than you owe, you ............ (will or will 33 not, as applicable) still owe us the difference. If we SB1231 Engrossed -223- LRB9106284WHdv 1 get more money than you owe, you will get the extra 2 money, unless we must pay it to someone else. 3 You can get the property back at any time before we 4 sell it by paying us the full amount you owe (not just 5 the past due payments), including our expenses. To learn 6 the exact amount you must pay, call us at 7 ................ (telephone number). 8 If you want us to explain to you in writing how we 9 have figured the amount that you owe us, you may call us 10 at .................. (telephone number) or write us at 11 .................................... (secured party's 12 address) and request a written explanation. We will 13 charge you $ ........... for the explanation if we sent 14 you another written explanation of the amount you owe us 15 within the last six months. 16 If you need more information about the sale call us 17 at .................. (telephone number) or write us at 18 ......................... (secured party's address). 19 We are sending this notice to the following other 20 people who have an interest ...................... 21 (describe collateral) or who owe money under your 22 agreement: 23 ................................................. 24 (Names of all other debtors and obligors, if any) 25 (5) A notification in the form of paragraph (4) is 26 sufficient, even if it includes errors in information not 27 required by paragraph (1). 28 (6) If a notification under this Section is not in 29 the form of paragraph (4), law other than this Article 30 determines the effect of including information not 31 required by paragraph (1). 32 (810 ILCS 5/9-615 new) 33 Sec. 9-615. Application of proceeds of disposition; SB1231 Engrossed -224- LRB9106284WHdv 1 liability for deficiency and right to surplus. 2 (a) Application of proceeds. A secured party shall 3 apply or pay over for application the cash proceeds of 4 disposition in the following order to: 5 (1) the reasonable expenses of retaking, holding, 6 preparing for disposition, processing, and disposing, 7 and, to the extent provided for by agreement and not 8 prohibited by law, reasonable attorney's fees and legal 9 expenses incurred by the secured party; 10 (2) the satisfaction of obligations secured by the 11 security interest or agricultural lien under which the 12 disposition is made; 13 (3) the satisfaction of obligations secured by any 14 subordinate security interest in or other subordinate 15 lien on the collateral if: 16 (A) the secured party receives from the holder 17 of the subordinate security interest or other lien 18 an authenticated demand for proceeds before 19 distribution of the proceeds is completed; and 20 (B) in a case in which a consignor has an 21 interest in the collateral, the subordinate security 22 interest or other lien is senior to the interest of 23 the consignor; and 24 (4) a secured party that is a consignor of the 25 collateral if the secured party receives from the 26 consignor an authenticated demand for proceeds before 27 distribution of the proceeds is completed. 28 (b) Proof of subordinate interest. If requested by a 29 secured party, a holder of a subordinate security interest or 30 other lien shall furnish reasonable proof of the interest or 31 lien within a reasonable time. Unless the holder does so, 32 the secured party need not comply with the holder's demand 33 under subsection (a)(3). 34 (c) Application of noncash proceeds. A secured party SB1231 Engrossed -225- LRB9106284WHdv 1 need not apply or pay over for application noncash proceeds 2 of disposition under this Section unless the failure to do so 3 would be commercially unreasonable. A secured party that 4 applies or pays over for application noncash proceeds shall 5 do so in a commercially reasonable manner. 6 (d) Surplus or deficiency if obligation secured. If the 7 security interest under which a disposition is made secures 8 payment or performance of an obligation, after making the 9 payments and applications required by subsection (a) and 10 permitted by subsection (c): 11 (1) unless subsection (a)(4) requires the secured 12 party to apply or pay over cash proceeds to a consignor, 13 the secured party shall account to and pay a debtor for 14 any surplus; and 15 (2) the obligor is liable for any deficiency. 16 (e) No surplus or deficiency in sales of certain rights 17 to payment. If the underlying transaction is a sale of 18 accounts, chattel paper, payment intangibles, or promissory 19 notes: 20 (1) the debtor is not entitled to any surplus; and 21 (2) the obligor is not liable for any deficiency. 22 (f) Calculation of surplus or deficiency in disposition 23 to person related to secured party. The surplus or 24 deficiency following a disposition is calculated based on the 25 amount of proceeds that would have been realized in a 26 disposition complying with this Part and described in 27 subsection (f)(2) of this Section to a transferee other than 28 the secured party, a person related to the secured party, or 29 a secondary obligor if: 30 (1) the transferee in the disposition is the 31 secured party, a person related to the secured party, or 32 a secondary obligor; and 33 (2) the amount of proceeds of the disposition is 34 significantly below the range of proceeds that would have SB1231 Engrossed -226- LRB9106284WHdv 1 been received from a complying disposition by a forced 2 sale without reserve to a willing buyer other than the 3 secured party, a person related to the secured party, or 4 a secondary obligor. 5 (g) Cash proceeds received by junior secured party. A 6 secured party that receives cash proceeds of a disposition in 7 good faith and without knowledge that the receipt violates 8 the rights of the holder of a security interest or other lien 9 that is not subordinate to the security interest or 10 agricultural lien under which the disposition is made: 11 (1) takes the cash proceeds free of the security 12 interest or other lien; 13 (2) is not obligated to apply the proceeds of the 14 disposition to the satisfaction of obligations secured by 15 the security interest or other lien; and 16 (3) is not obligated to account to or pay the 17 holder of the security interest or other lien for any 18 surplus. 19 (810 ILCS 5/9-616 new) 20 Sec. 9-616. Explanation of calculation of surplus or 21 deficiency. 22 (a) Definitions. In this Section: 23 (1) "Explanation" means a writing that: 24 (A) states whether a surplus or deficiency is 25 owed and the amount of the surplus, if applicable; 26 (B) states, if applicable, that future debits, 27 credits, charges, including additional credit 28 service charges or interest, rebates, and expenses 29 may affect the amount of the surplus or deficiency; 30 (C) provides a telephone number or mailing 31 address from which the debtor or consumer obligor 32 may obtain additional information concerning the 33 transaction and from which such person may request SB1231 Engrossed -227- LRB9106284WHdv 1 the amount of the deficiency and further information 2 regarding how the secured party calculated the 3 surplus or deficiency; and 4 (D) at the sender's option, the information 5 set forth in subsection (c). 6 (2) "Request" means a record: 7 (A) authenticated by a debtor or consumer 8 obligor; 9 (B) requesting that the recipient provide 10 information of how it calculated the surplus or 11 deficiency; and 12 (C) sent after disposition of the collateral 13 under Section 9-610. 14 (b) Explanation of calculation. In a consumer-goods 15 transaction in which the debtor is entitled to a surplus or a 16 consumer obligor is liable for a deficiency under Section 17 9-615, the secured party shall: 18 (1) send an explanation to the debtor or consumer 19 obligor, as applicable, after the disposition and: 20 (A) before or when the secured party accounts 21 to the debtor and pays any surplus or first makes 22 written demand on the consumer obligor after the 23 disposition for payment of the deficiency, other 24 than in instances in which such demand is made by a 25 third-party debt collector covered by the Fair Debt 26 Collection Practices Act; and 27 (B) within 14 days after receipt of a request 28 made by the debtor or consumer obligor within one 29 year after the secured party has given an 30 explanation under this Section or notice to such 31 debtor or consumer obligor under Section 9-614 of 32 this Article; or 33 (2) in the case of a consumer obligor who is liable 34 for a deficiency, within 14 days after receipt of a SB1231 Engrossed -228- LRB9106284WHdv 1 request, send to the consumer obligor a record waiving 2 the secured party's right to a deficiency. 3 (c) Required information for response to request. To 4 comply with a request, the secured party must provide a 5 response in writing which includes the following information: 6 (1) the aggregate amount of obligations secured by 7 the security interest under which the disposition was 8 made, and, if the amount reflects a rebate of unearned 9 interest or credit service charge, an indication of that 10 fact, calculated as of a specified date: 11 (A) if the secured party takes or receives 12 possession of the collateral after default, not more 13 than 35 days before the secured party takes or 14 receives possession; or 15 (B) if the secured party takes or receives 16 possession of the collateral before default or does 17 not take possession of the collateral, not more than 18 35 days before the disposition; 19 (2) the amount of proceeds of the disposition; 20 (3) the aggregate amount of the obligations after 21 deducting the amount of proceeds; 22 (4) the amount, in the aggregate or by type, and 23 types of expenses, including expenses of retaking, 24 holding, preparing for disposition, processing, and 25 disposing of the collateral, and attorney's fees secured 26 by the collateral which are known to the secured party 27 and relate to the current disposition; 28 (5) the amount, in the aggregate or by type, and 29 types of credits, including rebates of interest or credit 30 service charges, to which the obligor is known to be 31 entitled and which are not reflected in the amount in 32 paragraph (1); and 33 (6) the amount of the surplus or deficiency. 34 (d) Substantial compliance. A particular phrasing of SB1231 Engrossed -229- LRB9106284WHdv 1 the explanation or response to a request is not required. An 2 explanation or a response to a request complying 3 substantially with the requirements of this Section is 4 sufficient even if it is: 5 (1) accompanied by or combined with other 6 notifications; 7 (2) includes information not specified by this 8 Section; 9 (3) includes minor errors that are not seriously 10 misleading; or 11 (4) includes errors in information not required by 12 this Section. 13 (e) Charges for responses. A debtor or consumer obligor 14 is entitled without charge to one response to a request under 15 this Section during any six-month period in which the secured 16 party did not send to the debtor or consumer obligor an 17 explanation pursuant to subsection (b)(1). The secured party 18 may require payment of a charge not exceeding $25 for each 19 additional response. 20 (810 ILCS 5/9-617 new) 21 Sec. 9-617. Rights of transferee of collateral. 22 (a) Effects of disposition. A secured party's 23 disposition of collateral after default: 24 (1) transfers to a transferee for value all of the 25 debtor's rights in the collateral; 26 (2) discharges the security interest under which 27 the disposition is made; and 28 (3) discharges any subordinate security interest or 29 other subordinate lien. 30 (b) Rights of good-faith transferee. A transferee that 31 acts in good faith takes free of the rights and interests 32 described in subsection (a), even if the secured party fails 33 to comply with this Article or the requirements of any SB1231 Engrossed -230- LRB9106284WHdv 1 judicial proceeding. 2 (c) Rights of other transferee. If a transferee does 3 not take free of the rights and interests described in 4 subsection (a), the transferee takes the collateral subject 5 to: 6 (1) the debtor's rights in the collateral; 7 (2) the security interest or agricultural lien 8 under which the disposition is made; and 9 (3) any other security interest or other lien. 10 (810 ILCS 5/9-618 new) 11 Sec. 9-618. Rights and duties of certain secondary 12 obligors. 13 (a) Rights and duties of secondary obligor. A secondary 14 obligor acquires the rights and becomes obligated to perform 15 the duties of the secured party after the secondary obligor: 16 (1) receives an assignment of a secured obligation 17 from the secured party; 18 (2) receives a transfer of collateral from the 19 secured party and agrees to accept the rights and assume 20 the duties of the secured party; or 21 (3) is subrogated to the rights of a secured party 22 with respect to collateral. 23 (b) Effect of assignment, transfer, or subrogation. An 24 assignment, transfer, or subrogation described in subsection 25 (a): 26 (1) is not a disposition of collateral under 27 Section 9-610; and 28 (2) relieves the secured party of further duties 29 under this Article. 30 (810 ILCS 5/9-619 new) 31 Sec. 9-619. Transfer of record or legal title. 32 (a) "Transfer statement." In this Section, "transfer SB1231 Engrossed -231- LRB9106284WHdv 1 statement" means a record authenticated by a secured party 2 stating: 3 (1) that the debtor has defaulted in connection 4 with an obligation secured by specified collateral; 5 (2) that the secured party has exercised its 6 post-default remedies with respect to the collateral; 7 (3) that, by reason of the exercise, a transferee 8 has acquired the rights of the debtor in the collateral; 9 and 10 (4) the name and mailing address of the secured 11 party, debtor, and transferee. 12 (b) Effect of transfer statement. A transfer statement 13 entitles the transferee to the transfer of record of all 14 rights of the debtor in the collateral specified in the 15 statement in any official filing, recording, registration, or 16 certificate-of-title system covering the collateral. If a 17 transfer statement is presented with the applicable fee and 18 request form to the official or office responsible for 19 maintaining the system, the official or office shall: 20 (1) accept the transfer statement; 21 (2) promptly amend its records to reflect the 22 transfer; and 23 (3) if applicable, issue a new appropriate 24 certificate of title in the name of the transferee. 25 (c) Transfer not a disposition; no relief of secured 26 party's duties. A transfer of the record or legal title to 27 collateral to a secured party under subsection (b) or 28 otherwise is not of itself a disposition of collateral under 29 this Article and does not of itself relieve the secured party 30 of its duties under this Article. 31 (810 ILCS 5/9-620 new) 32 Sec. 9-620. Acceptance of collateral in full or partial 33 satisfaction of obligation; compulsory disposition of SB1231 Engrossed -232- LRB9106284WHdv 1 collateral. 2 (a) Conditions to acceptance in satisfaction. Except as 3 otherwise provided in subsection (g), a secured party may 4 accept collateral in full or partial satisfaction of the 5 obligation it secures only if: 6 (1) the debtor consents to the acceptance under 7 subsection (c); 8 (2) the secured party does not receive, within the 9 time set forth in subsection (d), a notification of 10 objection to the proposal authenticated by: 11 (A) a person to which the secured party was 12 required to send a proposal under Section 9-621; or 13 (B) any other person, other than the debtor, 14 holding an interest in the collateral subordinate to 15 the security interest that is the subject of the 16 proposal; 17 (3) if the collateral is consumer goods, the 18 collateral is not in the possession of the debtor when 19 the debtor consents to the acceptance; and 20 (4) subsection (e) does not require the secured 21 party to dispose of the collateral or the debtor waives 22 the requirement pursuant to Section 9-624. 23 (b) Purported acceptance ineffective. A purported or 24 apparent acceptance of collateral under this Section is 25 ineffective unless: 26 (1) the secured party consents to the acceptance in 27 an authenticated record or sends a proposal to the 28 debtor; and 29 (2) the conditions of subsection (a) are met. 30 (c) Debtor's consent. For purposes of this Section: 31 (1) a debtor consents to an acceptance of 32 collateral in partial satisfaction of the obligation it 33 secures only if the debtor agrees to the terms of the 34 acceptance in a record authenticated after default; and SB1231 Engrossed -233- LRB9106284WHdv 1 (2) a debtor consents to an acceptance of 2 collateral in full satisfaction of the obligation it 3 secures only if the debtor agrees to the terms of the 4 acceptance in a record authenticated after default or the 5 secured party: 6 (A) sends to the debtor after default a 7 proposal that is unconditional or subject only to a 8 condition that collateral not in the possession of 9 the secured party be preserved or maintained; 10 (B) in the proposal, proposes to accept 11 collateral in full satisfaction of the obligation it 12 secures; and 13 (C) does not receive a notification of 14 objection authenticated by the debtor within 20 days 15 after the proposal is sent. 16 (d) Effectiveness of notification. To be effective 17 under subsection (a)(2), a notification of objection must be 18 received by the secured party: 19 (1) in the case of a person to which the proposal 20 was sent pursuant to Section 9-621, within 20 days after 21 notification was sent to that person; and 22 (2) in other cases: 23 (A) within 20 days after the last notification 24 was sent pursuant to Section 9-621; or 25 (B) if a notification was not sent, before the 26 debtor consents to the acceptance under subsection 27 (c). 28 (e) Mandatory disposition of consumer goods. A secured 29 party that has taken possession of collateral shall dispose 30 of the collateral pursuant to Section 9-610 within the time 31 specified in subsection (f) if: 32 (1) 60 percent of the cash price has been paid in 33 the case of a purchase-money security interest in 34 consumer goods; or SB1231 Engrossed -234- LRB9106284WHdv 1 (2) 60 percent of the principal amount of the 2 obligation secured has been paid in the case of a 3 non-purchase-money security interest in consumer goods. 4 (f) Compliance with mandatory disposition requirement. 5 To comply with subsection (e), the secured party shall 6 dispose of the collateral: 7 (1) within 90 days after taking possession; or 8 (2) within any longer period to which the debtor 9 and all secondary obligors have agreed in an agreement to 10 that effect entered into and authenticated after default. 11 (g) No partial satisfaction in consumer transaction. In 12 a consumer transaction, a secured party may not accept 13 collateral in partial satisfaction of the obligation it 14 secures. 15 (810 ILCS 5/9-621 new) 16 Sec. 9-621. Notification of proposal to accept 17 collateral. 18 (a) Persons to which proposal to be sent. A secured 19 party that desires to accept collateral in full or partial 20 satisfaction of the obligation it secures shall send its 21 proposal to: 22 (1) any person from which the secured party has 23 received, before the debtor consented to the acceptance, 24 an authenticated notification of a claim of an interest 25 in the collateral; 26 (2) any other secured party or lienholder that, 10 27 days before the debtor consented to the acceptance, held 28 a security interest in or other lien on the collateral 29 perfected by the filing of a financing statement that: 30 (A) identified the collateral; 31 (B) was indexed under the debtor's name as of 32 that date; and 33 (C) was filed in the office or offices in SB1231 Engrossed -235- LRB9106284WHdv 1 which to file a financing statement against the 2 debtor covering the collateral as of that date; and 3 (3) any other secured party that, 10 days before 4 the debtor consented to the acceptance, held a security 5 interest in the collateral perfected by compliance with a 6 statute, regulation, or treaty described in Section 7 9-311(a). 8 (b) Proposal to be sent to secondary obligor in partial 9 satisfaction. A secured party that desires to accept 10 collateral in partial satisfaction of the obligation it 11 secures shall send its proposal to any secondary obligor in 12 addition to the persons described in subsection (a). 13 (810 ILCS 5/9-622 new) 14 Sec. 9-622. Effect of acceptance of collateral. 15 (a) Effect of acceptance. A secured party's acceptance 16 of collateral in full or partial satisfaction of the 17 obligation it secures: 18 (1) discharges the obligation to the extent 19 consented to by the debtor; 20 (2) transfers to the secured party all of a 21 debtor's rights in the collateral; 22 (3) discharges the security interest or 23 agricultural lien that is the subject of the debtor's 24 consent and any subordinate security interest or other 25 subordinate lien; and 26 (4) terminates any other subordinate interest. 27 (b) Discharge of subordinate interest notwithstanding 28 noncompliance. A subordinate interest is discharged or 29 terminated under subsection (a), even if the secured party 30 fails to comply with this Article. 31 (810 ILCS 5/9-623 new) 32 Sec. 9-623. Right to redeem collateral. SB1231 Engrossed -236- LRB9106284WHdv 1 (a) Persons that may redeem. A debtor, any secondary 2 obligor, or any other secured party or lienholder may redeem 3 collateral. 4 (b) Requirements for redemption. To redeem collateral, 5 a person shall tender: 6 (1) fulfillment of all obligations secured by the 7 collateral; and 8 (2) the reasonable expenses and attorney's fees 9 described in Section 9-615(a)(1). 10 (c) When redemption may occur. A redemption may occur 11 at any time before a secured party: 12 (1) has collected collateral under Section 9-607; 13 (2) has disposed of collateral or entered into a 14 contract for its disposition under Section 9-610; or 15 (3) has accepted collateral in full or partial 16 satisfaction of the obligation it secures under Section 17 9-622. 18 (810 ILCS 5/9-624 new) 19 Sec. 9-624. Waiver. 20 (a) Waiver of disposition notification. A debtor or 21 secondary obligor may waive the right to notification of 22 disposition of collateral under Section 9-611 only by an 23 agreement to that effect entered into and authenticated after 24 default. 25 (b) Waiver of mandatory disposition. A debtor may waive 26 the right to require disposition of collateral under Section 27 9-620(e) only by an agreement to that effect entered into and 28 authenticated after default. 29 (c) Waiver of redemption right. A debtor or secondary 30 obligor may waive the right to redeem collateral under 31 Section 9-623 only by an agreement to that effect entered 32 into and authenticated after default. SB1231 Engrossed -237- LRB9106284WHdv 1 (810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new) 2 SUBPART 2. NONCOMPLIANCE WITH ARTICLE 3 (810 ILCS 5/9-625 new) 4 Sec. 9-625. Remedies for secured party's failure to 5 comply with Article. 6 (a) Judicial orders concerning noncompliance. If it is 7 established that a secured party is not proceeding in 8 accordance with this Article, a court may order or restrain 9 collection, enforcement, or disposition of collateral on 10 appropriate terms and conditions. 11 (b) Damages for noncompliance. Subject to subsections 12 (c), (d), and (f), a person is liable for damages in the 13 amount of any loss caused by a failure to comply with this 14 Article. Loss caused by a failure to comply with a request 15 under Section 9-210 may include loss resulting from the 16 debtor's inability to obtain, or increased costs of, 17 alternative financing. 18 (c) Persons entitled to recover damages; statutory 19 damages in consumer-goods transaction. Except as otherwise 20 provided in Section 9-628: 21 (1) a person that, at the time of the failure, was 22 a debtor, was an obligor, or held a security interest in 23 or other lien on the collateral may recover in an 24 individual action damages under subsection (b) for its 25 loss; and 26 (2) if the collateral is consumer goods, a person 27 that was a debtor or a secondary obligor at the time a 28 secured party failed to comply with this Part may recover 29 in an individual action for that failure in any event an 30 amount not less than the credit service charge plus 10 31 percent of the principal amount of the obligation or the 32 time-price differential plus 10 percent of the cash 33 price. SB1231 Engrossed -238- LRB9106284WHdv 1 (d) Recovery when deficiency eliminated or reduced. A 2 debtor whose deficiency is eliminated under Section 9-626 may 3 recover damages for the loss of any surplus. However, a 4 debtor or secondary obligor whose deficiency is eliminated or 5 reduced under Section 9-626 may not otherwise recover under 6 subsection (b) for noncompliance with the provisions of this 7 Part relating to collection, enforcement, disposition, or 8 acceptance. 9 (e) Statutory damages: noncompliance with specified 10 provisions. In addition to any damages recoverable under 11 subsection (b), the debtor, consumer obligor, or person named 12 as a debtor in a filed record, as applicable, may recover in 13 an individual action $500 for each instance that a person: 14 (1) fails to comply with Section 9-208; 15 (2) fails to comply with Section 9-209; 16 (3) files a record that the person is not entitled 17 to file under Section 9-509(a); or 18 (4) fails to cause the secured party of record to 19 file or send a termination statement as required by 20 Section 9-513(a) or (c). 21 (f) Statutory damages: noncompliance with Section 22 9-210. A debtor or consumer obligor may recover damages 23 under subsection (b) and, in addition, may in an individual 24 action recover $500 in each case from a person that, without 25 reasonable cause, fails to comply with a request under 26 Section 9-210. A recipient of a request under Section 9-210 27 which never claimed an interest in the collateral or 28 obligations that are the subject of a request under that 29 Section has a reasonable excuse for failure to comply with 30 the request within the meaning of this subsection. 31 (g) Limitation of security interest: noncompliance with 32 Section 9-210. If a secured party fails to comply with a 33 request regarding a list of collateral or a statement of 34 account under Section 9-210, the secured party may claim a SB1231 Engrossed -239- LRB9106284WHdv 1 security interest only as shown in the statement included in 2 the request as against a person that is reasonably misled by 3 the failure. 4 (810 ILCS 5/9-626 new) 5 Sec. 9-626. Action in which deficiency or surplus is in 6 issue; applicable rules if amount of deficiency or surplus is 7 in issue. In an action in which the amount of a deficiency 8 or surplus is in issue, the following rules apply: 9 (1) A secured party need not prove compliance with 10 the provisions of this Part relating to collection, 11 enforcement, disposition, or acceptance unless the debtor 12 or a secondary obligor places the secured party's 13 compliance in issue. 14 (2) If the secured party's compliance is placed in 15 issue, the secured party has the burden of establishing 16 that the collection, enforcement, disposition, or 17 acceptance was conducted in accordance with this Part. 18 (3) Except as otherwise provided in Section 9-628, 19 if a secured party fails to prove that the collection, 20 enforcement, disposition, or acceptance was conducted in 21 accordance with the provisions of this Part relating to 22 collection, enforcement, disposition, or acceptance, the 23 liability of a debtor or a secondary obligor for a 24 deficiency is limited to an amount by which the sum of 25 the secured obligation, expenses, and attorney's fees 26 exceeds the greater of: 27 (A) the proceeds of the collection, 28 enforcement, disposition, or acceptance; or 29 (B) the amount of proceeds that would have 30 been realized had the noncomplying secured party 31 proceeded in accordance with the provisions of this 32 Part relating to collection, enforcement, 33 disposition, or acceptance. SB1231 Engrossed -240- LRB9106284WHdv 1 (4) For purposes of paragraph (3)(B), the amount of 2 proceeds that would have been realized is equal to the 3 sum of the secured obligation, expenses, and attorney's 4 fees unless the secured party proves that the amount is 5 less than that sum. 6 (5) If a deficiency or surplus is calculated under 7 Section 9-615(f), the debtor or obligor has the burden of 8 establishing that the amount of proceeds of the 9 disposition is significantly below the range of prices 10 that a complying disposition to a person other than the 11 secured party, a person related to the secured party, or 12 a secondary obligor would have brought. 13 (810 ILCS 5/9-627 new) 14 Sec. 9-627. Determination of whether conduct was 15 commercially reasonable. 16 (a) Greater amount obtainable under other circumstances; 17 no preclusion of commercial reasonableness. The fact that a 18 greater amount could have been obtained by a collection, 19 enforcement, disposition, or acceptance at a different time 20 or in a different method from that selected by the secured 21 party is not of itself sufficient to preclude the secured 22 party from establishing that the collection, enforcement, 23 disposition, or acceptance was made in a commercially 24 reasonable manner. 25 (b) Dispositions that are commercially reasonable. A 26 disposition of collateral is made in a commercially 27 reasonable manner if the disposition is made: 28 (1) in the usual manner on any recognized market; 29 (2) at the price current in any recognized market 30 at the time of the disposition; or 31 (3) otherwise in conformity with reasonable 32 commercial practices among dealers in the type of 33 property that was the subject of the disposition. SB1231 Engrossed -241- LRB9106284WHdv 1 (c) Approval by court or on behalf of creditors. A 2 collection, enforcement, disposition, or acceptance is 3 commercially reasonable if it has been approved: 4 (1) in a judicial proceeding; 5 (2) by a bona fide creditors' committee; 6 (3) by a representative of creditors; or 7 (4) by an assignee for the benefit of creditors. 8 (d) Approval under subsection (c) not necessary; absence 9 of approval has no effect. Approval under subsection (c) 10 need not be obtained, and lack of approval does not mean that 11 the collection, enforcement, disposition, or acceptance is 12 not commercially reasonable. 13 (810 ILCS 5/9-628 new) 14 Sec. 9-628. Nonliability and limitation on liability of 15 secured party; liability of secondary obligor. 16 (a) Limitation of liability to debtor or obligor. 17 Unless a secured party knows that a person is a debtor or 18 obligor, knows the identity of the person, and knows how to 19 communicate with the person: 20 (1) the secured party is not liable to the person, 21 or to a secured party or lienholder that has filed a 22 financing statement against the person, for failure to 23 comply with this Article; and 24 (2) the secured party's failure to comply with this 25 Article does not affect the liability of the person for a 26 deficiency. 27 (b) Limitation of liability to debtor, obligor, another 28 secured party, or lienholder. A secured party is not liable 29 because of its status as secured party: 30 (1) to a person that is a debtor or obligor, unless 31 the secured party knows: 32 (A) that the person is a debtor or obligor; 33 (B) the identity of the person; and SB1231 Engrossed -242- LRB9106284WHdv 1 (C) how to communicate with the person; or 2 (2) to a secured party or lienholder that has filed 3 a financing statement against a person, unless the 4 secured party knows: 5 (A) that the person is a debtor; and 6 (B) the identity of the person. 7 (c) Limitation of liability if reasonable belief that 8 transaction not a consumer-goods transaction or consumer 9 transaction. A secured party is not liable to any person, 10 and a person's liability for a deficiency is not affected, 11 because of any act or omission arising out of the secured 12 party's reasonable belief that a transaction is not a 13 consumer-goods transaction or a consumer transaction or that 14 goods are not consumer goods, if the secured party's belief 15 is based on its reasonable reliance on: 16 (1) a debtor's representation concerning the 17 purpose for which collateral was to be used, acquired, or 18 held; or 19 (2) an obligor's representation concerning the 20 purpose for which a secured obligation was incurred. 21 (d) Limitation of liability for statutory damages. A 22 secured party is not liable to any person under Section 23 9-625(c)(2) for its failure to comply with Section 9-616. 24 (e) Limitation of multiple liability for statutory 25 damages. A secured party is not liable under Section 26 9-625(c)(2) more than once with respect to any one secured 27 obligation. 28 (810 ILCS 5/Art. 9, Part 7 heading new) 29 PART 7. TRANSITION 30 (810 ILCS 5/9-701 new) 31 Sec. 9-701. Effective date. (See Section 99 of the 32 Public Act adding this Section to this Act.) SB1231 Engrossed -243- LRB9106284WHdv 1 (810 ILCS 5/9-702 new) 2 Sec. 9-702. Savings clause. 3 (a) Pre-effective-date transactions or liens. Except as 4 otherwise provided in this Part, this Act applies to a 5 transaction or lien within its scope, even if the transaction 6 or lien was entered into or created before the effective date 7 of this amendatory Act of the 91st General Assembly. 8 (b) Continuing validity. Except as otherwise provided 9 in subsection (c) and Sections 9-703 through 9-709: 10 (1) transactions and liens that were not governed 11 by Article 9 as it existed before the effective date of 12 this amendatory Act of the 91st General Assembly, were 13 validly entered into or created before the effective date 14 of this amendatory Act of the 91st General Assembly, and 15 would be subject to this Act if they had been entered 16 into or created after the effective date of this 17 amendatory Act of the 91st General Assembly, and the 18 rights, duties, and interests flowing from those 19 transactions and liens remain valid after the effective 20 date of this amendatory Act of the 91st General Assembly; 21 and 22 (2) the transactions and liens may be terminated, 23 completed, consummated, and enforced as required or 24 permitted by this Act or by the law that otherwise would 25 apply if this Act had not taken effect. 26 (c) Pre-effective-date proceedings. This amendatory Act 27 of the 91st General Assembly does not affect an action, case, 28 or proceeding commenced before the effective date of this 29 amendatory Act of the 91st General Assembly. 30 (810 ILCS 5/9-703 new) 31 Sec. 9-703. Security interest perfected before effective 32 date. 33 (a) Continuing priority over lien creditor: perfection SB1231 Engrossed -244- LRB9106284WHdv 1 requirements satisfied. A security interest that is 2 enforceable immediately before the effective date of this 3 amendatory Act of the 91st General Assembly and would have 4 priority over the rights of a person that becomes a lien 5 creditor at that time is a perfected security interest under 6 this Act if, on the effective date of this amendatory Act of 7 the 91st General Assembly, the applicable requirements for 8 enforceability and perfection under this Act are satisfied 9 without further action. 10 (b) Continuing priority over lien creditor: perfection 11 requirements not satisfied. Except as otherwise provided in 12 Section 9-705, if, immediately before the effective date of 13 this amendatory Act of the 91st General Assembly, a security 14 interest is enforceable and would have priority over the 15 rights of a person that becomes a lien creditor at that time, 16 but the applicable requirements for enforceability or 17 perfection under this Act are not satisfied on the effective 18 date of this amendatory Act of the 91st General Assembly, the 19 security interest: 20 (1) is a perfected security interest for one year 21 after the effective date of this amendatory Act of the 22 91st General Assembly; 23 (2) remains enforceable thereafter only if the 24 security interest becomes enforceable under Section 9-203 25 before the year expires; and 26 (3) remains perfected thereafter only if the 27 applicable requirements for perfection under this Act are 28 satisfied before the year expires. 29 (810 ILCS 5/9-704 new) 30 Sec. 9-704. Security interest unperfected before 31 effective date. A security interest that is enforceable 32 immediately before the effective date of this amendatory Act 33 of the 91st General Assembly but which would be subordinate SB1231 Engrossed -245- LRB9106284WHdv 1 to the rights of a person that becomes a lien creditor at 2 that time: 3 (1) remains an enforceable security interest for 4 one year after the effective date of this amendatory Act 5 of the 91st General Assembly; 6 (2) remains enforceable thereafter if the security 7 interest becomes enforceable under Section 9-203 on the 8 effective date of this amendatory Act of the 91st General 9 Assembly or within one year thereafter; and 10 (3) becomes perfected: 11 (A) without further action, on the effective date 12 of this amendatory Act of the 91st General Assembly if 13 the applicable requirements for perfection under this Act 14 are satisfied before or at that time; or 15 (B) when the applicable requirements for perfection 16 are satisfied if the requirements are satisfied after 17 that time. 18 (810 ILCS 5/9-705 new) 19 Sec. 9-705. Effectiveness of action taken before 20 effective date. 21 (a) Pre-effective-date action; one-year perfection 22 period unless reperfected. If action, other than the filing 23 of a financing statement, is taken before the effective date 24 of this amendatory Act of the 91st General Assembly and the 25 action would have resulted in priority of a security interest 26 over the rights of a person that becomes a lien creditor had 27 the security interest become enforceable before the effective 28 date of this amendatory Act of the 91st General Assembly, the 29 action is effective to perfect a security interest that 30 attaches under this Act within one year after the effective 31 date of this amendatory Act of the 91st General Assembly. An 32 attached security interest becomes unperfected one year after 33 the effective date of this amendatory Act of the 91st General SB1231 Engrossed -246- LRB9106284WHdv 1 Assembly unless the security interest becomes a perfected 2 security interest under this Act before the expiration of 3 that period. 4 (b) Pre-effective-date filing. The filing of a 5 financing statement before the effective date of this 6 amendatory Act of the 91st General Assembly is effective to 7 perfect a security interest to the extent the filing would 8 satisfy the applicable requirements for perfection under this 9 Act. 10 (c) Pre-effective-date filing in jurisdiction formerly 11 governing perfection. This Act does not render ineffective 12 an effective financing statement that, before the effective 13 date of this amendatory Act of the 91st General Assembly, is 14 filed and satisfies the applicable requirements for 15 perfection under the law of the jurisdiction governing 16 perfection as provided in Section 9-103 of the Uniform 17 Commercial Code as it existed before the effective date of 18 this amendatory Act of the 91st General Assembly. However, 19 except as otherwise provided in subsections (d) and (e) and 20 Section 9-706, the financing statement ceases to be effective 21 at the earlier of: 22 (1) the time the financing statement would have 23 ceased to be effective under the law of the jurisdiction 24 in which it is filed; or 25 (2) June 30, 2006. 26 (d) Continuation statement. The filing of a 27 continuation statement after the effective date of this 28 amendatory Act of the 91st General Assembly does not continue 29 the effectiveness of the financing statement filed before the 30 effective date of this amendatory Act of the 91st General 31 Assembly. However, upon the timely filing of a continuation 32 statement after the effective date of this amendatory Act of 33 the 91st General Assembly and in accordance with the law of 34 the jurisdiction governing perfection as provided in Part 3, SB1231 Engrossed -247- LRB9106284WHdv 1 the effectiveness of a financing statement filed in the same 2 office in that jurisdiction before the effective date of this 3 amendatory Act of the 91st General Assembly continues for the 4 period provided by the law of that jurisdiction. 5 (e) Application of subsection (c)(2) to transmitting 6 utility financing statement. Subsection (c)(2) applies to a 7 financing statement that, before the effective date of this 8 amendatory Act of the 91st General Assembly, is filed against 9 a transmitting utility and satisfies the applicable 10 requirements for perfection under the law of the jurisdiction 11 governing perfection as provided in Section 9-103, as that 12 Section existed before the effective date of this amendatory 13 Act of the 91st General Assembly, only to the extent that 14 Part 3 provides that the law of a jurisdiction other than 15 jurisdiction in which the financing statement is filed 16 governs perfection of a security interest in collateral 17 covered by the financing statement. 18 (f) Application of Part 5. A financing statement that 19 includes a financing statement filed before the effective 20 date of this amendatory Act of the 91st General Assembly and 21 a continuation statement filed after the effective date of 22 this amendatory Act of the 91st General Assembly is effective 23 only to the extent that it satisfies the requirements of Part 24 5 for an initial financing statement. 25 (810 ILCS 5/9-706 new) 26 Sec. 9-706. When initial financing statement suffices to 27 continue effectiveness of financing statement. 28 (a) Initial financing statement in lieu of continuation 29 statement. The filing of an initial financing statement in 30 the office specified in Section 9-501 continues the 31 effectiveness of a financing statement filed before the 32 effective date of this amendatory Act of the 91st General 33 Assembly if: SB1231 Engrossed -248- LRB9106284WHdv 1 (1) the filing of an initial financing statement in 2 that office would be effective to perfect a security 3 interest under this Act; 4 (2) the pre-effective-date financing statement was 5 filed in an office in another State or another office in 6 this State; and 7 (3) the initial financing statement satisfies 8 subsection (c). 9 (b) Period of continued effectiveness. The filing of an 10 initial financing statement under subsection (a) continues 11 the effectiveness of the pre-effective-date financing 12 statement: 13 (1) if the initial financing statement is filed 14 before the effective date of this amendatory Act of the 15 91st General Assembly, for the period provided in Section 16 9-403 of the Uniform Commercial Code as it existed before 17 the effective date of this amendatory Act of the 91st 18 General Assembly with respect to a financing statement; 19 and 20 (2) if the initial financing statement is filed 21 after the effective date of this amendatory Act of the 22 91st General Assembly, for the period provided in Section 23 9-515 with respect to an initial financing statement. 24 (c) Requirements for initial financing statement under 25 subsection (a). To be effective for purposes of subsection 26 (a), an initial financing statement must: 27 (1) satisfy the requirements of Part 5 for an 28 initial financing statement; 29 (2) identify the pre-effective-date financing 30 statement by indicating the office in which the financing 31 statement was filed and providing the dates of filing and 32 file numbers, if any, of the financing statement and of 33 the most recent continuation statement filed with respect 34 to the financing statement; and SB1231 Engrossed -249- LRB9106284WHdv 1 (3) indicate that the pre-effective-date financing 2 statement remains effective. 3 (810 ILCS 5/9-707 new) 4 Sec. 9-707. Amendment of pre-effective-date financing 5 statement. 6 (a) "Pre-effective-date financing statement". In this 7 Section, "pre-effective-date financing statement" means a 8 financing statement filed before the effective date of this 9 amendatory Act of the 91st General Assembly. 10 (b) Applicable law. After the effective date of this 11 amendatory Act of the 91st General Assembly, a person may add 12 or delete collateral covered by, continue or terminate the 13 effectiveness of, or otherwise amend the information provided 14 in, a pre-effective-date financing statement only in 15 accordance with the law of the jurisdiction governing 16 perfection as provided in Part 3. However, the effectiveness 17 of a pre-effective-date financing statement also may be 18 terminated in accordance with the law of the jurisdiction in 19 which the financing statement is filed. 20 (c) Method of amending: general rule. Except as 21 otherwise provided in subsection (d), if the law of this 22 State governs perfection of a security interest, the 23 information in a pre-effective-date financing statement may 24 be amended after the effective date of this amendatory Act of 25 the 91st General Assembly only if: 26 (1) the pre-effective-date financing statement and 27 an amendment are filed in the office specified in Section 28 9-501; 29 (2) an amendment is filed in the office specified 30 in Section 9-501 concurrently with, or after the filing 31 in that office of, an initial financing statement that 32 satisfies Section 9-706(c); or 33 (3) an initial financing statement that provides SB1231 Engrossed -250- LRB9106284WHdv 1 the information as amended and satisfies Section 9-706(c) 2 is filed in the office specified in Section 9-501. 3 (d) Method of amending: continuation. If the law of 4 this State governs perfection of a security interest, the 5 effectiveness of a pre-effective-date financing statement may 6 be continued only under Section 9-705(d) and (f) or Section 7 9-706. 8 (e) Method of amending: additional termination rule. 9 Whether or not the law of this State governs perfection of a 10 security interest, the effectiveness of a pre-effective-date 11 financing statement filed in this State may be terminated 12 after the effective date of this amendatory Act of the 91st 13 General Assembly by filing a termination statement in the 14 office in which the pre-effective-date financing statement is 15 filed, unless an initial financing statement that satisfies 16 Section 9-706(c) has been filed in the office specified by 17 the law of the jurisdiction governing perfection as provided 18 in Part 3 as the office in which to file a financing 19 statement. 20 (810 ILCS 5/9-708 new) 21 Sec. 9-708. Persons entitled to file initial financing 22 statement or continuation statement. A person may file an 23 initial financing statement or a continuation statement under 24 this Part if: 25 (1) the secured party of record authorizes the 26 filing; and 27 (2) the filing is necessary under this Part: 28 (A) to continue the effectiveness of a 29 financing statement filed before the effective date 30 of this amendatory Act of the 91st General Assembly; 31 or 32 (B) to perfect or continue the perfection of a 33 security interest. SB1231 Engrossed -251- LRB9106284WHdv 1 (810 ILCS 5/9-709 new) 2 Sec. 9-709. Priority. 3 (a) Law governing priority. This Act determines the 4 priority of conflicting claims to collateral. However, if 5 the relative priorities of the claims were established before 6 the effective date of this amendatory Act of the 91st General 7 Assembly, Article 9 as it existed before the effective date 8 of this amendatory Act of the 91st General Assembly 9 determines priority. 10 (b) Priority if security interest becomes enforceable 11 under Section 9-203. For purposes of Section 9-322(a), the 12 priority of a security interest that becomes enforceable 13 under Section 9-203 of this Act dates from the effective date 14 of this amendatory Act of the 91st General Assembly if the 15 security interest is perfected under this Act by the filing 16 of a financing statement before the effective date of this 17 amendatory Act of the 91st General Assembly which would not 18 have been effective to perfect the security interest under 19 Article 9 as it existed before the effective date of this 20 amendatory Act of the 91st General Assembly. This subsection 21 does not apply to conflicting security interests each of 22 which is perfected by the filing of such a financing 23 statement. 24 (810 ILCS 5/9-710 new) 25 Sec. 9-710. Local-filing office responsibilities for 26 filings under the Uniform Commercial Code prior to this 27 amendatory Act of the 91st General Assembly. 28 (a) In this Section: 29 (1) "Local-filing office" means a filing office, 30 other than the office of the Secretary of State, that is 31 designated as the proper place to file a financing 32 statement under Section 9-401(1) of the Uniform 33 Commercial Code as in effect immediately before the SB1231 Engrossed -252- LRB9106284WHdv 1 effective date of this amendatory Act of the 91st General 2 Assembly. The term applies only with respect to a record 3 that covers a type of collateral as to which the filing 4 office is designated in that Section as the proper place 5 to file. 6 (2) "Former-Article-9 records" means: 7 (A) financing statements and other records 8 that have been filed in a local-filing office before 9 July 1, 2001, and that are, or upon processing and 10 indexing will be, reflected in the index maintained, 11 as of June 30, 2001, by the local-filing office for 12 financing statements and other records filed in the 13 local filing office before July 1, 2001. 14 (B) the index as of June 30, 2001. 15 (b) Except for a record terminating a former-Article-9 16 record, a local-filing office must not accept for filing a 17 record presented after June 30, 2001, whether or not the 18 record relates to a financing statement filed in the 19 local-filing office before July 1, 2001. If the record 20 terminating such former-Article-9 record statement is in the 21 standard form prescribed by the Secretary of State, the 22 uniform fee for filing and indexing the termination statement 23 in the office of a county recorder shall be $5 and otherwise 24 shall be $10, plus in each case an additional fee of $5 for 25 each name more than one at each address listed against which 26 the record is required to be indexed. 27 (c) Until July 1, 2001, each local-filing office must 28 maintain all former-Article-9 records in accordance with the 29 Uniform Commercial Code as in effect immediately before the 30 effective date of this amendatory Act of the 91st General 31 Assembly. A former-Article-9 record that is not reflected on 32 the index maintained on June 30, 2001, by the local-filing 33 office must be processed and indexed, and reflected on the 34 index as of June 30, 2001, as soon as practicable but in any SB1231 Engrossed -253- LRB9106284WHdv 1 event no later than July 30, 2001. 2 (d) Until at least June 30, 2008, each local-filing 3 office must respond to requests for information with respect 4 to former-Article-9 records relating to a debtor and issue 5 certificates, in accordance with the Uniform Commercial Code 6 as in effect immediately before this amendatory Act of the 7 91st General Assembly. The fees charged for responding to 8 requests for information relating to the debtor issuing the 9 certificates with respect to former-Article-9 records must be 10 the fees in effect under the Uniform Commercial Code as in 11 effect immediately before the effective date of this 12 amendatory Act of the 91st General Assembly on June 30, 2001, 13 unless a different fee is later set by the local filing 14 office. However, the different fee must not exceed $10 for 15 responding to a request for information relating to a debtor 16 or $10 for issuing a certificate. 17 (e) After June 30, 2008, each local-filing office may 18 remove and destroy, in accordance with any then applicable 19 record retention law of this State, all former-Article-9 20 records, including the related index. 21 (f) This Section does not apply, with respect to 22 financing statements and other records, to a filing office in 23 which mortgages or records of mortgages on real property are 24 required to be filed or recorded if: 25 (1) the collateral is timber to be cut or 26 as-extracted collateral, or 27 (2) the record is or relates to a financing 28 statement filed as a fixture filing and the collateral is 29 goods that are or are to become fixtures. 30 PART 99. (BLANK)MISCELLANEOUS ILLINOIS PROVISIONS31 (810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901) 32 Sec. 9-9901. (Blank).Liability of Secretary of State.SB1231 Engrossed -254- LRB9106284WHdv 1Neither the Secretary of State nor any of the Secretary of2State's employees or agents shall be subject to personal3liability by reason of any error or omission in the4performance of any duty under this Article except in case of5wilful negligence.6 (Source: P.A. 87-1047.) 7 (810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902) 8 Sec. 9-9902. (Blank).Security interests in crops.9(a) Legislative findings; purpose. The General Assembly10finds:11(1) it has been the accepted practice between12farmers and agricultural lenders for lenders to extend13credit with repayment secured by a security interest in14crops perfected in accordance with the provisions of this15Article;16(2) in making these loans, it has been the accepted17practice of agricultural lenders to rely upon a search of18financing statements properly filed in accordance with19the provisions of this Article to determine the presence20of claims in favor of other lenders;21(3) recently, this long standing practice and the22expectations of agricultural lenders have been negated by23court decisions that hold that a mortgagee of real estate24who takes possession, during foreclosure proceedings, of25mortgaged real estate with unsevered crops has priority26over a perfected security interest in crops;27(4) as a result of these court decisions, the28documentation and expenses in connection with prudent29agricultural lending practices will significantly30increase, creating an undue burden on agricultural31lenders;32(5) the application of these court decisions to the33holders of obligations secured by the collateralSB1231 Engrossed -255- LRB9106284WHdv 1assignment of beneficial interests in land trusts will2result in the creation of claims against crops that3agricultural lenders will be unable to discover by public4record search;5(6) these court decisions defeat the legitimate6expectations of agricultural lenders, unnecessarily7increase the cost of agricultural credit and impede the8free flow and availability of agricultural credit,9constituting an undue burden on the Illinois farm10economy;11(7) the application of these court decisions to the12holders of obligations secured by the collateral13assignment of beneficial interests in land trusts will14similarly defeat the expectations of agricultural15lenders, unnecessarily increase the cost of agricultural16credit and impede the free flow and availability of17agricultural credit, constituting an undue burden on the18Illinois farm economy;19(8) real estate lenders, frequently dealing with20farmers prior to the involvement of other agricultural21lenders, in the ordinary course of lending can perfect a22security interest in crops in accordance with the23provisions of this Article to the extent these lenders24are relying on that collateral;25(9) it is the purpose of this Section to restore an26efficient system of searching for the claims of lenders27and the protection afforded agricultural lenders by a28perfected security interest in crops under this Article,29and thereby to foster and encourage the availability of30agricultural credit.31(b) Definitions. In this Section the following meanings32apply:33(1) "Collateral assignment of beneficial interest"34means any pledge or assignment of the beneficial interestSB1231 Engrossed -256- LRB9106284WHdv 1in a land trust to a person to secure a debt or other2obligation.3(2) "Land trust" means any trust arrangement under4which the legal and equitable title to real estate is5held by a trustee, the interest of the beneficiary of the6trust is personal property and the beneficiary or any7person designated in writing by the beneficiary has (i)8the exclusive power to direct or control the trustee in9dealing with the title to the trust property, (ii) the10exclusive control of the management, operation, renting,11and selling of the trust property, and (iii) the12exclusive right to the earnings, avails, and proceeds of13the trust property.14(c) Rights to crops. With respect to any crops growing15or to be grown on real estate held in a land trust, the16rights of a holder of an obligation secured by a collateral17assignment of beneficial interest in the land trust,18including rights by virtue of an equitable lien, shall be19subject to a security interest properly perfected under this20Article.21(d) Application of Section. This Section applies to the22holder of an obligation secured by a collateral assignment of23beneficial interest in a land trust who becomes entitled to24crops by obtaining possession on or after December 22, 1988.25 (Source: P.A. 87-1047.) 26 Section 10. The Uniform Commercial Code is amended by 27 changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502, 28 2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103, 29 8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section 30 5-118 as follows: 31 (810 ILCS 5/1-105) (from Ch. 26, par. 1-105) 32 Sec. 1-105. Territorial application of the Act; parties' SB1231 Engrossed -257- LRB9106284WHdv 1 power to choose applicable law. 2 (1) Except as provided in this Section, when a 3 transaction bears a reasonable relation to this State and 4 also to another state or nation the parties may agree that 5 the law either of this State or of the other state or nation 6 shall govern their rights and duties. Failing an agreement, 7 this Act applies to transactions bearing an appropriate 8 relation to this State. 9 (2) Where one of the following provisions of this Act 10 specifies the applicable law, that provision governs and a 11 contrary agreement is effective only to the extent permitted 12 by the law (including the conflict of laws rules) so 13 specified: 14 Rights of creditors against sold goods. Section 2-402. 15 Applicability of the Article on Leases. Sections 2A-105 16 and 2A-106. 17 Applicability of the Article on Bank Deposits and 18 Collections. Section 4-102. 19 Governing law in the Article on Funds Transfers. Section 20 4A-507. 21 Letters of Credit. Section 5-116. 22 Applicability of the Article on Investment Securities. 23 Section 8-110. 24 Law governing perfection, the effect of perfection or 25 nonperfection, and the priority of security 26 interests and agricultural liens. Sections 9-301 27 through 9-307. 28Perfection provisions of the Article on Secured29Transactions. Section 9-103.30 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.) 31 (810 ILCS 5/1-201) (from Ch. 26, par. 1-201) 32 Sec. 1-201. General Definitions. Subject to additional 33 definitions contained in the subsequent Articles of this Act SB1231 Engrossed -258- LRB9106284WHdv 1 which are applicable to specific Articles or Parts thereof, 2 and unless the context otherwise requires, in this Act: 3 (1) "Action" in the sense of a judicial proceeding 4 includes recoupment, counterclaim, set-off, suit in equity 5 and any other proceedings in which rights are determined. 6 (2) "Aggrieved party" means a party entitled to resort 7 to a remedy. 8 (3) "Agreement" means the bargain of the parties in fact 9 as found in their language or by implication from other 10 circumstances including course of dealing or usage of trade 11 or course of performance as provided in this Act (Sections 12 1-205,and2-208, and 2A-207). Whether an agreement has legal 13 consequences is determined by the provisions of this Act, if 14 applicable; otherwise by the law of contracts (Section 15 1-103). (Compare "Contract".) 16 (4) "Bank" means any person engaged in the business of 17 banking. 18 (5) "Bearer" means the person in possession of an 19 instrument, document of title, or certificated security 20 payable to bearer or indorsed in blank. 21 (6) "Bill of lading" means a document evidencing the 22 receipt of goods for shipment issued by a person engaged in 23 the business of transporting or forwarding goods, and 24 includes an airbill. "Airbill" means a document serving for 25 air transportation as a bill of lading does for marine or 26 rail transportation, and includes an air consignment note or 27 air waybill. 28 (7) "Branch" includes a separately incorporated foreign 29 branch of a bank. 30 (8) "Burden of establishing" a fact means the burden of 31 persuading the triers of fact that the existence of the fact 32 is more probable than its non-existence. 33 (9) "Buyer in ordinary course of business" means a 34 person that buys goodswhoin good faith,andwithout SB1231 Engrossed -259- LRB9106284WHdv 1 knowledge that the sale violatesto him is in violation of2 theownershiprightsor security interestof another persona3third partyin the goods, andbuysin the ordinary course 4 from a person, other than a pawnbroker, in the business of 5 selling goods of that kindbut does not include a pawnbroker. 6 A person buys goods in the ordinary course if the sale to the 7 person comports with the usual or customary practices in the 8 kind of business in which the seller is engaged or with the 9 seller's own usual or customary practices. A person that 10 sells oil, gas, or other minerals at the wellhead or minehead 11 is a personAll persons who sell minerals or the like12(including oil and gas) at wellhead or minehead shall be13deemed to be personsin the business of selling goods of that 14 kind. A buyer in ordinary course of business"Buying"may 15 buybefor cash,orby exchange of other property, or on 16 secured or unsecured credit, and may acquireincludes17receivinggoods or documents of title under a pre-existing 18 contract for sale. Only a buyer that takes possession of the 19 goods or has a right to recover the goods from the seller 20 under Article 2 may be a buyer in ordinary course of 21 business. A person that acquires goods in a transfer in bulk 22 or as security for or in total or partial satisfaction of a 23 money debt is not a buyer in ordinary course of business.but24does not include a transfer in bulk or as security for or in25total or partial satisfaction of a money debt.26 (10) "Conspicuous": A term or clause is conspicuous when 27 it is so written that a reasonable person against whom it is 28 to operate ought to have noticed it. A printed heading in 29 capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. 30 Language in the body of a form is "conspicuous" if it is in 31 larger or other contrasting type or color. But in a telegram 32 any stated term is "conspicuous". Whether a term or clause is 33 "conspicuous" or not is for decision by the court. 34 (11) "Contract" means the total legal obligation which SB1231 Engrossed -260- LRB9106284WHdv 1 results from the parties' agreement as affected by this Act 2 and any other applicable rules of law. (Compare "Agreement".) 3 (12) "Creditor" includes a general creditor, a secured 4 creditor, a lien creditor and any representative of 5 creditors, including an assignee for the benefit of 6 creditors, a trustee in bankruptcy, a receiver in equity and 7 an executor or administrator of an insolvent debtor's or 8 assignor's estate. 9 (13) "Defendant" includes a person in the position of 10 defendant in a cross-action or counterclaim. 11 (14) "Delivery" with respect to instruments, documents 12 of title, chattel paper or certificated securities means 13 voluntary transfer of possession. 14 (15) "Document of title" includes bill of lading, dock 15 warrant, dock receipt, warehouse receipt or order for the 16 delivery of goods, and also any other document which in the 17 regular course of business or financing is treated as 18 adequately evidencing that the person in possession of it is 19 entitled to receive, hold and dispose of the document and the 20 goods it covers. To be a document of title a document must 21 purport to be issued by or addressed to a bailee and purport 22 to cover goods in the bailee's possession which are either 23 identified or are fungible portions of an identified mass. 24 (16) "Fault" means wrongful act, omission or breach. 25 (17) "Fungible" with respect to goods or securities 26 means goods or securities of which any unit is, by nature or 27 usage of trade, the equivalent of any other like unit. Goods 28 which are not fungible shall be deemed fungible for the 29 purposes of this Act to the extent that under a particular 30 agreement or document unlike units are treated as 31 equivalents. 32 (18) "Genuine" means free of forgery or counterfeiting. 33 (19) "Good faith" means honesty in fact in the conduct 34 or transaction concerned. SB1231 Engrossed -261- LRB9106284WHdv 1 (20) "Holder" with respect to a negotiable instrument 2 means the person in possession if the instrument is payable 3 to bearer or, in the case of an instrument payable to an 4 identified person, if the identified person is in possession. 5 "Holder" with respect to a document of title means the person 6 in possession if the goods are deliverable to bearer or to 7 the order of the person in possession. 8 (21) To "honor" is to pay or accept and pay, or where a 9 credit so engages to purchase or discount a draft complying 10 with the terms of the credit. 11 (22) "Insolvency proceedings" includes any assignment 12 for the benefit of creditors or other proceedings intended to 13 liquidate or rehabilitate the estate of the person involved. 14 (23) A person is "insolvent" who either has ceased to 15 pay his debts in the ordinary course of business or cannot 16 pay his debts as they become due or is insolvent within the 17 meaning of the federal bankruptcy law. 18 (24) "Money" means a medium of exchange authorized or 19 adopted by a domestic or foreign government and includes a 20 monetary unit of account established by an intergovernmental 21 organization or by agreement between 2 or more nations. 22 (25) A person has "notice" of a fact when 23 (a) he has actual knowledge of it; or 24 (b) he has received a notice or notification of it; 25 or 26 (c) from all the facts and circumstances known to 27 him at the time in question he has reason to know that it 28 exists. A person "knows" or has "knowledge" of a fact 29 when he has actual knowledge of it. "Discover" or "learn" 30 or a word or phrase of similar import refers to knowledge 31 rather than to reason to know. The time and circumstances 32 under which a notice or notification may cease to be 33 effective are not determined by this Act. 34 (26) A person "notifies" or "gives" a notice or SB1231 Engrossed -262- LRB9106284WHdv 1 notification to another by taking such steps as may be 2 reasonably required to inform the other in ordinary course 3 whether or not such other actually comes to know of it. A 4 person "receives" a notice or notification when 5 (a) it comes to his attention; or 6 (b) it is duly delivered at the place of business 7 through which the contract was made or at any other place 8 held out by him as the place for receipt of such 9 communications. 10 (27) Notice, knowledge or a notice or notification 11 received by an organization is effective for a particular 12 transaction from the time when it is brought to the attention 13 of the individual conducting that transaction, and in any 14 event from the time when it would have been brought to his 15 attention if the organization had exercised due diligence. An 16 organization exercises due diligence if it maintains 17 reasonable routines for communicating significant information 18 to the person conducting the transaction and there is 19 reasonable compliance with the routines. Due diligence does 20 not require an individual acting for the organization to 21 communicate information unless such communication is part of 22 his regular duties or unless he has reason to know of the 23 transaction and that the transaction would be materially 24 affected by the information. 25 (28) "Organization" includes a corporation, government 26 or governmental subdivision or agency, business trust, 27 estate, trust, partnership or association, two or more 28 persons having a joint or common interest, or any other legal 29 or commercial entity. 30 (29) "Party", as distinct from "third party", means a 31 person who has engaged in a transaction or made an agreement 32 within this Act. 33 (30) "Person" includes an individual or an organization 34 (see Section 1-102). SB1231 Engrossed -263- LRB9106284WHdv 1 (31) "Presumption" or "presumed" means that the trier of 2 fact must find the existence of the fact presumed unless and 3 until evidence is introduced which would support a finding of 4 its non-existence. 5 (32) "Purchase" includes taking by sale, discount, 6 negotiation, mortgage, pledge, lien, security interest, issue 7 or reissue, gift or any other voluntary transaction creating 8 an interest in property. 9 (33) "Purchaser" means a person who takes by purchase. 10 (34) "Remedy" means any remedial right to which an 11 aggrieved party is entitled with or without resort to a 12 tribunal. 13 (35) "Representative" includes an agent, an officer of a 14 corporation or association, and a trustee, executor or 15 administrator of an estate, or any other person empowered to 16 act for another. 17 (36) "Rights" includes remedies. 18 (37) "Security interest" means an interest in personal 19 property or fixtures which secures payment or performance of 20 an obligation.The retention or reservation of title by a21seller of goods notwithstanding shipment or delivery to the22buyer (Section 2-401) is limited in effect to a reservation23of a "security interest".The term also includes any interest 24 of a consignor and a buyer of accounts,orchattel paper, a 25 payment intangible, or a promissory note in a transaction 26 thatwhichis subject to Article 9. The special property 27 interest of a buyer of goods on identification of those goods 28 to a contract for sale under Section 2-401 is not a "security 29 interest", but a buyer may also acquire a "security 30 interest", by complying with Article 9. Except as otherwise 31 provided in Section 2-505, the right of a seller or lessor of 32 goods under Article 2 or 2A to retain or acquire possession 33 of the goods is not a "security interest", but a seller or 34 lessor may also acquire a "security interest" by complying SB1231 Engrossed -264- LRB9106284WHdv 1 with Article 9. The retention or reservation of title by a 2 seller of goods notwithstanding shipment or delivery to the 3 buyer (Section 2-401) is limited in effect to a reservation 4 of a "security interest".Unless a consignment is intended as5security, reservation of title thereunder is not a "security6interest" but a consignment is in any event subject to the7provisions on consignment sales (Section 2-326).8 Whether a transaction creates a lease or security 9 interest is determined by the facts of each case; however, a 10 transaction creates a security interest if the consideration 11 the lessee is to pay the lessor for the right to possession 12 and use of the goods is an obligation for the term of the 13 lease not subject to termination by the lessee; and 14 (a) the original term of the lease is equal to or 15 greater than the remaining economic life of the goods; 16 (b) the lessee is bound to renew the lease for the 17 remaining economic life of the goods or is bound to 18 become the owner of the goods; 19 (c) the lessee has an option to renew the lease for 20 the remaining economic life of the goods for no 21 additional consideration or nominal additional 22 consideration upon compliance with the lease agreement; 23 or 24 (d) the lessee has an option to become the owner of 25 the goods for no additional consideration or nominal 26 additional consideration upon compliance with the lease 27 agreement. 28 A transaction does not create a security interest merely 29 because it provides that: 30 (a) the present value of the consideration the 31 lessee is obligated to pay the lessor for the right to 32 possession and use of the goods is substantially equal to 33 or is greater than the fair market value of the goods at 34 the time the lease is entered into; SB1231 Engrossed -265- LRB9106284WHdv 1 (b) the lessee assumes risk of loss of the goods, 2 or agrees to pay taxes, insurance, filing, recording, or 3 registration fees, or service or maintenance costs with 4 respect to the goods; 5 (c) the lessee has an option to renew the lease or 6 to become the owner of the goods; 7 (d) the lessee has an option to renew the lease for 8 a fixed rent that is equal to or greater than the 9 reasonably predictable fair market rent for the use of 10 the goods for the term of the renewal at the time the 11 option is to be performed; or 12 (e) the lessee has an option to become the owner of 13 the goods for a fixed price that is equal to or greater 14 than the reasonably predictable fair market value of the 15 goods at the time the option is to be performed. 16 For purposes of this subsection (37): 17 (x) Additional consideration is not nominal if (i) 18 when the option to renew the lease is granted to the 19 lessee the rent is stated to be the fair market rent for 20 the use of the goods for the term of the renewal 21 determined at the time the option is to be performed, or 22 (ii) when the option to become the owner of the goods is 23 granted to the lessee the price is stated to be the fair 24 market value of the goods determined at the time the 25 option is to be performed. Additional consideration is 26 nominal if it is less than the lessee's reasonably 27 predictable cost of performing under the lease agreement 28 if the option is not exercised; 29 (y) "Reasonably predictable" and "remaining 30 economic life of the goods" are to be determined with 31 reference to the facts and circumstances at the time the 32 transaction is entered into; and 33 (z) "Present value" means the amount as of a date 34 certain of one or more sums payable in the future, SB1231 Engrossed -266- LRB9106284WHdv 1 discounted to the date certain. The discount is 2 determined by the interest rate specified by the parties 3 if the rate is not manifestly unreasonable at the time 4 the transaction is entered into; otherwise, the discount 5 is determined by a commercially reasonable rate that 6 takes into account the facts and circumstances as of each 7 case at the time the transaction was entered into. 8 (38) "Send" in connection with any writing or notice 9 means to deposit in the mail or deliver for transmission by 10 any other usual means of communication with postage or cost 11 of transmission provided for and properly addressed and in 12 the case of an instrument to an address specified thereon or 13 otherwise agreed, or if there be none to any address 14 reasonable under the circumstances. The receipt of any 15 writing or notice within the time at which it would have 16 arrived if properly sent has the effect of a proper sending. 17 (39) "Signed" includes any symbol executed or adopted by 18 a party with present intention to authenticate a writing. 19 (40) "Surety" includes guarantor. 20 (41) "Telegram" includes a message transmitted by radio, 21 teletype, cable, any mechanical method of transmission, or 22 the like. 23 (42) "Term" means that portion of an agreement which 24 relates to a particular matter. 25 (43) "Unauthorized" signature means one made without 26 actual, implied, or apparent authority and includes a 27 forgery. 28 (44) "Value". Except as otherwise provided with respect 29 to negotiable instruments and bank collections (Sections 30 3-303, 4-210,4-208and 4-2114-209), a person gives "value" 31 for rights if he acquires them: 32 (a) in return for a binding commitment to extend 33 credit or for the extension of immediately available 34 credit whether or not drawn upon and whether or not a SB1231 Engrossed -267- LRB9106284WHdv 1 charge-back is provided for in the event of difficulties 2 in collection; or 3 (b) as security for or in total or partial 4 satisfaction of a pre-existing claim; or 5 (c) by accepting delivery pursuant to a 6 pre-existing contract for purchase; or 7 (d) generally, in return for any consideration 8 sufficient to support a simple contract. 9 (45) "Warehouse receipt" means a receipt issued by a 10 person engaged in the business of storing goods for hire. 11 (46) "Written" or "writing" includes printing, 12 typewriting or any other intentional reduction to tangible 13 form. 14 (Source: P.A. 87-493; 87-582; 87-895; 87-1135.) 15 (810 ILCS 5/2-103) (from Ch. 26, par. 2-103) 16 Sec. 2-103. Definitions and index of definitions. 17 (1) In this Article unless the context otherwise 18 requires 19 (a) "Buyer" means a person who buys or contracts to 20 buy goods. 21 (b) "Good faith" in the case of a merchant means 22 honesty in fact and the observance of reasonable commercial 23 standards of fair dealing in the trade. 24 (c) "Receipt" of goods means taking physical 25 possession of them. 26 (d) "Seller" means a person who sells or contracts 27 to sell goods. 28 (2) Other definitions applying to this Article or to 29 specified Parts thereof, and the sections in which they 30 appear are: 31 "Acceptance". Section 2--606. 32 "Banker's credit". Section 2--325. 33 "Between merchants". Section 2--104. SB1231 Engrossed -268- LRB9106284WHdv 1 "Cancellation". Section 2--106(4). 2 "Commercial unit". Section 2--105. 3 "Confirmed credit". Section 2--325. 4 "Conforming to contract". Section 2--106. 5 "Contract for sale". Section 2--106. 6 "Cover". Section 2--712. 7 "Entrusting". Section 2--403. 8 "Financing agency". Section 2--104. 9 "Future goods". Section 2--105. 10 "Goods". Section 2--105. 11 "Identification". Section 2--501. 12 "Installment contract". Section 2--612. 13 "Letter of Credit". Section 2--325. 14 "Lot". Section 2--105. 15 "Merchant". Section 2--104. 16 "Overseas". Section 2--323. 17 "Person in position of seller". Section 2--707. 18 "Present sale". Section 2--106. 19 "Sale". Section 2--106. 20 "Sale on approval". Section 2--326. 21 "Sale or return". Section 2--326. 22 "Termination". Section 2--106. 23 (3) The following definitions in other Articles apply to 24 this Article: 25 "Check". Section 3--104. 26 "Consignee". Section 7--102. 27 "Consignor". Section 7--102. 28 "Consumer goods". Section 9-1029--109. 29 "Dishonor". Section 3-5023--507. 30 "Draft". Section 3--104. 31 (4) In addition Article 1 contains general definitions 32 and principles of construction and interpretation applicable 33 throughout this Article. 34 (Source: Laws 1961, p. 2101.) SB1231 Engrossed -269- LRB9106284WHdv 1 (810 ILCS 5/2-210) (from Ch. 26, par. 2-210) 2 Sec. 2-210. Delegation of performance; assignment of 3 rights. 4 (1) A party may perform his duty through a delegate 5 unless otherwise agreed or unless the other party has a 6 substantial interest in having his original promisor perform 7 or control the acts required by the contract. No delegation 8 of performance relieves the party delegating of any duty to 9 perform or any liability for breach. 10 (2) Except as otherwise provided in Section 9-406, 11 unless otherwise agreed all rights of either seller or buyer 12 can be assigned except where the assignment would materially 13 change the duty of the other party, or increase materially 14 the burden or risk imposed on him by his contract, or impair 15 materially his chance of obtaining return performance. A 16 right to damages for breach of the whole contract or a right 17 arising out of the assignor's due performance of his entire 18 obligation can be assigned despite agreement otherwise. 19 (3) The creation, attachment, perfection, or enforcement 20 of a security interest in the seller's interest under a 21 contract is not a transfer that materially changes the duty 22 of or increases materially the burden or risk imposed on the 23 buyer or impairs materially the buyer's chance of obtaining 24 return performance with the purview of subsection (2) unless, 25 and then only to the extent that, enforcement actually 26 results in a delegation of material performance of the 27 seller. Even in that event, the creation, attachment, 28 perfection, and enforcement of the security interest remain 29 effective, but (i) the seller is liable to the buyer for 30 damages caused by the delegation to the extent that the 31 damages could not reasonably be prevented by the buyer, and 32 (ii) a court having jurisdiction may grant other appropriate 33 relief, including cancellation of the contract for sale or an 34 injunction against enforcement of the security interest or SB1231 Engrossed -270- LRB9106284WHdv 1 consummation of the enforcement. 2 (4)(3)Unless the circumstances indicate the contrary a 3 prohibition of assignment of "the contract" is to be 4 construed as barring only the delegation to the assignee of 5 the assignor's performance. 6 (5)(4)An assignment of "the contract" or of "all my 7 rights under the contract" or an assignment in similar 8 general terms is an assignment of rights and unless the 9 language or the circumstances (as in an assignment for 10 security) indicate the contrary, it is a delegation of 11 performance of the duties of the assignor and its acceptance 12 by the assignee constitutes a promise by him to perform those 13 duties. This promise is enforceable by either the assignor or 14 the other party to the original contract. 15 (6)(5)The other party may treat any assignment which 16 delegates performance as creating reasonable grounds for 17 insecurity and may without prejudice to his rights against 18 the assignor demand assurances from the assignee (Section 19 2--609). 20 (Source: Laws 1961, p. 2101.) 21 (810 ILCS 5/2-326) (from Ch. 26, par. 2-326) 22 Sec. 2-326. Sale on approval and sale or return; 23consignment sales andrights of creditors. 24 (1) Unless otherwise agreed, if delivered goods may be 25 returned by the buyer even though they conform to the 26 contract, the transaction is 27 (a) a "sale on approval" if the goods are delivered 28 primarily for use, and 29 (b) a "sale or return" if the goods are delivered 30 primarily for resale. 31 (2)Except as provided in subsection (3),Goods held on 32 approval are not subject to the claims of the buyer's 33 creditors until acceptance; goods held on sale or return are SB1231 Engrossed -271- LRB9106284WHdv 1 subject to such claims while in the buyer's possession. 2 (3)Where goods are delivered to a person for sale and3such person maintains a place of business at which he deals4in goods of the kind involved, under a name other than the5name of the person making delivery, then with respect to6claims of creditors of the person conducting the business the7goods are deemed to be on sale or return. The provisions of8this subsection are applicable even though an agreement9purports to reserve title to the person making delivery until10payment or resale or uses such words as "on consignment" or11"on memorandum". However, this subsection is not applicable12if the person making delivery13(a) complies with an applicable law providing for a14consignor's interest or the like to be evidenced by a sign,15or16(b) establishes that the person conducting the17business is generally known by his creditors to be18substantially engaged in selling the goods of others, or19(c) complies with the filing provisions of the20Article on Secured Transactions (Article 9).21(4)Any "or return" term of a contract for sale is to be 22 treated as a separate contract for sale within the statute of 23 frauds section of this Article (Section 2--201) and as 24 contradicting the sale aspect of the contract within the 25 provisions of this Article on parol or extrinsic evidence 26 (Section 2--202). 27 (Source: Laws 1961, p. 2101.) 28 (810 ILCS 5/2-502) (from Ch. 26, par. 2-502) 29 Sec. 2-502. Buyer's right to goods on seller's 30 insolvency. 31 (1) Subject to subsectionssubsection(2) and (3) and 32 even though the goods have not been shipped a buyer who has 33 paid a part or all of the price of goods in which he has a SB1231 Engrossed -272- LRB9106284WHdv 1 special property under the provisions of the immediately 2 preceding section may on making and keeping good a tender of 3 any unpaid portion of their price recover them from the 4 seller if: 5 (a) in the case of goods bought for personal, 6 family, or household purposes, the seller repudiates or 7 fails to deliver as required by the contract; or 8 (b) in all cases, the seller becomes insolvent 9 within 10 days after receipt of the first installment on 10 their price. 11 (2) The buyer's right to recover the goods under 12 subsection (1)(a) vests upon acquisition of a special 13 property, even if the seller had not then repudiated or 14 failed to deliver. 15 (3) If the identification creating his special property 16 has been made by the buyer he acquires the right to recover 17 the goods only if they conform to the contract for sale. 18 (Source: Laws 1961, p. 2101.) 19 (810 ILCS 5/2-716) (from Ch. 26, par. 2-716) 20 Sec. 2-716. Buyer's right to specific performance or 21 replevin. 22 (1) Specific performance may be ordered where the goods 23 are unique or in other proper circumstances. 24 (2) The judgment for specific performance may include 25 such terms and conditions as to payment of the price, 26 damages, or other relief as the court may deem just. 27 (3) The buyer has a right of replevin for goods 28 identified to the contract if after reasonable effort he is 29 unable to effect cover for such goods or the circumstances 30 reasonably indicate that such effort will be unavailing or if 31 the goods have been shipped under reservation and 32 satisfaction of the security interest in them has been made 33 or tendered. In the case of goods bought for personal, SB1231 Engrossed -273- LRB9106284WHdv 1 family, or household purposes, the buyer's right of replevin 2 vests upon acquisition of a special property, even if the 3 seller had not then repudiated or failed to deliver. 4 (Source: P.A. 84-545.) 5 (810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103) 6 Sec. 2A-103. Definitions and index of definitions. 7 (1) In this Article unless the context otherwise 8 requires: 9 (a) "Buyer in ordinary course of business" means a 10 person who, in good faith and without knowledge that the 11 sale to him or her is in violation of the ownership 12 rights or security interest or leasehold interest of a 13 third party in the goods, buys in ordinary course from a 14 person in the business of selling goods of that kind but 15 does not include a pawnbroker. "Buying" may be for cash 16 or by exchange of other property or on secured or 17 unsecured credit and includes receiving goods or 18 documents of title under a pre-existing contract for sale 19 but does not include a transfer in bulk or as security 20 for or in total or partial satisfaction of a money debt. 21 (b) "Cancellation" occurs when either party puts an 22 end to the lease contract for default by the other party. 23 (c) "Commercial unit" means such a unit of goods as 24 by commercial usage is a single whole for purposes of 25 lease and division of which materially impairs its 26 character or value on the market or in use. A commercial 27 unit may be a single article, as a machine, or a set of 28 articles, as a suite of furniture or a line of machinery, 29 or a quantity, as a gross or carload, or any other unit 30 treated in use or in the relevant market as a single 31 whole. 32 (d) "Conforming" goods or performance under a lease 33 contract means goods or performance that are in SB1231 Engrossed -274- LRB9106284WHdv 1 accordance with the obligations under the lease contract. 2 (e) "Consumer lease" means a lease that a lessor 3 regularly engaged in the business of leasing or selling 4 makes to a lessee who is an individual and who takes 5 under the lease primarily for a personal, family, or 6 household purpose, if the total payments to be made under 7 the lease contract, excluding payments for options to 8 renew or buy, do not exceed $40,000. 9 (f) "Fault" means wrongful act, omission, breach, 10 or default. 11 (g) "Finance lease" means a lease with respect to 12 which: 13 (i) the lessor does not select, manufacture, 14 or supply the goods; 15 (ii) the lessor acquires the goods or the 16 right to possession and use of the goods in 17 connection with the lease; and 18 (iii) one of the following occurs: 19 (A) the lessee receives a copy of the 20 contract by which the lessor acquired the goods 21 or the right to possession and use of the goods 22 before signing the lease contract; 23 (B) the lessee's approval of the contract 24 by which the lessor acquired the goods or the 25 right to possession and use of the goods is a 26 condition to effectiveness of the lease 27 contract; 28 (C) the lessee, before signing the lease 29 contract, receives an accurate and complete 30 statement designating the promises and 31 warranties, and any disclaimers of warranties, 32 limitations or modifications of remedies, or 33 liquidated damages, including those of a third 34 party, such as the manufacturer of the goods, SB1231 Engrossed -275- LRB9106284WHdv 1 provided to the lessor by the person supplying 2 the goods in connection with or as part of the 3 contract by which the lessor acquired the goods 4 or the right to possession and use of the 5 goods; or 6 (D) if the lease is not a consumer lease, 7 the lessor, before the lessee signs the lease 8 contract, informs the lessee in writing (a) of 9 the identity of the person supplying the goods 10 to the lessor, unless the lessee has selected 11 that person and directed the lessor to acquire 12 the goods or the right to possession and use of 13 the goods from that person, (b) that the lessee 14 is entitled under this Article to the promises 15 and warranties, including those of any third 16 party, provided to the lessor by the person 17 supplying the goods in connection with or as 18 part of the contract by which the lessor 19 acquired the goods or the right to possession 20 and use of the goods, and (c) that the lessee 21 may communicate with the person supplying the 22 goods to the lessor and receive an accurate and 23 complete statement of those promises and 24 warranties, including any disclaimers and 25 limitations of them or of remedies. 26 (h) "Goods" means all things that are movable at 27 the time of identification to the lease contract, or are 28 fixtures (Section 2A-309), but the term does not include 29 money, documents, instruments, accounts, chattel paper, 30 general intangibles, or minerals or the like, including 31 oil and gas, before extraction. The term also includes 32 the unborn young of animals. 33 (i) "Installment lease contract" means a lease 34 contract that authorizes or requires the delivery of SB1231 Engrossed -276- LRB9106284WHdv 1 goods in separate lots to be separately accepted, even 2 though the lease contract contains a clause "each 3 delivery is a separate lease" or its equivalent. 4 (j) "Lease" means a transfer of the right to 5 possession and use of goods for a term in return for 6 consideration, but a sale, including a sale on approval 7 or a sale or return, or retention or creation of a 8 security interest is not a lease. Unless the context 9 clearly indicates otherwise, the term includes a 10 sublease. 11 (k) "Lease agreement" means the bargain, with 12 respect to the lease, of the lessor and the lessee in 13 fact as found in their language or by implication from 14 other circumstances including course of dealing or usage 15 of trade or course of performance as provided in this 16 Article. Unless the context clearly indicates otherwise, 17 the term includes a sublease agreement. 18 (l) "Lease contract" means the total legal 19 obligation that results from the lease agreement as 20 affected by this Article and any other applicable rules 21 of law. Unless the context clearly indicates otherwise, 22 the term includes a sublease contract. 23 (m) "Leasehold interest" means the interest of the 24 lessor or the lessee under a lease contact. 25 (n) "Lessee" means a person who acquires the right 26 to possession and use of goods under a lease. Unless the 27 context clearly indicates otherwise, the term includes a 28 sublessee. 29 (o) "Lessee in ordinary course of business" means a 30 person who in good faith and without knowledge that the 31 lease to him or her is in violation of the ownership 32 rights or security interest or leasehold interest of a 33 third party in the goods leases in ordinary course from a 34 person in the business of selling or leasing goods of SB1231 Engrossed -277- LRB9106284WHdv 1 that kind but does not include a pawnbroker. "Leasing" 2 may be for cash or by exchange of other property or on 3 secured or unsecured credit and includes receiving goods 4 or documents of title under a pre-existing lease contract 5 but does not include a transfer in bulk or as security 6 for or in total or partial satisfaction of a money debt. 7 (p) "Lessor" means a person who transfers the right 8 to possession and use of goods under a lease. Unless the 9 context clearly indicates otherwise, the term includes a 10 sublessor. 11 (q) "Lessor's residual interest" means the lessor's 12 interest in the goods after expiration, termination, or 13 cancellation of the lease contract. 14 (r) "Lien" means a charge against or interest in 15 goods to secure payment of a debt or performance of an 16 obligation, but the term does not include a security 17 interest. 18 (s) "Lot" means a parcel or a single article that 19 is the subject matter of a separate lease or delivery, 20 whether or not it is sufficient to perform the lease 21 contract. 22 (t) "Merchant lessee" means a lessee that is a 23 merchant with respect to goods of the kind subject to the 24 lease. 25 (u) "Present value" means the amount as of a date 26 certain of one or more sums payable in the future, 27 discounted to the date certain. The discount is 28 determined by the interest rate specified by the parties 29 if the rate was not manifestly unreasonable at the time 30 the transaction was entered into; otherwise, the discount 31 is determined by a commercially reasonable rate that 32 takes into account the facts and circumstances of each 33 case at the time the transaction was entered into. 34 (v) "Purchase" includes taking by sale, lease, SB1231 Engrossed -278- LRB9106284WHdv 1 mortgage, security interest, pledge, gift, or any other 2 voluntary transaction creating an interest in goods. 3 (w) "Sublease" means a lease of goods the right to 4 possession and use of which was acquired by the lessor as 5 a lessee under an existing lease. 6 (x) "Supplier" means a person from whom a lessor 7 buys or leases goods to be leased under a finance lease. 8 (y) "Supply contract" means a contract under which 9 a lessor buys or leases goods to be leased. 10 (z) "Termination" occurs when either party pursuant 11 to a power created by agreement or law puts an end to the 12 lease contract otherwise than for default. 13 (2) Other definitions applying to this Article and the 14 Sections in which they appear are: 15 "Accessions". Section 2A-310(1). 16 "Construction mortgage". Section 2A-309(1)(d). 17 "Encumbrance". Section 2A-309(1)(e). 18 "Fixtures". Section 2A-309(1)(a). 19 "Fixture filing". Section 2A-309(1)(b). 20 "Purchase money lease". Section 2A-309(1)(c). 21 (3) The following definitions in other Articles apply to 22 this Article: 23 "Account". Section 9-102(a)(2)9-106. 24 "Between merchants". Section 2-104(3). 25 "Buyer". Section 2-103(1)(a). 26 "Chattel paper". Section 9-102(a)(11)9-105 (1)(b). 27 "Consumer goods". Section 9-102(a)(23)9-109(1). 28 "Document". Section 9-102(a)(30)9-105 (1)(f). 29 "Entrusting". Section 2-403(3). 30 "General intangibleintangibles". Section 9-102(a)(42) 319-106. 32 "Good faith". Section 2-103(1)(b). 33 "Instrument". Section 9-102(a)(47)9-105 (1)(i). 34 "Merchant". Section 2-104(1). SB1231 Engrossed -279- LRB9106284WHdv 1 "Mortgage". Section 9-102(a)(55)9-105 (1)(j). 2 "Pursuant to commitment". Section 9-102(a)(68)9-1053(1)(k). 4 "Receipt". Section 2-103(1)(c). 5 "Sale". Section 2-106(1). 6 "Sale on approval". Section 2-326. 7 "Sale or return". Section 2-326. 8 "Seller". Section 2-103(1)(d). 9 (4) In addition, Article 1 contains general definitions 10 and principles of construction and interpretation applicable 11 throughout this Article. 12 (Source: P.A. 87-493.) 13 (810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303) 14 Sec. 2A-303. Alienability of party's interest under 15 lease contract or of lessor's residual interest in goods; 16 delegation of performance; transfer of rights. 17 (1) As used in this Section, "creation of a security 18 interest" includes the sale of a lease contract that is 19 subject to Article 9, Secured Transactions, by reason of 20 Section 9-109(a)(3)9-102(1)(b). 21 (2) Except as provided in subsectionsubsections(3) and 22 Section 9-407(4), a provision in a lease agreement which (i) 23 prohibits the voluntary or involuntary transfer, including a 24 transfer by sale, sublease, creation or enforcement of a 25 security interest, or attachment, levy, or other judicial 26 process, of an interest of a party under the lease contract 27 or of the lessor's residual interest in the goods, or (ii) 28 makes such a transfer an event of default, gives rise to the 29 rights and remedies provided in subsection (4)(5), but a 30 transfer that is prohibited or is an event of default under 31 the lease agreement is otherwise effective. 32 (3)A provision in a lease agreement which (i) prohibits33the creation or enforcement of a security interest in anSB1231 Engrossed -280- LRB9106284WHdv 1interest of a party under the lease contract or in the2lessor's residual interest in the goods, or (ii) makes such a3transfer an event of default, is not enforceable unless, and4then only to the extent that, there is an actual transfer by5the lessee of the lessee's right of possession or use of the6goods in violation of the provision or an actual delegation7of a material performance of either party to the lease8contract in violation of the provision. Neither the granting9nor the enforcement of a security interest in (i) the10lessor's interest under the lease contract or (ii) the11lessor's residual interest in the goods is a transfer that12materially impairs the prospect of obtaining return13performance by, materially changes the duty of, or materially14increases the burden or risk imposed on, the lessee within15the purview of subsection (5) unless, and then only to the16extent that, there is an actual delegation of a material17performance of the lessor.18(4)A provision in a lease agreement which (i) prohibits 19 a transfer of a right to damages for default with respect to 20 the whole lease contract or of a right to payment arising out 21 of the transferor's due performance of the transferor's 22 entire obligation, or (ii) makes such a transfer an event of 23 default, is not enforceable, and such a transfer is not a 24 transfer that materially impairs the prospect of obtaining 25 return performance by, materially changes the duty of, or 26 materially increases the burden or risk imposed on, the other 27 party to the lease contract within the purview of subsection 28 (4)(5). 29 (4)(5)Subject to subsectionsubsections(3) and 30 Section 9-407(4): 31 (a) if a transfer is made which is made an event of 32 default under a lease agreement, the party to the lease 33 contract not making the transfer, unless that party 34 waives the default or otherwise agrees, has the rights SB1231 Engrossed -281- LRB9106284WHdv 1 and remedies described in Section 2A-501(2); 2 (b) if paragraph (a) is not applicable and if a 3 transfer is made that (i) is prohibited under a lease 4 agreement or (ii) materially impairs the prospect of 5 obtaining return performance by, materially changes the 6 duty of, or materially increases the burden of risk 7 imposed on, the other party to the lease contract, unless 8 the party not making the transfer agrees at any time to 9 the transfer in the lease contract or otherwise, then, 10 except as limited by contract, (i) the transferor is 11 liable to the party not making the transfer for damages 12 caused by the transfer to the extent that the damages 13 could not reasonably be prevented by the party not making 14 the transfer and (ii) a court having jurisdiction may 15 grant other appropriate relief, including cancellation of 16 the lease contract or an injunction against the transfer. 17 (5)(6)A transfer of "the lease" or of "all my rights 18 under the lease", or a transfer in similar general terms, is 19 a transfer of rights and, unless the language or the 20 circumstances, as in a transfer for security, indicate the 21 contrary, the transfer is a delegation of duties by the 22 transferor to the transferee. Acceptance by the transferee 23 constitutes a promise by the transferee to perform those 24 duties. The promise is enforceable by either the transferor 25 or the other party to the lease contract. 26 (6)(7)Unless otherwise agreed by the lessor and the 27 lessee, a delegation of performance does not relieve the 28 transferor as against the other party of any duty to perform 29 or of any liability for default. 30 (7)(8)In a consumer lease, to prohibit the transfer of 31 an interest of a party under the lease contract or to make a 32 transfer an event of default, the language must be specific, 33 by a writing, and conspicuous. 34 (Source: P.A. 87-493.) SB1231 Engrossed -282- LRB9106284WHdv 1 (810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307) 2 Sec. 2A-307. Priority of liens arising by attachment or 3 levy on, security interests in, and other claims to goods. 4 (1) Except as otherwise provided in Section 2A-306, a 5 creditor of a lessee takes subject to the lease contract. 6 (2) Except as otherwise provided in subsection 7subsections(3)and (4)and in Sections 2A-306 and 2A-308, a 8 creditor of a lessor takes subject to the lease contract 9 unless: (a)the creditor holds a lien that attached to the 10 goods before the lease contract became enforceable,11(b) the creditor holds a security interest in the12goods and the lessee did not give value and receive13delivery of the goods without knowledge of the security14interest; or15(c) the creditor holds a security interest in the16goods which was perfected (Section 9-303) before the17lease contract became enforceable. 18 (3) Except as otherwise provided in Sections 9-317, 19 9-321, and 9-323, a lessee takes a leasehold interest subject 20 to a security interest held by a creditor of the lessor.A21lessee in the ordinary course of business takes the leasehold22interest free of a security interest in the goods created by23the lessor even though the security interest is perfected24(Section 9-303) and the lessee knows of its existence.25(4) A lessee other than a lessee in the ordinary course26of business takes the leasehold interest free of a security27interest to the extent that it secures future advances made28after the secured party acquires knowledge of the lease or29more than 45 days after the lease contract becomes30enforceable, whichever first occurs, unless the future31advances are made pursuant to a commitment entered into32without knowledge of the lease and before the expiration of33the 45-day period.34 (Source: P.A. 87-493.) SB1231 Engrossed -283- LRB9106284WHdv 1 (810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309) 2 Sec. 2A-309. Lessor's and lessee's rights when goods 3 become fixtures. 4 (1) In this Section: 5 (a) goods are "fixtures" when they become so 6 related to particular real estate that an interest in 7 them arises under real estate law; 8 (b) a "fixture filing" is the filing, in the office 9 where a mortgage on the real estate would be filed or 10 recorded, of a financing statement covering goods that 11 are or are to become fixtures and conforming to the 12 requirements of Section 9-502(a) and (b)9-402(5); 13 (c) a lease is a "purchase money lease" unless the 14 lessee has possession or use of the goods or the right to 15 possession or use of the goods before the lease agreement 16 is enforceable; 17 (d) a mortgage is a "construction mortgage" to the 18 extent it secures an obligation incurred for the 19 construction of an improvement on land including the 20 acquisition cost of the land, if the recorded writing so 21 indicates; and 22 (e) "encumbrance" includes real estate mortgages 23 and other liens on real estate and all other rights in 24 real estate that are not ownership interests. 25 (2) Under this Article a lease may be of goods that are 26 fixtures or may continue in goods that become fixtures, but 27 no lease exists under this Article of ordinary building 28 materials incorporated into an improvement on land. 29 (3) This Article does not prevent creation of a lease of 30 fixtures pursuant to real estate law. 31 (4) The perfected interest of a lessor of fixtures has 32 priority over a conflicting interest of an encumbrancer or 33 owner of the real estate if: 34 (a) the lease is a purchase money lease, the SB1231 Engrossed -284- LRB9106284WHdv 1 conflicting interest of the encumbrancer or owner arises 2 before the goods become fixtures, the interest of the 3 lessor is perfected by a fixture filing before the goods 4 become fixtures or within 10 days thereafter, and the 5 lessee has an interest of record in the real estate or is 6 in possession of the real estate; or 7 (b) the interest of the lessor is perfected by a 8 fixture filing before the interest of the encumbrancer or 9 owner is of record, the lessor's interest has priority 10 over any conflicting interest of a predecessor in title 11 of the encumbrancer or owner, and the lessee has an 12 interest of record in the real estate or is in possession 13 of the real estate. 14 (5) The interest of a lessor of fixtures, whether or not 15 perfected, has priority over the conflicting interest of an 16 encumbrancer or owner of the real estate if: 17 (a) the fixtures are readily removable factory or 18 office machines, readily removable equipment that is not 19 primarily used or leased for use in the operation of the 20 real estate, or readily removable replacements of 21 domestic appliances that are goods subject to a consumer 22 lease, and before the goods become fixtures the lease 23 contract is enforceable; or 24 (b) the conflicting interest is a lien on the real 25 estate obtained by legal or equitable proceedings after 26 the lease contract is enforceable; or 27 (c) the encumbrancer or owner has consented in 28 writing to the lease or has disclaimed an interest in the 29 goods as fixtures; or 30 (d) the lessee has a right to remove the goods as 31 against the encumbrancer or owner. If the lessee's right 32 to remove terminates, the priority of the interest of the 33 lessor continues for a reasonable time. 34 (6) Notwithstanding subsection (4)(a) but otherwise SB1231 Engrossed -285- LRB9106284WHdv 1 subject to subsections (4) and (5), the interest of a lessor 2 of fixtures, including the lessor's residual interest, is 3 subordinate to the conflicting interest of an encumbrancer of 4 the real estate under a construction mortgage recorded before 5 the goods become fixtures if the goods become fixtures before 6 the completion of the construction. To the extent given to 7 refinance a construction mortgage, the conflicting interest 8 of an encumbrancer of the real estate under a mortgage has 9 this priority to the same extent as the encumbrancer of the 10 real estate under the construction mortgage. 11 (7) In cases not within the preceding subsections, 12 priority between the interest of a lessor of fixtures, 13 including the lessor's residual interest, and the conflicting 14 interest of an encumbrancer or owner of the real estate who 15 is not the lessee is determined by the priority rules 16 governing conflicting interests in real estate. 17 (8) If the interest of a lessor of fixtures, including 18 the lessor's residual interest, has priority over all 19 conflicting interests of all owners and encumbrancers of the 20 real estate, the lessor or the lessee may (i) on default, 21 expiration, termination, or cancellation of the lease 22 agreement but subject to the lease agreement and this 23 Article, or (ii) if necessary to enforce other rights and 24 remedies of the lessor or lessee under this Article, remove 25 the goods from the real estate, free and clear of all 26 conflicting interests of all owners and encumbrancers of the 27 real estate, but the lessor or lessee must reimburse any 28 encumbrancer or owner of the real estate who is not the 29 lessee and who has not otherwise agreed for the cost of 30 repair of any physical injury, but not for any diminution in 31 value of the real estate caused by the absence of the goods 32 removed or by any necessity of replacing them. A person 33 entitled to reimbursement may refuse permission to remove 34 until the party seeking removal gives adequate security for SB1231 Engrossed -286- LRB9106284WHdv 1 the performance of this obligation. 2 (9) Even though the lease agreement does not create a 3 security interest, the interest of a lessor of fixtures, 4 including the lessor's residual interest, is perfected by 5 filing a financing statement as a fixture filing for leased 6 goods that are or are to become fixtures in accordance with 7 the relevant provisions of the Article on Secured 8 Transactions (Article 9). 9 (Source: P.A. 87-493.) 10 (810 ILCS 5/4-210) (from Ch. 26, par. 4-210) 11 Sec. 4-210. Security interest of collecting bank in 12 items, accompanying documents and proceeds. 13 (a) A collecting bank has a security interest in an item 14 and any accompanying documents or the proceeds of either: 15 (1) in case of an item deposited in an account, to 16 the extent to which credit given for the item has been 17 withdrawn or applied; 18 (2) in case of an item for which it has given 19 credit available for withdrawal as of right, to the 20 extent of the credit given, whether or not the credit is 21 drawn upon or there is a right of charge-back; or 22 (3) if it makes an advance on or against the item. 23 (b) If credit given for several items received at one 24 time or pursuant to a single agreement is withdrawn or 25 applied in part, the security interest remains upon all the 26 items, any accompanying documents or the proceeds of either. 27 For the purpose of this Section, credits first given are 28 first withdrawn. 29 (c) Receipt by a collecting bank of a final settlement 30 for an item is a realization on its security interest in the 31 item, accompanying documents, and proceeds. So long as the 32 bank does not receive final settlement for the item or give 33 up possession of the item or accompanying documents for SB1231 Engrossed -287- LRB9106284WHdv 1 purposes other than collection, the security interest 2 continues to that extent and is subject to Article 9, but: 3 (1) no security agreement is necessary to make the 4 security interest enforceable Section 9-203(b)(3)(A) 59-203 (1)(a); 6 (2) no filing is required to perfect the security 7 interest; and 8 (3) the security interest has priority over 9 conflicting perfected security interests in the item, 10 accompanying documents, or proceeds. 11 (Source: P.A. 87-582; 87-1135.) 12 (810 ILCS 5/5-118 new) 13 Sec. 5-118. Security interest of issuer or nominated 14 person. 15 (a) An issuer or nominated person has a security 16 interest in a document presented under a letter of credit to 17 the extent that the issuer or nominated person honors or 18 gives value for the presentation. 19 (b) So long as and to the extent that an issuer or 20 nominated person has not been reimbursed or has not otherwise 21 recovered the value given with respect to a security interest 22 in a document under subsection (a), the security interest 23 continues and is subject to Article 9, but: 24 (1) a security agreement is not necessary to make 25 the security interest enforceable under Section 26 9-203(b)(3); 27 (2) if the document is presented in a medium other 28 than a written or other tangible medium, the security 29 interest is perfected; and 30 (3) if the document is presented in a written or 31 other tangible medium and is not a certificated security, 32 chattel paper, a document of title, an instrument, or a 33 letter of credit, the security interest is perfected and SB1231 Engrossed -288- LRB9106284WHdv 1 has priority over a conflicting security interest in the 2 document so long as the debtor does not have possession 3 of the document. 4 (810 ILCS 5/7-503) (from Ch. 26, par. 7-503) 5 Sec. 7-503. Document of title to goods defeated in 6 certain cases. 7 (1) A document of title confers no right in goods 8 against a person who before issuance of the document had a 9 legal interest or a perfected security interest in them and 10 who neither 11 (a) delivered or entrusted them or any document of 12 title covering them to the bailor or his nominee with actual 13 or apparent authority to ship, store, or sell with power to 14 obtain delivery under this Article (Section 7--403) or with 15 power of disposition under this Act (Sections 2--403 and 16 9-3209--307) or other statute or rule of law; nor 17 (b) acquiesced in the procurement by the bailor or 18 his nominee of any document of title. 19 (2) Title to goods based upon an unaccepted delivery 20 order is subject to the rights of anyone to whom a negotiable 21 warehouse receipt or bill of lading covering the goods has 22 been duly negotiated. Such a title may be defeated under the 23 next section to the same extent as the right of the issuer or 24 a transferee from the issuer. 25 (3) Title to goods based upon a bill of lading issued to 26 a freight forwarder is subject to the rights of anyone to 27 whom a bill issued by the freight forwarder is duly 28 negotiated; but delivery by the carrier in accordance with 29 Part 4 of this Article pursuant to its own bill of lading 30 discharges the carrier's obligation to deliver. 31 (Source: Laws 1961, p. 2101.) 32 (810 ILCS 5/8-103) (from Ch. 26, par. 8-103) SB1231 Engrossed -289- LRB9106284WHdv 1 Sec. 8-103. Rules for determining whether certain 2 obligations and interests are securities or financial assets. 3 (a) A share or similar equity interest issued by a 4 corporation, business trust, joint stock company, or similar 5 entity is a security. 6 (b) An "investment company security" is a security. 7 "Investment company security" means a share or similar equity 8 interest issued by an entity that is registered as an 9 investment company under the federal investment company laws, 10 an interest in a unit investment trust that is so registered, 11 or a face-amount certificate issued by a face-amount 12 certificate company that is so registered. Investment 13 company security does not include an insurance policy or 14 endowment policy or annuity contract issued by an insurance 15 company. 16 (c) An interest in a partnership or limited liability 17 company is not a security unless it is dealt in or traded on 18 securities exchanges or in securities markets, its terms 19 expressly provide that it is a security governed by this 20 Article, or it is an investment company security. However, 21 an interest in a partnership or limited liability company is 22 a financial asset if it is held in a securities account. 23 (d) A writing that is a security certificate is governed 24 by this Article and not by Article 3, even though it also 25 meets the requirements of that Article. However, a 26 negotiable instrument governed by Article 3 is a financial 27 asset if it is held in a securities account. 28 (e) An option or similar obligation issued by a clearing 29 corporation to its participants is not a security, but is a 30 financial asset. 31 (f) A commodity contract, as defined in Section 32 9-102(a)(15)9-115, is not a security or a financial asset. 33 (Source: P.A. 89-364, eff. 1-1-96.) SB1231 Engrossed -290- LRB9106284WHdv 1 (810 ILCS 5/8-106) (from Ch. 26, par. 8-106) 2 Sec. 8-106. Control. 3 (a) A purchaser has "control" of a certificated security 4 in bearer form if the certificated security is delivered to 5 the purchaser. 6 (b) A purchaser has "control" of a certificated security 7 in registered form if the certificated security is delivered 8 to the purchaser, and: 9 (1) the certificate is indorsed to the purchaser or 10 in blank by an effective indorsement; or 11 (2) the certificate is registered in the name of 12 the purchaser, upon original issue or registration of 13 transfer by the issuer. 14 (c) A purchaser has "control" of an uncertificated 15 security if: 16 (1) the uncertificated security is delivered to the 17 purchaser;or18 (2) the issuer has agreed that it will comply with 19 instructions originated by the purchaser without further 20 consent by the registered owner; or 21 (3) another person has control of the security 22 entitlement on behalf of the purchaser or, having 23 previously acquired control of the security entitlement, 24 acknowledges that it has control on behalf of the 25 purchaser. 26 (d) A purchaser has "control" of a security entitlement 27 if: 28 (1) the purchaser becomes the entitlement holder; 29 or 30 (2) the securities intermediary has agreed that it 31 will comply with entitlement orders originated by the 32 purchaser without further consent by the entitlement 33 holder. 34 (e) If an interest in a security entitlement is granted SB1231 Engrossed -291- LRB9106284WHdv 1 by the entitlement holder to the entitlement holder's own 2 securities intermediary, the securities intermediary has 3 control. 4 (f) A purchaser who has satisfied the requirements of 5 subsection (c)(2)or (d)(2)has control even if the 6 registered owner in the case of subsection (c)(2)or the 7 entitlement holder in the case of subsection (d)(2)retains 8 the right to make substitutions for the uncertificated 9 security or security entitlement, to originate instructions 10 or entitlement orders to the issuer or securities 11 intermediary, or otherwise to deal with the uncertificated 12 security or security entitlement. 13 (g) An issuer or a securities intermediary may not enter 14 into an agreement of the kind described in subsection (c)(2) 15 or (d)(2) without the consent of the registered owner or 16 entitlement holder, but an issuer or a securities 17 intermediary is not required to enter into such an agreement 18 even though the registered owner or entitlement holder so 19 directs. An issuer or securities intermediary that has 20 entered into such an agreement is not required to confirm the 21 existence of the agreement to another party unless requested 22 to do so by the registered owner or entitlement holder. 23 (Source: P.A. 89-364, eff. 1-1-96.) 24 (810 ILCS 5/8-110) 25 Sec. 8-110. Applicability; choice of law. 26 (a) The local law of the issuer's jurisdiction, as 27 specified in subsection (d), governs: 28 (1) the validity of a security; 29 (2) the rights and duties of the issuer with 30 respect to registration of transfer; 31 (3) the effectiveness of registration of transfer 32 by the issuer; 33 (4) whether the issuer owes any duties to an SB1231 Engrossed -292- LRB9106284WHdv 1 adverse claimant to a security; and 2 (5) whether an adverse claim can be asserted 3 against a person to whom transfer of a certificated or 4 uncertificated security is registered or a person who 5 obtains control of an uncertificated security. 6 (b) The local law of the securities intermediary's 7 jurisdiction, as specified in subsection (e), governs: 8 (1) acquisition of a security entitlement from the 9 securities intermediary; 10 (2) the rights and duties of the securities 11 intermediary and entitlement holder arising out of a 12 security entitlement; 13 (3) whether the securities intermediary owes any 14 duties to an adverse claimant to a security entitlement; 15 and 16 (4) whether an adverse claim can be asserted 17 against a person who acquires a security entitlement from 18 the securities intermediary or a person who purchases a 19 security entitlement or interest therein from an 20 entitlement holder. 21 (c) The local law of the jurisdiction in which a 22 security certificate is located at the time of delivery 23 governs whether an adverse claim can be asserted against a 24 person to whom the security certificate is delivered. 25 (d) "Issuer's jurisdiction" means the jurisdiction under 26 which the issuer of the security is organized or, if 27 permitted by the law of that jurisdiction, the law of another 28 jurisdiction specified by the issuer. An issuer organized 29 under the law of this State may specify the law of another 30 jurisdiction as the law governing the matters specified in 31 subsection (a)(2) through (5). 32 (e) The following rules determine a "securities 33 intermediary's jurisdiction" for purposes of this Section: 34 (1) If an agreement between the securities SB1231 Engrossed -293- LRB9106284WHdv 1 intermediary and its entitlement holder governing the 2 securities account expressly provides that a particular 3 jurisdiction is the securities intermediary's 4 jurisdiction for purposes of this Part, this Article, or 5 this Actspecifies that it is governed by the law of a6particular jurisdiction, that jurisdiction is the 7 securities intermediary's jurisdiction. 8 (2) If paragraph (1) does not apply and an 9 agreement between the securities intermediary and its 10 entitlement holder governing the securities account 11 expressly provides that the agreement is governed by the 12 law of a particular jurisdiction, that jurisdiction is 13 the securities intermediary's jurisdiction. 14 (3) If neither paragraph (1) nor paragraph (2) 15 applies and an agreement between the securities 16 intermediary and its entitlement holder governing the 17 securities accountdoes not specify the governing law as18provided in paragraph (1), butexpressly provides 19specifiesthat the securities account is maintained at an 20 office in a particular jurisdiction, that jurisdiction is 21 the securities intermediary's jurisdiction. 22 (4)(3)If none of the preceding paragraphs applies 23an agreement between the securities intermediary and its24entitlement holder does not specify a jurisdiction as25provided in paragraph (1) or (2), the securities 26 intermediary's jurisdiction is the jurisdiction in which 27is locatedthe office identified in an account statement 28 as the office serving the entitlement holder's account is 29 located. 30 (5)(4)If none of the preceding paragraphs 31 applies,an agreement between the securities intermediary32and its entitlement holder does not specify a33jurisdiction as provided in paragraph (1) or (2) and an34account statement does not identify an office serving theSB1231 Engrossed -294- LRB9106284WHdv 1entitlement holder's account as provided in paragraph2(3),the securities intermediary's jurisdiction is the 3 jurisdiction in whichis locatedthe chief executive 4 office of the securities intermediary is located. 5 (f) A securities intermediary's jurisdiction is not 6 determined by the physical location of certificates 7 representing financial assets, or by the jurisdiction in 8 which is organized the issuer of the financial asset with 9 respect to which an entitlement holder has a security 10 entitlement, or by the location of facilities for data 11 processing or other record keeping concerning the account. 12 (Source: P.A. 89-364, eff. 1-1-96.) 13 (810 ILCS 5/8-301) (from Ch. 26, par. 8-301) 14 Sec. 8-301. Delivery. 15 (a) Delivery of a certificated security to a purchaser 16 occurs when: 17 (1) the purchaser acquires possession of the 18 security certificate; 19 (2) another person, other than a securities 20 intermediary, either acquires possession of the security 21 certificate on behalf of the purchaser or, having 22 previously acquired possession of the certificate, 23 acknowledges that it holds for the purchaser; or 24 (3) a securities intermediary acting on behalf of 25 the purchaser acquires possession of the security 26 certificate, only if the certificate is in registered 27 form and is (i) registered in the name of the purchaser, 28 (ii) payable to the order of the purchaser, or (iii)has29beenspecially indorsed to the purchaser by an effective 30 indorsement and has not been indorsed to the securities 31 intermediary or in blank. 32 (b) Delivery of an uncertificated security to a 33 purchaser occurs when: SB1231 Engrossed -295- LRB9106284WHdv 1 (1) the issuer registers the purchaser as the 2 registered owner, upon original issue or registration of 3 transfer; or 4 (2) another person, other than a securities 5 intermediary, either becomes the registered owner of the 6 uncertificated security on behalf of the purchaser or, 7 having previously become the registered owner, 8 acknowledges that it holds for the purchaser. 9 (Source: P.A. 89-364, eff. 1-1-96.) 10 (810 ILCS 5/8-302) (from Ch. 26, par. 8-302) 11 Sec. 8-302. Rights of purchaser. 12 (a) Except as otherwise provided in subsections (b) and 13 (c),upon deliveryof a certificated or uncertificated 14 securityto a purchaser, the purchaseracquires all rights in 15 the security that the transferor had or had power to 16 transfer. 17 (b) A purchaser of a limited interest acquires rights 18 only to the extent of the interest purchased. 19 (c) A purchaser of a certificated security who as a 20 previous holder had notice of an adverse claim does not 21 improve its position by taking from a protected purchaser. 22 (Source: P.A. 89-364, eff. 1-1-96.) 23 (810 ILCS 5/8-510) 24 Sec. 8-510. Rights of purchaser of security entitlement 25 from entitlement holder. 26 (a) In a case not covered by the priority rules in 27 Article 9 or the rules stated in subsection (c), an action 28 based on an adverse claim to a financial asset or security 29 entitlement, whether framed in conversion, replevin, 30 constructive trust, equitable lien, or other theory, may not 31 be asserted against a person who purchases a security 32 entitlement, or an interest therein, from an entitlement SB1231 Engrossed -296- LRB9106284WHdv 1 holder if the purchaser gives value, does not have notice of 2 the adverse claim, and obtains control. 3 (b) If an adverse claim could not have been asserted 4 against an entitlement holder under Section 8-502, the 5 adverse claim cannot be asserted against a person who 6 purchases a security entitlement, or an interest therein, 7 from the entitlement holder. 8 (c) In a case not covered by the priority rules in 9 Article 9, a purchaser for value of a security entitlement, 10 or an interest therein, who obtains control has priority over 11 a purchaser of a security entitlement, or an interest 12 therein, who does not obtain control. Except as otherwise 13 provided in subsection (d), purchasers who have control rank 14 according to priority in time of: 15 (1) the purchaser's becoming the person for whom 16 the securities account, in which the security entitlement 17 is carried, is maintained, if the purchaser obtained 18 control under Section 8-106(d)(1); 19 (2) the securities intermediary's agreement to 20 comply with the purchaser's entitlement orders with 21 respect to security entitlements carried or to be 22 carried in the securities account in which the security 23 entitlement is carried, if the purchaser obtained control 24 under Section 8-106(d)(2); or 25 (3) if the purchaser obtained control through 26 another person under Section 8-106(d)(3), the time on 27 which priority would be based under this subsection if 28 the other person were the secured party. 29 (d) Aequally, except that asecurities intermediary as 30 purchaser has priority over a conflicting purchaser who has 31 control unless otherwise agreed by the securities 32 intermediary. 33 (Source: P.A. 89-364, eff. 1-1-96.) SB1231 Engrossed -297- LRB9106284WHdv 1 Section 15. The Local Records Act is amended by changing 2 Section 14 as follows: 3 (50 ILCS 205/14) (from Ch. 116, par. 43.114) 4 Sec. 14. Part 54of Article 9 of the"Uniform Commercial 5 Code", approved July 31, 1961, as amended,is subject to the 6 provisions of this Act, as now or hereafter amended. 7 (Source: P.A. 76-1708.) 8 Section 20. The Counties Code is amended by changing 9 Section 3-5018 as follows: 10 (55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018) 11 Sec. 3-5018. Fees. The recorder elected as provided for 12 in this Division shall receive such fees as are or may be 13 provided for him by law, in case of provision therefor: 14 otherwise he shall receive the same fees as are or may be 15 provided in this Section, except when increased by county 16 ordinance pursuant to the provisions of this Section, to be 17 paid to the county clerk for his services in the office of 18 recorder for like services.No filing fee shall be charged19for providing informational copies of financing statements to20the recorder pursuant to subsection (8) of Section 9-403 of21the Uniform Commercial Code.22 For recording deeds or other instruments $12 for the 23 first 4 pages thereof, plus $1 for each additional page 24 thereof, plus $1 for each additional document number therein 25 noted. The aggregate minimum fee for recording any one 26 instrument shall not be less than $12. 27 For recording deeds or other instruments wherein the 28 premises affected thereby are referred to by document number 29 and not by legal description a fee of $1 in addition to that 30 hereinabove referred to for each document number therein 31 noted. SB1231 Engrossed -298- LRB9106284WHdv 1 For recording assignments of mortgages, leases or liens 2 $12 for the first 4 pages thereof, plus $1 for each 3 additional page thereof. However, except for leases and 4 liens pertaining to oil, gas and other minerals, whenever a 5 mortgage, lease or lien assignment assigns more than one 6 mortgage, lease or lien document, a $7 fee shall be charged 7 for the recording of each such mortgage, lease or lien 8 document after the first one. 9 For recording maps or plats of additions or subdivisions 10 approved by the county or municipality (including the 11 spreading of the same of record in map case or other proper 12 books) or plats of condominiums $50 for the first page, plus 13 $1 for each additional page thereof except that in the case 14 of recording a single page, legal size 8 1/2 x 14, plat of 15 survey in which there are no more than two lots or parcels of 16 land, the fee shall be $12. In each county where such maps 17 or plats are to be recorded, the recorder may require the 18 same to be accompanied by such number of exact, true and 19 legible copies thereof as the recorder deems necessary for 20 the efficient conduct and operation of his office. 21 For certified copies of records the same fees as for 22 recording, but in no case shall the fee for a certified copy 23 of a map or plat of an addition, subdivision or otherwise 24 exceed $10. 25 Each certificate of such recorder of the recording of the 26 deed or other writing and of the date of recording the same 27 signed by such recorder, shall be sufficient evidence of the 28 recording thereof, and such certificate including the 29 indexing of record, shall be furnished upon the payment of 30 the fee for recording the instrument, and no additional fee 31 shall be allowed for the certificate or indexing. 32 The recorder shall charge an additional fee, in an amount 33 equal to the fee otherwise provided by law, for recording a 34 document (other than a document filed under the Plat Act or SB1231 Engrossed -299- LRB9106284WHdv 1 the Uniform Commercial Code) that does not conform to the 2 following standards: 3 (1) The document shall consist of one or more 4 individual sheets measuring 8.5 inches by 11 inches, not 5 permanently bound and not a continuous form. Graphic 6 displays accompanying a document to be recorded that 7 measure up to 11 inches by 17 inches shall be recorded 8 without charging an additional fee. 9 (2) The document shall be legibly printed in black 10 ink, by hand, type, or computer. Signatures and dates 11 may be in contrasting colors if they will reproduce 12 clearly. 13 (3) The document shall be on white paper of not 14 less than 20-pound weight and shall have a clean margin 15 of at least one-half inch on the top, the bottom, and 16 each side. Margins may be used for non-essential 17 notations that will not affect the validity of the 18 document, including but not limited to form numbers, page 19 numbers, and customer notations. 20 (4) The first page of the document shall contain a 21 blank space, measuring at least 3 inches by 5 inches, 22 from the upper right corner. 23 (5) The document shall not have any attachment 24 stapled or otherwise affixed to any page. 25 A document that does not conform to these standards shall not 26 be recorded except upon payment of the additional fee 27 required under this paragraph. This paragraph, as amended by 28 this amendatory Act of 1995, applies only to documents dated 29 after the effective date of this amendatory Act of 1995. 30 The county board of any county may provide for an 31 additional charge of $3 for filing every instrument, paper, 32 or notice for record, in order to defray the cost of 33 converting the county recorder's document storage system to 34 computers or micrographics. SB1231 Engrossed -300- LRB9106284WHdv 1 A special fund shall be set up by the treasurer of the 2 county and such funds collected pursuant to Public Act 3 83-1321 shall be used solely for a document storage system to 4 provide the equipment, materials and necessary expenses 5 incurred to help defray the costs of implementing and 6 maintaining such a document records system. 7 The foregoing fees allowed by this Section are the 8 maximum fees that may be collected from any officer, agency, 9 department or other instrumentality of the State. The county 10 board may, however, by ordinance, increase the fees allowed 11 by this Section and collect such increased fees from all 12 persons and entities other than officers, agencies, 13 departments and other instrumentalities of the State if the 14 increase is justified by an acceptable cost study showing 15 that the fees allowed by this Section are not sufficient to 16 cover the cost of providing the service. 17 A statement of the costs of providing each service, 18 program and activity shall be prepared by the county board. 19 All supporting documents shall be public record and subject 20 to public examination and audit. All direct and indirect 21 costs, as defined in the United States Office of Management 22 and Budget Circular A-87, may be included in the 23 determination of the costs of each service, program and 24 activity. 25 (Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.) 26 Section 25. The Public Utilities Act is amended by 27 changing Section 18-107 as follows: 28 (220 ILCS 5/18-107) 29 Sec. 18-107. Security interests in intangible transition 30 property and grantee instruments. 31 (a) Notwithstanding any other provision of law, neither 32 intangible transition property, grantee instruments nor any SB1231 Engrossed -301- LRB9106284WHdv 1 right, title or interest therein, shall constitute property 2 in which a security interest may be created under the Uniform 3 Commercial Code nor shall any such rights be deemed proceeds 4 of any property which is not intangible transition property 5 or grantee instruments, as the case may be. For purposes of 6 the foregoing, the terms "account",and"general intangible", 7(as defined under Section 9-106 of the Uniform Commercial8Code) and the term"instrument", and "payment intangible" (as 9 defined under Section 9-1029-105of the Uniform Commercial 10 Code) shall, as used in the Uniform Commercial Code, be 11 deemed to exclude any such intangible transition property, 12 grantee instruments or any right, title, or interest therein. 13 (b) The granting, perfection and enforcement of security 14 interests in intangible transition property or grantee 15 instruments are governed by this Section rather than by 16 Article 9 of the Uniform Commercial Code. 17 (c) A valid and enforceable security interest in 18 intangible transition property and in grantee instruments 19 shall attach and be perfected only by the means set forth 20 below in this subsection (c) of Section 18-107: 21 (1) To the extent transitional funding instruments 22 or grantee instruments are purported to be secured by 23 intangible transition property or to the extent 24 transitional funding instruments are purported to be 25 secured by grantee instruments, as the case may be, as 26 specified in the applicable transitional funding order, 27 the lien of the transitional funding instruments and 28 grantee instruments, if any, shall attach automatically 29 to such intangible transition property and grantee 30 instruments, if any, from the time of issuance of the 31 transitional funding instruments and grantee instruments, 32 if any. Such lien shall be a valid and enforceable 33 security interest in the intangible transition property 34 or the grantee instruments, as the case may be, securing SB1231 Engrossed -302- LRB9106284WHdv 1 the transitional funding instruments and grantee 2 instruments, if any, and shall be continuously perfected 3 if, before the date of issuance of the applicable 4 transitional funding instruments or grantee instruments, 5 if any, or within no more than 10 days thereafter, a 6 filing has been made by or on behalf of the holder with 7 the Chief Clerk of the Commission stating that such 8 transitional funding instruments or grantee instruments, 9 if any, have been issued. Any such filing made with the 10 Commission in respect to such transitional funding 11 instruments or grantee instruments shall take precedence 12 over any subsequent filing except as may otherwise be 13 provided in the applicable transitional funding order. 14 (2) The liens under subparagraph (1) are 15 enforceable against the electric utility, any assignee, 16 grantee or issuer, and all third parties, including 17 judicial lien creditors, subject only to the rights of 18 any third parties holding security interests in the 19 intangible transition property or grantee instruments 20 previously perfected in the manner described in this 21 subsection if value has been given by the purchasers of 22 transitional funding instruments or grantee instruments. 23 A perfected lien in intangible transition property and 24 grantee instruments, if any, is a continuously perfected 25 security interest in all then existing or thereafter 26 arising revenues and proceeds arising with respect to the 27 associated intangible transition property or grantee 28 instruments, as the case may be, whether or not the 29 electric power and energy included in the calculation of 30 such revenues and proceeds have been provided. The lien 31 created under this subsection is perfected and ranks 32 prior to any other lien, including any judicial lien, 33 which subsequently attaches to the intangible transition 34 property or grantee instruments, as the case may be, and SB1231 Engrossed -303- LRB9106284WHdv 1 to any other rights created by the transitional funding 2 order or any revenues or proceeds of the foregoing. The 3 relative priority of a lien created under this subsection 4 is not defeated or adversely affected by changes to the 5 transitional funding order or to the instrument funding 6 charges payable by any retail customer, class of retail 7 customers or other person or group of persons obligated 8 to pay such charges. 9 (3) The relative priority of a lien created under 10 this subsection is not defeated or adversely affected by 11 the commingling of revenues arising with respect to 12 intangible transition property or grantee instruments 13 with funds of the electric utility or other funds of the 14 assignee, issuer or grantee. 15 (4) If an event of default occurs under 16 transitional funding instruments or grantee instruments, 17 the holders thereof or their authorized representatives, 18 as secured parties, may foreclose or otherwise enforce 19 the lien in the grantee instruments or in the intangible 20 transition property securing the transitional funding 21 instruments or grantee instruments, as applicable, 22 subject to the rights of any third parties holding prior 23 security interests in the intangible transition property 24 or grantee instruments previously perfected in the manner 25 provided in this subsection. Upon application by the 26 holders or their authorized representatives, without 27 limiting their other remedies, the Commission shall order 28 the sequestration and payment to the holders or their 29 authorized representatives of revenues arising with 30 respect to the intangible transition property or grantee 31 instruments pledged to the holders. An order under this 32 subsection shall remain in full force and effect 33 notwithstanding any bankruptcy, reorganization, or other 34 insolvency proceedings with respect to the electric SB1231 Engrossed -304- LRB9106284WHdv 1 utility, grantee, assignee or issuer. 2 (5) The Commission shall maintain segregated 3 records which reflect the date and time of receipt of all 4 filings made under this subsection. The Commission may 5 provide that transfers of intangible transition property 6 or of grantee instruments be filed in accordance with the 7 same system. 8 (Source: P.A. 90-561, eff. 12-16-97.) 9 Section 30. The Illinois Vehicle Code is amended by 10 changing Section 3-114 as follows: 11 (625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114) 12 Sec. 3-114. Transfer by operation of law. 13 (a) If the interest of an owner in a vehicle passes to 14 another other than by voluntary transfer, the transferee 15 shall, except as provided in paragraph (b), promptly mail or 16 deliver within 20 days to the Secretary of State the last 17 certificate of title, if available, proof of the transfer, 18 and his application for a new certificate in the form the 19 Secretary of State prescribes. It shall be unlawful for any 20 person having possession of a certificate of title for a 21 motor vehicle, semi-trailer, or house car by reason of his 22 having a lien or encumbrance on such vehicle, to fail or 23 refuse to deliver such certificate to the owner, upon the 24 satisfaction or discharge of the lien or encumbrance, 25 indicated upon such certificate of title. 26 (b) If the interest of an owner in a vehicle passes to 27 another under the provisions of the Small Estates provisions 28 of the Probate Act of 1975 the transferee shall promptly mail 29 or deliver to the Secretary of State, within 120 days, the 30 last certificate of title, if available, the documentation 31 required under the provisions of the Probate Act of 1975, and 32 an application for certificate of title. The Small Estate SB1231 Engrossed -305- LRB9106284WHdv 1 Affidavit form shall be furnished by the Secretary of State. 2 The transfer may be to the transferee or to the nominee of 3 the transferee. 4 (c) If the interest of an owner in a vehicle passes to 5 another under other provisions of the Probate Act of 1975, as 6 amended, and the transfer is made by a representative or 7 guardian, such transferee shall promptly mail or deliver to 8 the Secretary of State, the last certificate of title, if 9 available, and a certified copy of the letters of office or 10 guardianship, and an application for certificate of title. 11 Such application shall be made before the estate is closed. 12 The transfer may be to the transferee or to the nominee of 13 the transferee. 14 (d) If the interest of an owner in joint tenancy passes 15 to the other joint tenant with survivorship rights as 16 provided by law, the transferee shall promptly mail or 17 deliver to the Secretary of State, the last certificate of 18 title, if available, proof of death of the one joint tenant 19 and survivorship of the surviving joint tenant, and an 20 application for certificate of title. Such application shall 21 be made within 120 days after the death of the joint tenant. 22 The transfer may be to the transferee or to the nominee of 23 the transferee. 24 (e) The Secretary of State shall transfer a decedent's 25 vehicle title to any legatee, representative or heir of the 26 decedent who submits to the Secretary a death certificate and 27 an affidavit by an attorney at law on the letterhead 28 stationery of the attorney at law stating the facts of the 29 transfer. 30 (f) Repossession with assignment of title. In all cases 31 wherein a lienholder has repossessed a vehicle by other than 32 judicial process and holds it for resale under a security 33 agreement, and the owner of record has executed an assignment 34 of the existing certificate of title after default, the SB1231 Engrossed -306- LRB9106284WHdv 1 lienholder may proceed to sell or otherwise dispose of the 2 vehicle as authorized under the Uniform Commercial Code. 3 Upon selling the vehicle to another person, the lienholder 4 need not send the certificate of title to the Secretary of 5 State, but shall promptly and within 20 days mail or deliver 6 to the purchaser as transferee the existing certificate of 7 title for the repossessed vehicle, reflecting the release of 8 the lienholder's security interest in the vehicle. The 9 application for a certificate of title made by the purchaser 10 shall comply with subsection (a) of Section 3-104 and be 11 accompanied by the existing certificate of title for the 12 repossessed vehicle. The lienholder shall execute the 13 assignment and warranty of title showing the name and address 14 of the purchaser in the spaces provided therefor on the 15 certificate of title or as the Secretary of State prescribes. 16 The lienholder shall complete the assignment of title in the 17 certificate of title to reflect the transfer of the vehicle 18 to the lienholder and also a reassignment to reflect the 19 transfer from the lienholder to the purchaser. For this 20 purpose, the lienholder is specifically authorized to 21 complete and execute the space reserved in the certificate of 22 title for a dealer reassignment, notwithstanding that the 23 lienholder is not a licensed dealer. Nothing herein shall be 24 construed to mean that the lienholder is taking title to the 25 repossessed vehicle for purposes of liability for retailer 26 occupation, vehicle use, or other tax with respect to the 27 proceeds from the repossession sale. Delivery of the 28 existing certificate of title to the purchaser shall be 29 deemed disclosure to the purchaser of the owner of the 30 vehicle. 31 (f-5) Repossession without assignment of title. In all 32 cases wherein a lienholder has repossessed a vehicle by other 33 than judicial process and holds it for resale under a 34 security agreement, and the owner of record has not executed SB1231 Engrossed -307- LRB9106284WHdv 1 an assignment of the existing certificate of title, the 2 lienholder shall comply with the following provisions: 3 (1) Prior to sale, the lienholder shall deliver or 4 mail to the owner at the owner's last known address and 5 to any other lienholder of record, a notice of redemption 6 setting forth the following information: (i) the name of 7 the owner of record and in bold type at or near the top 8 of the notice a statement that the owner's vehicle was 9 repossessed on a specified date for failure to make 10 payments on the loan (or other reason), (ii) a 11 description of the vehicle subject to the lien sufficient 12 to identify it, (iii) the right of the owner to redeem 13 the vehicle, (iv) the lienholder's intent to sell or 14 otherwise dispose of the vehicle after the expiration of 15 21 days from the date of mailing or delivery of the 16 notice, and (v) the name, address, and telephone number 17 of the lienholder from whom information may be obtained 18 concerning the amount due to redeem the vehicle and from 19 whom the vehicle may be redeemed under Section 9-623 209-506of the Uniform Commercial Code. At the 21 lienholder's option, the information required to be set 22 forth in this notice of redemption may be made a part of 23 or accompany the notification of sale or other 24 disposition required undersubsection (3) ofSection 25 9-6119-504of the Uniform Commercial Code, but none of 26 the information required by this notice shall be 27 construed to impose any requirement under Article 9 of 28 the Uniform Commercial Code. 29 (2) With respect to the repossession of a vehicle 30 used primarily for personal, family, or household 31 purposes, the lienholder shall also deliver or mail to 32 the owner at the owner's last known address an affidavit 33 of defense. The affidavit of defense shall accompany the 34 notice of redemption required in subdivision (f-5)(1) of SB1231 Engrossed -308- LRB9106284WHdv 1 this Section. The affidavit of defense shall (i) identify 2 the lienholder, owner, and the vehicle; (ii) provide 3 space for the owner to state the defense claimed by the 4 owner; and (iii) include an acknowledgment by the owner 5 that the owner may be liable to the lienholder for fees, 6 charges, and costs incurred by the lienholder in 7 establishing the insufficiency or invalidity of the 8 owner's defense. To stop the transfer of title, the 9 affidavit of defense must be received by the lienholder 10 no later than 21 days after the date of mailing or 11 delivery of the notice required in subdivision (f-5)(1) 12 of this Section. If the lienholder receives the affidavit 13 from the owner in a timely manner, the lienholder must 14 apply to a court of competent jurisdiction to determine 15 if the lienholder is entitled to possession of the 16 vehicle. 17 (3) Upon selling the vehicle to another person, the 18 lienholder need not send the certificate of title to the 19 Secretary of State, but shall promptly and within 20 days 20 mail or deliver to the purchaser as transferee (i) the 21 existing certificate of title for the repossessed 22 vehicle, reflecting the release of the lienholder's 23 security interest in the vehicle; and (ii) an affidavit 24 of repossession made by or on behalf of the lienholder 25 which provides the following information: that the 26 vehicle was repossessed, a description of the vehicle 27 sufficient to identify it, whether the vehicle has been 28 damaged in excess of 33 1/3% of its fair market value as 29 required under subdivision (b)(3) of Section 3-117.1, 30 that the owner and any other lienholder of record were 31 given the notice required in subdivision (f-5)(1) of this 32 Section, that the owner of record was given the affidavit 33 of defense required in subdivision (f-5)(2) of this 34 Section, that the interest of the owner was lawfully SB1231 Engrossed -309- LRB9106284WHdv 1 terminated or sold pursuant to the terms of the security 2 agreement, and the purchaser's name and address. If the 3 vehicle is damaged in excess of 33 1/3% of its fair 4 market value, the lienholder shall make application for a 5 salvage certificate under Section 3-117.1 and transfer 6 the vehicle to a person eligible to receive assignments 7 of salvage certificates identified in Section 3-118. 8 (4) The application for a certificate of title made 9 by the purchaser shall comply with subsection (a) of 10 Section 3-104 and be accompanied by the affidavit of 11 repossession furnished by the lienholder and the existing 12 certificate of title for the repossessed vehicle. The 13 lienholder shall execute the assignment and warranty of 14 title showing the name and address of the purchaser in 15 the spaces provided therefor on the certificate of title 16 or as the Secretary of State prescribes. The lienholder 17 shall complete the assignment of title in the certificate 18 of title to reflect the transfer of the vehicle to the 19 lienholder and also a reassignment to reflect the 20 transfer from the lienholder to the purchaser. For this 21 purpose, the lienholder is specifically authorized to 22 execute the assignment on behalf of the owner as seller 23 if the owner has not done so and to complete and execute 24 the space reserved in the certificate of title for a 25 dealer reassignment, notwithstanding that the lienholder 26 is not a licensed dealer. Nothing herein shall be 27 construed to mean that the lienholder is taking title to 28 the repossessed vehicle for purposes of liability for 29 retailer occupation, vehicle use, or other tax with 30 respect to the proceeds from the repossession sale. 31 Delivery of the existing certificate of title to the 32 purchaser shall be deemed disclosure to the purchaser of 33 the owner of the vehicle. In the event the lienholder 34 does not hold the certificate of title for the SB1231 Engrossed -310- LRB9106284WHdv 1 repossessed vehicle, the lienholder shall make 2 application for and may obtain a new certificate of title 3 in the name of the lienholder upon furnishing information 4 satisfactory to the Secretary of State. Upon receiving 5 the new certificate of title, the lienholder may proceed 6 with the sale described in subdivision (f-5)(3), except 7 that upon selling the vehicle the lienholder shall 8 promptly and within 20 days mail or deliver to the 9 purchaser the new certificate of title reflecting the 10 assignment and transfer of title to the purchaser. 11 (5) Neither the lienholder nor the owner shall file 12 with the Office of the Secretary of State the notice of 13 redemption or affidavit of defense described in 14 subdivisions (f-5)(1) and (f-5)(2) of this Section. The 15 Office of the Secretary of State shall not determine the 16 merits of an owner's affidavit of defense, nor consider 17 any allegations or assertions regarding the validity or 18 invalidity of a lienholder's claim to the vehicle or an 19 owner's asserted defenses to the repossession action. 20 (f-7) Notice of reinstatement in certain cases. 21 (1) If, at the time of repossession by a lienholder 22 that is seeking to transfer title pursuant to subsection 23 (f-5), the owner has paid an amount equal to 30% or more 24 of the deferred payment price or total of payments due, 25 the owner may, within 21 days of the date of 26 repossession, reinstate the contract or loan agreement 27 and recover the vehicle from the lienholder by tendering 28 in a lump sum (i) the total of all unpaid amounts, 29 including any unpaid delinquency or deferral charges due 30 at the date of reinstatement, without acceleration; and 31 (ii) performance necessary to cure any default other than 32 nonpayment of the amounts due; and (iii) all reasonable 33 costs and fees incurred by the lienholder in retaking, 34 holding, and preparing the vehicle for disposition and in SB1231 Engrossed -311- LRB9106284WHdv 1 arranging for the sale of the vehicle. Reasonable costs 2 and fees incurred by the lienholder include without 3 limitation repossession and storage expenses and, if 4 authorized by the contract or loan agreement, reasonable 5 attorneys' fees and collection agency charges. 6 (2) Tender of payment and performance pursuant to 7 this limited right of reinstatement restores to the owner 8 his rights under the contract or loan agreement as though 9 no default had occurred. The owner has the right to 10 reinstate the contract or loan agreement and recover the 11 vehicle from the lienholder only once under this 12 subsection. The lienholder may, in the lienholder's sole 13 discretion, extend the period during which the owner may 14 reinstate the contract or loan agreement and recover the 15 vehicle beyond the 21 days allowed under this subsection, 16 and the extension shall not subject the lienholder to 17 liability to the owner under the laws of this State. 18 (3) The lienholder shall deliver or mail written 19 notice to the owner at the owner's last known address, 20 within 3 business days of the date of repossession, of 21 the owner's right to reinstate the contract or loan 22 agreement and recover the vehicle pursuant to the limited 23 right of reinstatement described in this subsection. At 24 the lienholder's option, the information required to be 25 set forth in this notice of reinstatement may be made 26 part of or accompany the notice of redemption required in 27 subdivision (f-5)(1) of this Section and the notification 28 of sale or other disposition required undersubsection29(3) ofSection 9-6119-504of the Uniform Commercial 30 Code, but none of the information required by this notice 31 of reinstatement shall be construed to impose any 32 requirement under Article 9 of the Uniform Commercial 33 Code. 34 (4) The reinstatement period, if applicable, and SB1231 Engrossed -312- LRB9106284WHdv 1 the redemption period described in subdivision (f-5)(1) 2 of this Section, shall run concurrently if the 3 information required to be set forth in the notice of 4 reinstatement is part of or accompanies the notice of 5 redemption. In any event, the 21 day redemption period 6 described in subdivision (f-5)(1) of this Section shall 7 commence on the date of mailing or delivery to the owner 8 of the information required to be set forth in the notice 9 of redemption, and the 21 day reinstatement period 10 described in this subdivision, if applicable, shall 11 commence on the date of mailing or delivery to the owner 12 of the information required to be set forth in the notice 13 of reinstatement. 14 (5) The Office of the Secretary of State shall not 15 determine the merits of an owner's claim of right to 16 reinstatement, nor consider any allegations or assertions 17 regarding the validity or invalidity of a lienholder's 18 claim to the vehicle or an owner's asserted right to 19 reinstatement. Where a lienholder is subject to 20 licensing and regulatory supervision by the State of 21 Illinois, the lienholder shall be subject to all of the 22 powers and authority of the lienholder's primary State 23 regulator to enforce compliance with the procedures set 24 forth in this subsection (f-7). 25 (f-10) Repossession by judicial process. In all cases 26 wherein a lienholder has repossessed a vehicle by judicial 27 process and holds it for resale under a security agreement, 28 order for replevin, or other court order establishing the 29 lienholder's right to possession of the vehicle, the 30 lienholder may proceed to sell or otherwise dispose of the 31 vehicle as authorized under the Uniform Commercial Code or 32 the court order. Upon selling the vehicle to another person, 33 the lienholder need not send the certificate of title to the 34 Secretary of State, but shall promptly and within 20 days SB1231 Engrossed -313- LRB9106284WHdv 1 mail or deliver to the purchaser as transferee (i) the 2 existing certificate of title for the repossessed vehicle 3 reflecting the release of the lienholder's security interest 4 in the vehicle; (ii) a certified copy of the court order; and 5 (iii) a bill of sale identifying the new owner's name and 6 address and the year, make, model, and vehicle identification 7 number of the vehicle. The application for a certificate of 8 title made by the purchaser shall comply with subsection (a) 9 of Section 3-104 and be accompanied by the certified copy of 10 the court order furnished by the lienholder and the existing 11 certificate of title for the repossessed vehicle. The 12 lienholder shall execute the assignment and warranty of title 13 showing the name and address of the purchaser in the spaces 14 provided therefor on the certificate of title or as the 15 Secretary of State prescribes. The lienholder shall complete 16 the assignment of title in the certificate of title to 17 reflect the transfer of the vehicle to the lienholder and 18 also a reassignment to reflect the transfer from the 19 lienholder to the purchaser. For this purpose, the 20 lienholder is specifically authorized to execute the 21 assignment on behalf of the owner as seller if the owner has 22 not done so and to complete and execute the space reserved in 23 the certificate of title for a dealer reassignment, 24 notwithstanding that the lienholder is not a licensed dealer. 25 Nothing herein shall be construed to mean that the lienholder 26 is taking title to the repossessed vehicle for purposes of 27 liability for retailer occupation, vehicle use, or other tax 28 with respect to the proceeds from the repossession sale. 29 Delivery of the existing certificate of title to the 30 purchaser shall be deemed disclosure to the purchaser of the 31 owner of the vehicle. In the event the lienholder does not 32 hold the certificate of title for the repossessed vehicle, 33 the lienholder shall make application for and may obtain a 34 new certificate of title in the name of the lienholder upon SB1231 Engrossed -314- LRB9106284WHdv 1 furnishing information satisfactory to the Secretary of 2 State. Upon receiving the new certificate of title, the 3 lienholder may proceed with the sale described in this 4 subsection, except that upon selling the vehicle the 5 lienholder shall promptly and within 20 days mail or deliver 6 to the purchaser the new certificate of title reflecting the 7 assignment and transfer of title to the purchaser. 8 (f-15) The Secretary of State shall not issue a 9 certificate of title to a purchaser under subsection (f), 10 (f-5), or (f-10) of this Section, unless the person from whom 11 the vehicle has been repossessed by the lienholder is shown 12 to be the last registered owner of the motor vehicle. The 13 Secretary of State may provide by rule for the standards to 14 be followed by a lienholder in assigning and transferring 15 certificates of title with respect to repossessed vehicles. 16 (f-20) If applying for a salvage certificate or a 17 junking certificate, the lienholder shall within 20 days make 18 an application to the Secretary of State for a salvage 19 certificate or a junking certificate, as set forth in this 20 Code. The Secretary of State shall not issue a salvage 21 certificate or a junking certificate to such lienholder 22 unless the person from whom such vehicle has been repossessed 23 is shown to be the last registered owner of such motor 24 vehicle and such lienholder establishes to the satisfaction 25 of the Secretary of State that he is entitled to such salvage 26 certificate or junking certificate. The Secretary of State 27 may provide by rule for the standards to be followed by a 28 lienholder in order to obtain a salvage certificate or 29 junking certificate for a repossessed vehicle. 30 (g) A person holding a certificate of title whose 31 interest in the vehicle has been extinguished or transferred 32 other than by voluntary transfer shall mail or deliver the 33 certificate, within 20 days upon request of the Secretary of 34 State. The delivery of the certificate pursuant to the SB1231 Engrossed -315- LRB9106284WHdv 1 request of the Secretary of State does not affect the rights 2 of the person surrendering the certificate, and the action of 3 the Secretary of State in issuing a new certificate of title 4 as provided herein is not conclusive upon the rights of an 5 owner or lienholder named in the old certificate. 6 (h) The Secretary of State may decline to process any 7 application for a transfer of an interest in a vehicle 8 hereunder if any fees or taxes due under this Act from the 9 transferor or the transferee have not been paid upon 10 reasonable notice and demand. 11 (i) The Secretary of State shall not be held civilly or 12 criminally liable to any person because any purported 13 transferor may not have had the power or authority to make a 14 transfer of any interest in any vehicle or because a 15 certificate of title issued in error is subsequently used to 16 commit a fraudulent act. 17 (Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.) 18 Section 31. The Illinois Vehicle Code is amended by 19 changing Section 3-202 as follows: 20 (625 ILCS 5/3-202) (from Ch. 95 1/2, par. 3-202) 21 Sec. 3-202. Perfection of security interest. 22 (a) Unless excepted by Section 3-201, a security 23 interest in a vehicle of a type for which a certificate of 24 title is required is not valid against subsequent transferees 25 or lienholders of the vehicle unless perfected as provided in 26 this Act. 27 (b) A security interest is perfected by the delivery to 28 the Secretary of State of the existing certificate of title, 29 if any, an application for a certificate of title containing 30 the name and address of the lienholder and the required fee. 31 The security interestItis perfected as of the time of its 32 creation if the delivery to the Secretary of State is SB1231 Engrossed -316- LRB9106284WHdv 1 completed within 21 days after the creation of the security 2 interest or receipt by the new lienholder of the existing 3 certificate of title from a prior lienholder or licensed 4 dealerthereafter, otherwise as of the time of the delivery. 5 (c) If a vehicle is subject to a security interest when 6 brought into this State, the validity of the security 7 interest is determined by the law of the jurisdiction where 8 the vehicle was when the security interest attached, subject 9 to the following: 10 1. If the parties understood at the time the security 11 interest attached that the vehicle would be kept in this 12 State and it was brought into this State within 30 days 13 thereafter for purposes other than transportation through 14 this State, the validity of the security interest in this 15 State is determined by the law of this State. 16 2. If the security interest was perfected under the law 17 of the jurisdiction where the vehicle was when the security 18 interest attached, the following rules apply: 19 (A) If the name of the lienholder is shown on an 20 existing certificate of title issued by that jurisdiction, 21 his security interest continues perfected in this State. 22 (B) If the name of the lienholder is not shown on an 23 existing certificate of title issued by that jurisdiction, a 24 security interest may be perfected by the lienholder 25 delivering to the Secretary of State the prescribed notice 26 and by payment of the required fee. Such security interest is 27 perfected as of the time of delivery of the prescribed notice 28 and payment of the required fee. 29 3. If the security interest was not perfected under the 30 law of the jurisdiction where the vehicle was when the 31 security interest attached, it may be perfected in this 32 State; in that case perfection dates from the time of 33 perfection in this State. 34 4. A security interest may be perfected under paragraph SB1231 Engrossed -317- LRB9106284WHdv 1 3 of this subsection either as provided in subsection (b) or 2 by the lienholder delivering to the Secretary of State a 3 notice of security interest in the form the Secretary of 4 State prescribes and the required fee. 5 (Source: P.A. 81-557.) 6 Section 33. The Code of Civil Procedure is amended by 7 changing Section 9-316 as follows: 8 (735 ILCS 5/9-316) (from Ch. 110, par. 9-316) 9 Sec. 9-316. Lien upon crops. Every landlord shall have a 10 lien upon the crops grown or growing upon the demised 11 premises for the rent thereof, whether the same is payable 12 wholly or in part in money or specific articles of property 13 or products of the premises, or labor, and also for the 14 faithful performance of the terms of the lease. Such lien 15 shall continue for the period of 6 months after the 16 expiration of the term for which the premises are demised, 17 and may be enforced by distraint as provided in Part 3 of 18 Article IX of this Act. 19 A good faith purchaser shall, however, take such crops 20 free of any landlord's lien unless, within 6 months prior to 21 the purchase, the landlord provides written notice of his 22 lien to the purchaser by registered or certified mail. Such 23 notice shall contain the names and addresses of the landlord 24 and tenant, and clearly identify the leased property. 25 A landlord may require that, prior to his tenant's 26 selling any crops grown on the demised premises, the tenant 27 disclose the name of the person to whom the tenant intends to 28 sell those crops. Where such a requirement has been imposed, 29 the tenant shall not sell the crops to any person other than 30 a person who has been disclosed to the landlord as a 31 potential buyer of the crops. 32 A lien arising under this Section and duly perfected SB1231 Engrossed -318- LRB9106284WHdv 1 under Article 9 of the Uniform Commercial Code shall have 2 priority over any other agricultural lien as defined in, and 3 over any security interest arising under, provisions of 4 Article 9 of the Uniform Commercial Code. 5 (Source: P.A. 83-70.) 6 Section 35. The Uniform Federal Lien Registration Act is 7 amended by changing Section 4 as follows: 8 (770 ILCS 110/4) (from Ch. 82, par. 404) 9 Sec. 4. (a) If a notice of federal lien, a refiling of a 10 notice of federal lien or a notice of revocation of any 11 certificate described in subsection (b) is presented to a 12 filing officer who is: 13 (1) the Secretary of State, he shall cause the notice to 14 be marked, held and indexed in accordance with the provisions 15 of Section 9-5199-403(4)of the Uniform Commercial Code as 16 if the notice were a financing statement within the meaning 17 of that Code; or 18 (2) any other officer described in Section 2, he shall 19 endorse thereon his identification and the date and time of 20 receipt and forthwith file it alphabetically or enter it in 21 an alphabetical index showing the name and address of the 22 person named in the notice, the date and time of receipt, the 23 title and address of the official or entity certifying the 24 lien, the total amount appearing on the notice of lien, and 25 in the case of federal tax liens, the collector's serial 26 number of the notice. 27 (b) If a certificate of release, nonattachment, 28 discharge or subordination of any lien is presented to the 29 Secretary of State for filing he shall: 30 (1) cause a certificate of release or nonattachment to 31 be marked, held and indexed as if the certificate were a 32 termination statement within the meaning of the Uniform SB1231 Engrossed -319- LRB9106284WHdv 1 Commercial Code, but the notice of lien to which the 2 certificate relates may not be removed from the files; and 3 (2) cause a certificate of discharge or subordination to 4 be marked, held and indexed as if the certificate were a 5 release of collateral within the meaning of the Uniform 6 Commercial Code. 7 (c) If a refiled notice of federal lien referred to in 8 subsection (a) or any of the certificates or notices referred 9 to in subsection (b) is presented for filing to any other 10 filing officer specified in Section 2, he shall permanently 11 attach the refiled notice or the certificate to the original 12 notice of lien and enter the refiled notice or the 13 certificate with the date of filing in any alphabetical lien 14 index on the line where the original notice of lien is 15 entered. 16 (d) Upon request of any person, the filing officer shall 17 issue his certificate showing whether there is on file, on 18 the date and hour stated therein, any notice of lien or 19 certificate or notice affecting any lien filed under this Act 20 or "An Act in relation to liens of the United States of 21 America", approved June 27, 1923, as amended, naming a 22 particular person, and if a notice or certificate is on file, 23 giving the date and hour of filing of each notice or 24 certificate. The fee for a certificate is $5. Upon request, 25 the filing officer shall furnish a copy of any notice of 26 federal lien, or notice or certificate affecting a federal 27 lien, for a fee of 50¢ per page. 28 (Source: P.A. 86-254.) 29 Section 37. The Uniform Commercial Code is amended by 30 adding Section 9-404.5 as follows: 31 (810 ILCS 5/9-404.5 new) 32 Sec. 9-404.5. Termination statement; duties of filing SB1231 Engrossed -320- LRB9106284WHdv 1 officer. 2 (1) If a financing statement covering consumer goods is 3 filed on or after July 1, 1973, then within one month or 4 within 10 days following written demand by the debtor after 5 there is no outstanding secured obligation and no commitment 6 to make advances, incur obligations or otherwise give value, 7 the secured party must file with each filing officer with 8 whom the financing statement was filed, a termination 9 statement to the effect that he no longer claims a security 10 interest under the financing statement, which shall be 11 identified by file number. In other cases whenever there is 12 no outstanding secured obligation and no commitment to make 13 advances, incur obligations or otherwise give value, the 14 secured party must on written demand by the debtor send the 15 debtor, for each filing officer with whom the financing 16 statement was filed, a termination statement to the effect 17 that he no longer claims a security interest under the 18 financing statement, which shall be identified by file 19 number. A termination statement signed by a person other than 20 the secured party of record must be accompanied by a separate 21 written statement of assignment signed by the secured party 22 of record. If the affected secured party fails to file such 23 a termination statement as required by this subsection, or to 24 send such a termination statement within 10 days after proper 25 demand therefor, he shall be liable to the debtor for $100 26 and in addition for any loss caused to the debtor by such 27 failure. 28 (2) On presentation to the filing officer of such a 29 termination statement he must note it in the index. If he has 30 received the termination statement in duplicate, he shall 31 return one copy of the termination statement to the secured 32 party stamped to show the time of receipt thereof. If the 33 filing officer has a microfilm or other photographic record 34 of the financing statement, and of any related continuation SB1231 Engrossed -321- LRB9106284WHdv 1 statement, statement of assignment and statement of release, 2 he may remove the originals from the files at any time after 3 receipt of the termination statement, or if he has no such 4 record, he may remove them from the files at any time after 5 one year after receipt of the termination statement. 6 (3) If the termination statement is in the standard form 7 prescribed by the Secretary of State, the uniform fee for 8 filing and indexing the termination statement in the office 9 of a county recorder shall be $5 and otherwise shall be $10, 10 plus in each case an additional fee of $5 for each name more 11 than one at each address listed against which the termination 12 statement is required to be indexed. 13 Section 40. The Toxic Substances Disclosure to Employees 14 Act is amended by changing Section 6 as follows: 15 (820 ILCS 255/6) (from Ch. 48, par. 1406) 16 Sec. 6. Exemptions. This Act shall not apply to: 17 (a) Use of toxic substances, compounds or mixtures 18 regulated by this Act which are: 19 (1) Intended for personal consumption by employees in 20 the workplace. 21 (2) Consumer goods used, stored or sold by an employer, 22 manufacturer, importer, retailer or supplier in the same 23 form, approximate amount, concentration and manner as they 24 are sold to consumers, provided that employee exposure to 25 such consumer goods is not significantly greater than 26 consumer exposure occurring during the principal consumer 27 uses of the consumer goods. For purposes of this Act, 28 "consumer goods" shall be defined as in Section 9-1029-109.129 of the Uniform Commercial Code. 30 (3) Present in a concentration of less than 1%. In the 31 cases of carcinogens, mutagens or teratogens, only those 32 substances shall be exempt which are present in a SB1231 Engrossed -322- LRB9106284WHdv 1 concentration of 0.1% or less. No substance shall be exempt 2 under this paragraph which is present in concentrations 3 exceeding threshold concentrations established by regulation 4 of the Department. 5 (b) Laboratories in which a toxic substance, compound or 6 mixture regulated by this Act is used by or under the direct 7 supervision of a technically qualified individual, provided 8 that the toxic substance or mixture is not produced in the 9 laboratories for commercial sale. The Department shall 10 promulgate rules prescribing the standards used in 11 determining whether a laboratory is under the direct 12 supervision of a technically qualified individual. 13 (c) All retail trade establishments as listed in the 14 "Standard Industrial Classification Manual" Division G, 15 Retail Trade, published by the U.S. Government Printing 16 Office, except the Act shall apply to those retail trade 17 establishments listed within Major Groups: 52 - Building 18 Materials, Hardware, Garden Supply, and Mobile Home Dealers; 19 and 55 - Automotive Dealers and Gasoline Service Stations, 20 except for those activities involving the retail sales of 21 gasoline motor fuels or lubricants, or if the retail trade 22 establishments are engaged in any of the following specific 23 activities, this Act shall apply only to the retail trade 24 establishments' involvement in such specific activities: 25 paint mixing, other than the tinting of consumer sized 26 containers of paint; finishing or refinishing operations 27 using paint or paint related products; automobile battery 28 servicing, photo finishing operations; and dry cleaning 29 operations. 30 (Source: P.A. 85-506.) 31 Section 99. Effective date. This Act takes effect on 32 July 1, 2001, except that this Section and Sections 31 and 37 33 take effect upon becoming law.