Source: https://leg.mt.gov/bills/1997/Bills/House/HB0426_01.htm
Timestamp: 2018-07-17 17:16:46
Document Index: 463868487

Matched Legal Cases: ['art 3', 'art 5', 'art 6', 'art 2', 'art 4', 'arts 5', 'art 4', 'art 1', 'art 1']

A Bill for an Act entitled: "An Act generally revising the uniform commercial code; replacing the former laws governing letters of credit with updated laws; conforming the laws governing letters of credit to current usage and practice; accommodating new forms of letters of credit, particularly the use of electronic media; maintaining letters of credit as an inexpensive and efficient instrument for facilitating trade; replacing the former laws governing investment securities with updated laws; addressing securities holding through securities intermediaries; providing a modern legal structure for current securities holding practices; providing rules for determining rights under the indirect holding of securities; revising other laws to reflect the revisions to the laws governing letters of credit and investment securities; amending sections 30-1-105, 30-1-206, 30-2-512, 30-3-124, 30-4-104, 30-9-103, 30-9-104, 30-9-105, 30-9-106, 30-9-203, 30-9-301, 30-9-302, 30-9-303, 30-9-304, 30-9-305, 30-9-306, 30-9-309, 30-9-312, and 32-1-426, MCA; and repealing sections 30-5-102, 30-5-103, 30-5-104, 30-5-105, 30-5-106, 30-5-107, 30-5-108, 30-5-109, 30-5-110, 30-5-111, 30-5-112, 30-5-113, 30-5-114, 30-5-115, 30-5-116, 30-5-117, 30-8-102, 30-8-103, 30-8-104, 30-8-105, 30-8-106, 30-8-107, 30-8-108, 30-8-201, 30-8-202, 30-8-203, 30-8-204, 30-8-205, 30-8-206, 30-8-207, 30-8-208, 30-8-301, 30-8-302, 30-8-303, 30-8-304, 30-8-305, 30-8-306, 30-8-307, 30-8-308, 30-8-309, 30-8-310, 30-8-311, 30-8-312, 30-8-313, 30-8-314, 30-8-315, 30-8-316, 30-8-317, 30-8-318, 30-8-319, 30-8-320, 30-8-321, 30-8-401, 30-8-402, 30-8-403, 30-8-404, 30-8-405, 30-8-406, 30-8-407, 30-8-408, 30-10-401, 30-10-402, 30-10-403, 30-10-404, 30-10-405, 30-10-406, 30-10-407, 30-10-408, 30-10-409, 30-10-410, and 30-10-411, MCA."
Section 1. Section 30-1-105, MCA, is amended to read:
"30-1-105. Territorial application of the code -- parties' power to choose applicable law. (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of such the other state or nation shall govern their rights and duties. Failing such agreement, this code applies to transactions bearing an appropriate relation to this state.
(2) Where one of the following provisions of this code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods. 30-2-402.
Applicability of the Chapter on Leases. 30-2A-105 and 30-2A-106.
Applicability of the Chapter on Bank Deposits and Collections. 30-4-102.
Governing law in the Chapter on Funds Transfers. 30-4A-507.
Letters of Credit. [Section 20].
Applicability of the Chapter on Investment Securities. 30-8-106 [section 30].
Perfection provisions of the Chapter on Secured Transactions. 30-9-103."
Section 2. Section 30-1-206, MCA, is amended to read:
"30-1-206. Statute of frauds for kinds of personal property not otherwise covered. (1) Except in the cases described in subsection (2) of this section a contract for the sale of personal property is not enforceable by way of action or defense beyond $5,000 in amount or value of remedy unless there is some writing which indicates that a contract for sale has been made between the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the party against whom enforcement is sought or by his the party's authorized agent.
(2) Subsection (1) of this section does not apply to contracts for the sale of goods (30-2-201) nor of securities (30-8-319 [section 33]) nor to security agreements (30-9-203)."
Section 3. Section 30-2-512, MCA, is amended to read:
"30-2-512. Payment by buyer before inspection. (1) Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless:
(b) despite tender of the required documents the circumstances would justify injunction against honor under the provisions of this code (30-5-114 [section 13(2)]).
(2) Payment pursuant to subsection (1) does not constitute an acceptance of goods or impair the buyer's right to inspect or any of his the buyer's remedies."
Section 4. Section 30-3-124, MCA, is amended to read:
"30-3-124. Subject matter. (1) This chapter applies to negotiable instruments. It does not apply to money or to payment orders governed by chapter 4A. A negotiable instrument that is also a certificated security under 30-8-102(1)(a) [section 22(1)(d)] is subject to chapter 8 and to this chapter.
(2) In the event of conflict between the provisions of this chapter and those of chapter 4, chapter 8, or chapter 9, the provisions of chapter 4, chapter 8, and chapter 9 prevail over those of this chapter.
(3) Regulations of the board of governors of the federal reserve system and operating circulars of the federal reserve banks supersede any inconsistent provision of this chapter to the extent of the inconsistency."
Section 5. Section 30-4-104, MCA, is amended to read:
"30-4-104. Definitions and index of definitions. (1) In this chapter, unless the context otherwise requires:
(a) "account" means any deposit or credit account with a bank and includes a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;
(b) "afternoon" means the period of a day between noon and midnight;
(c) "banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;
(d) "clearinghouse" means an association of banks or other payors regularly clearing items;
(e) "customer" means a person having an account with a bank or for whom a bank has agreed to collect items and includes a bank maintaining an account at another bank;
(f) "documentary draft" means a draft to be presented for acceptance or payment if specified documents, certificated securities ([section 22]) or transfer statements instructions for uncertificated securities ([section 22]), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;
(g) "draft" means a draft as defined in 30-3-104 or an item, other than an instrument, that is an order;
(h) "item" means an instrument or a promise or an order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by chapter 4A or a credit or debit card slip.
(i) "midnight deadline" with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;
(j) "settle" means to pay in cash, by clearinghouse settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final.
(k) "suspends payments" with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.
"Bank". 30-4-105.
"Collecting bank". 30-4-105.
"Depositary bank". 30-4-105.
"Intermediary bank". 30-4-105.
"Payor bank". 30-4-105.
"Presenting bank". 30-4-105.
"Presentment notice". 30-4-111.
"Acceptance". 30-3-410.
"Alteration". 30-3-407.
"Cashier's check". 30-3-104.
"Certificate of deposit". 30-3-104.
"Certified check". 30-3-410.
"Check". 30-3-104.
"Drawee". 30-3-102.
"Good faith". 30-3-102.
"Holder in due course". 30-3-302.
"Instrument". 30-3-104.
"Notice of dishonor". 30-3-508.
"Order". 30-3-102.
"Ordinary care". 30-3-102.
"Person entitled to enforce". 30-3-301.
"Presentment". 30-3-504.
"Promise". 30-3-102.
"Prove". 30-3-102.
"Teller's check". 30-3-104.
"Unauthorized signature". 30-3-404.
(4) In addition, chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter."
NEW SECTION. Section 6. Definitions. (1) In this chapter:
(f)(i) "Document" means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion:
(A) which is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in [section 12(5)]; and
(B) which is capable of being examined for compliance with the terms and conditions of the letter of credit.
(ii) A document may not be oral.
(h) "Honor" of a letter of credit means performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, "honor" occurs:
(j) "Letter of credit" means a definite undertaking that satisfies the requirements of [section 8] by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.
(i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit; and
(ii) undertakes by agreement or custom and practice to reimburse.
"Accept" or "Acceptance" 30-3-410
"Value" 30-3-303, 30-4-209
(3) Chapter 1 contains certain additional general definitions and principles of construction and interpretation applicable throughout this chapter.
NEW SECTION. Section 7. Scope. (1) This chapter applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.
(3) With the exception of this subsection, subsections (1) and (4), [sections 6(1)(i) and (1)(j), 10(4), and 18(4)], and except to the extent prohibited in 30-1-102(3) and [section 21(4)], the effect of this chapter may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this chapter.
NEW SECTION. Section 8. Formal requirements. A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated:
(1) by a signature; or
(2) in accordance with the agreement of the parties or the standard practice referred to in [section 12(5)].
NEW SECTION. Section 9. Consideration. Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.
NEW SECTION. Section 10. Issuance, amendment, cancellation, and duration. (1) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides.
NEW SECTION. Section 11. Confirmer, nominated person, and adviser. (1) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.
(4) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under subsection (3). The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.
NEW SECTION. Section 12. Issuer's rights and obligations. (1) Except as otherwise provided in [section 13], an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection (5), appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in [section 17] and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.
(2) An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:
(a) to honor;
(b) if the letter of credit provides for honor to be completed more than 7 business days after presentation, to accept a draft or incur a deferred obligation; or
(3) Except as otherwise provided in subsection (4), an issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.
(4) Failure to give the notice specified in subsection (2) or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in [section 13(1)] or expiration of the letter of credit before presentation.
(5) An issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer's observance of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present evidence of the standard practice.
(6) An issuer is not responsible for:
(a) the performance or nonperformance of the underlying contract, arrangement, or transaction;
(b) an act or omission of others; or
(c) observance or knowledge of the usage of a particular trade other than the standard practice referred to in subsection (5).
(7) If an undertaking constituting a letter of credit under [section 6(1)(j)] contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.
(8) An issuer that has dishonored a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.
(9) An issuer that has honored a presentation as permitted or required by this chapter:
(c) is precluded from asserting a right of recourse on a draft under 30-3-414 and 30-3-415;
(d) except as otherwise provided in [sections 14 and 21], is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentation; and
NEW SECTION. Section 13. Fraud and forgery. (1) If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:
(a) the issuer shall honor the presentation, if honor is demanded by:
(i) a nominated person who has given value in good faith and without notice of forgery or material fraud;
(ii) a confirmer who has honored its confirmation in good faith;
(iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person; or
(iv) an assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and
(b) the issuer, acting in good faith, may honor or dishonor the presentation in any other case.
(2) If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:
(a) the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer;
(b) a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;
(c) all of the conditions to entitle a person to the relief under the law of this state have been met; and
(d) on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for protection under subsection (1)(a).
NEW SECTION. Section 14. Warranties. (1) If its presentation is honored, the beneficiary warrants:
(a) to the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in [section 13(1)]; and
(b) to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.
(2) The warranties in subsection (1) are in addition to warranties arising under chapters 3, 4, 7, and 8 because of the presentation or transfer of documents covered by any of those chapters.
NEW SECTION. Section 15. Remedies. (1) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer's obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant's election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document.
(2) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.
(3) If an adviser or nominated person other than a confirmer breaches an obligation under this chapter or an issuer breaches an obligation not covered in subsection (1) or (2), a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (1) and (2).
(4) An issuer, nominated person, or adviser who is found liable under subsection (1), (2), or (3) shall pay interest on the amount owed from the date of wrongful dishonor or other appropriate date.
(5) Reasonable attorney's fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this chapter.
(6) Damages that would otherwise be payable by a party for breach of an obligation under this chapter may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.
NEW SECTION. Section 16. Transfer of letter of credit. (1) Except as otherwise provided in [section 17], unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.
(2) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if:
(a) the transfer would violate applicable law; or
(b) the transferor or transferee has failed to comply with any requirement stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice referred to in [section 12(5)] or is otherwise reasonable under the circumstances.
NEW SECTION. Section 17. Transfer by operation of law. (1) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.
(2) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in subsection (5), an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice referred to in [section 12(5)] or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer.
(3) An issuer is not obliged to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized.
(4) Honor of a purported successor's apparently complying presentation under subsection (1) or (2) has the consequences specified in [section 12(9)] even if the purported successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary are forged documents for the purposes of [section 13].
(5) An issuer whose rights of reimbursement are not covered by subsection (4) or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (2).
(6) A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section.
NEW SECTION. Section 18. Assignment of proceeds. (1) (a) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit.
(b) The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.
(5) Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.
(6) Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by chapter 9 or other law. Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by chapter 9 or other law.
NEW SECTION. Section 19. Statute of limitations. An action to enforce a right or obligation arising under this chapter must be commenced within 1 year after the expiration date of the relevant letter of credit or 1 year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.
NEW SECTION. Section 20. Choice of law and forum. (1) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in [section 8] or by a provision in the person's letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.
(2) Unless subsection (1) applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person's undertaking. If more than one address is indicated, the person is considered to be located at the address from which the person's undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection.
(3) (a) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the Uniform Customs and Practice for Documentary Credits, to which the letter of credit, confirmation, or other undertaking is expressly made subject.
(b) The rules of custom and practice govern except to the extent of any conflict with the nonvariable provisions specified in [section 7(3)] if:
(i) this chapter would govern the liability of an issuer, nominated person, or adviser under subsection (1) or (2);
(ii) the relevant undertaking incorporates rules of custom or practice; and
(iii) there is conflict between this chapter and those rules as applied to that undertaking.
(4) If there is conflict between this chapter and chapter 3, 4, 4A, or 9, this chapter governs.
(5) The forum for settling disputes arising out of an undertaking within this chapter may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (1).
NEW SECTION. Section 21. Subrogation of issuer, applicant, and nominated person. (1) An issuer that honors a beneficiary's presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary and of the applicant to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.
(3) A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:
(4) Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections (1) and (2) do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (3) do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.
NEW SECTION. Section 22. Definitions. (1) In this chapter:
(b) "Bearer form" as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an indorsement.
(g) "Entitlement holder" means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of [section 61(2)(b) or (2)(c)], that person is the entitlement holder.
(i) (i) "Financial asset," except as otherwise provided in [section 23], means:
(B) an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or
(C) any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter.
(ii) As context requires, the term means either the interest itself or the means by which a person's claim to it is evidenced, including a certificated or uncertificated security, a security certificate, or a security entitlement.
(j) "Good faith," for purposes of the obligation of good faith in the performance or enforcement of contracts or duties within this chapter, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(o) "Security," except as otherwise provided in [section 23], means an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer:
(q) "Security entitlement" means the rights and property interest of an entitlement holder with respect to a financial asset specified in [sections 61 through 71].
"Appropriate person" [section 27]
"Control" [section 26]
"Delivery" [section 47]
"Investment company security" [section 23]
"Issuer" [section 37]
"Overissue" [section 46]
"Protected purchaser" [section 49]
"Securities account" [section 61]
(3) In addition, chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.
(4) The characterization of a person, business, or transaction for purposes of this chapter does not determine the characterization of the person, business, or transaction for purposes of any other law, regulation, or rule.
NEW SECTION. Section 23. Rules for determining whether certain obligations and interests are securities or financial assets. (1) A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.
(3) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.
(4) A writing that is a security certificate is governed by this chapter and not by chapter 3, even though it also meets the requirements of that chapter. However, a negotiable instrument governed by chapter 3 is a financial asset if it is held in a securities account.
(6) A commodity contract, as defined in [section 76], is not a security or a financial asset.
NEW SECTION. Section 24. Acquisition of security or financial asset or interest therein. (1) A person acquires a security or an interest therein, under this chapter, if:
(a) the person is a purchaser to whom a security is delivered pursuant to [section 47]; or
(b) the person acquires a security entitlement to the security pursuant to [section 61].
(2) A person acquires a financial asset, other than a security, or an interest therein, under this chapter, if the person acquires a security entitlement to the financial asset.
(3) A person who acquires a security entitlement to a security or other financial asset has the rights specified in [sections 61 through 71], but is a purchaser of any security, security entitlement, or other financial asset held by the securities intermediary only to the extent provided in [section 63].
(4) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule, or agreement to transfer, deliver, present, surrender, exchange, or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset pursuant to subsection (1) or (2).
NEW SECTION. Section 25. Notice of adverse claim. (1) A person has notice of an adverse claim if:
(a) 1 year after a date set for presentment or surrender for redemption or exchange; or
(b) 6 months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date.
(5) Filing of a financing statement under chapter 9 is not notice of an adverse claim to a financial asset.
NEW SECTION. Section 26. Control. (1) A purchaser has "control" of a certificated security in bearer form if the certificated security is delivered to the purchaser.
(2) A purchaser has "control" of a certificated security in registered form if the certificated security is delivered to the purchaser and:
(a) the purchaser becomes the entitlement holder; or
(6) A purchaser who has satisfied the requirements of subsection (3)(b) or (4)(b) has control even if the registered owner in the case of subsection (3)(b) or the entitlement holder in the case of subsection (4)(b) retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement.
(7) An issuer or a securities intermediary may not enter into an agreement of the kind described in subsection (3)(b) or (4)(b) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.
NEW SECTION. Section 27. Whether indorsement, instruction, or entitlement order is effective. (1) "Appropriate person" means:
(d) if the person designated in subsection (1)(a), (1)(b), or (1)(c) is deceased, the designated person's successor taking under other law or the designated person's personal representative acting for the estate of the decedent; or
(e) if the person designated in subsection (1)(a), (1)(b), or (1)(c) lacks capacity, the designated person's guardian, conservator, or other similar representative who has power under other law to transfer the security or financial asset.
(b) it is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under [section 26(3)(b) or (4)(b)]; or
NEW SECTION. Section 28. Warranties in direct holding. (1) A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an indorser, if the transfer is by indorsement, warrants to any subsequent purchaser that:
(8) A secured party who redelivers a security certificate received, or after payment and on order of the debtor delivers the security certificate to another person, makes only the warranties of an agent under subsection (7).
(9) Except as otherwise provided in subsection (7), a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subsections (1) through (6). A broker that delivers a security certificate to its customer, or causes its customer to be registered as the owner of an uncertificated security, makes to the customer the warranties provided in subsection (1) or (2) and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of the customer.
NEW SECTION. Section 29. Warranties in indirect holding. (1) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that:
(2) A person who delivers a security certificate to a securities intermediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated security be credited to a securities account makes to the securities intermediary the warranties specified in [section 28(1) or (2)].
(3) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in [section 28(1) or (2)].
NEW SECTION. Section 30. Applicability -- choice of law. (1) The local law of the issuer's jurisdiction, as specified in subsection (4), governs:
(2) The local law of the securities intermediary's jurisdiction, as specified in subsection (5), governs:
(4) "Issuer's jurisdiction" means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in subsections (1)(b) through (1)(e).
(a) If an agreement between the securities intermediary and its entitlement holder specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
(b) If an agreement between the securities intermediary and its entitlement holder does not specify the governing law as provided in subsection (5)(a), but expressly specifies that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary's jurisdiction.
(c) If an agreement between the securities intermediary and its entitlement holder does not specify a jurisdiction as provided in subsection (5)(a) or (5)(b), the securities intermediary's jurisdiction is the jurisdiction in which is located the office identified in an account statement as the office serving the entitlement holder's account.
(d) If an agreement between the securities intermediary and its entitlement holder does not specify a jurisdiction as provided in subsection (5)(a) or (5)(b) and an account statement does not identify an office serving the entitlement holder's account as provided in subsection (5)(c), the securities intermediary's jurisdiction is the jurisdiction in which is located the chief executive office of the securities intermediary.
NEW SECTION. Section 31. Clearing corporation rules. A rule adopted by a clearing corporation governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with this chapter and affects another party who does not consent to the rule.
NEW SECTION. Section 32. Creditor's legal process. (1) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subsection (4). However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.
(2) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in subsection (4).
(3) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor's securities account is maintained, except as otherwise provided in subsection (4).
NEW SECTION. Section 33. Statute of frauds inapplicable. A contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within 1 year of its making.
NEW SECTION. Section 34. Evidentiary rules concerning certificated securities. The following rules apply in an action on a certificated security against the issuer:
NEW SECTION. Section 35. Securities intermediary and others not liable to adverse claimant. A securities intermediary that has transferred a financial asset pursuant to an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, or broker or other agent or bailee:
(1) took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order, or other legal process;
NEW SECTION. Section 36. Securities intermediary as purchaser for value. A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitlement to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder.
NEW SECTION. Section 37. Issuer. (1) With respect to an obligation on or a defense to a security, an "issuer" includes a person that:
(3) With respect to a registration of a transfer, issuer means a person on whose behalf transfer books are maintained.
NEW SECTION. Section 38. Issuer's responsibility and defenses -- notice of defect or defense. (1) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture, or document or to a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument, indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the like, pursuant to which the security is issued.
(b) Subsection (2)(a) applies to an issuer that is a government or governmental subdivision, agency, or instrumentality only if there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.
(3) Except as otherwise provided in [section 41], lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.
NEW SECTION. Section 39. Staleness as notice of defect or defense. After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer, if the act or event:
(2) is not covered by subsection (1) and the purchaser takes the security more than 2 years after the date set for surrender or presentation or the date on which performance became due.
NEW SECTION. Section 40. Effect of issuer's restriction on transfer. A restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless:
NEW SECTION. Section 41. Effect of unauthorized signature on security certificate. An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security if the purchaser is without notice of the lack of authority and the signing has been done by:
(2) an employee of the issuer, or of any of the persons listed in subsection (1), entrusted with responsible handling of the security certificate.
NEW SECTION. Section 42. Completion of alteration of security certificate. (1) If a security certificate contains the signatures necessary to its issue or transfer but is incomplete in any other respect:
NEW SECTION. Section 43. Rights and duties of issuer with respect to registered owners. (1) Before due presentment for registration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, receive notifications, and otherwise exercise all the rights and powers of an owner.
(2) This chapter does not affect the liability of the registered owner of a security for a call, assessment, or the like.
NEW SECTION. Section 44. Effect of signature of authenticating trustee, registrar, or transfer agent. (1) A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security, if the purchaser is without notice of a particular defect, that:
(2) Unless otherwise agreed, a person signing under subsection (1) does not assume responsibility for the validity of the security in other respects.
NEW SECTION. Section 45. Issuer's lien. A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate.
NEW SECTION. Section 46. Overissue. (1) In this section, "overissue" means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue.
(2) Except as otherwise provided in subsections (3) and (4), the provisions of this chapter which validate a security or compel its issue or reissue do not apply to the extent that validation, issue, or reissue would result in overissue.
NEW SECTION. Section 47. Delivery. (1) Delivery of a certificated security to a purchaser occurs when:
(c) a securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and has been specially indorsed to the purchaser by an effective indorsement.
NEW SECTION. Section 48. Rights of purchaser. (1) Except as otherwise provided in subsections (2) and (3), upon delivery of a certificated or uncertificated security to a purchaser, the purchaser acquires all rights in the security that the transferor had or had power to transfer.
NEW SECTION. Section 49. Protected purchaser. (1) "Protected purchaser" means a purchaser of a certificated or uncertificated security, or of an interest therein, who:
NEW SECTION. Section 50. Indorsement. (1) An indorsement may be in blank or special. An indorsement in blank includes an indorsement to bearer. A special indorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank indorsement to a special indorsement.
(6) Unless otherwise agreed, a person making an indorsement assumes only the obligations provided in [section 28] and not an obligation that the security will be honored by the issuer.
NEW SECTION. Section 51. Instruction. (1) If an instruction has been originated by an appropriate person but is incomplete in any other respect, any person may complete it as authorized and the issuer may rely on it as completed, even though it has been completed incorrectly.
(2) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed by [section 28] and not an obligation that the security will be honored by the issuer.
NEW SECTION. Section 52. Effect of guaranteeing signature, indorsement, or instruction. (1) A person who guarantees a signature of an indorser of a security certificate warrants that at the time of signing:
(3) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (2) and also warrants that at the time the instruction is presented to the issuer:
(4) A guarantor under subsections (1) and (2) or a special guarantor under subsection (3) does not otherwise warrant the rightfulness of the transfer.
(5) A person who guarantees an indorsement of a security certificate makes the warranties of a signature guarantor under subsection (1) and also warrants the rightfulness of the transfer in all respects.
(6) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (3) and also warrants the rightfulness of the transfer in all respects.
NEW SECTION. Section 53. Purchaser's right to requisites for registration of transfer. Unless otherwise agreed, the transferor of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor need not comply unless the purchaser pays the necessary expenses. If the transferor fails within a reasonable time to comply with the demand, the purchaser may reject or rescind the transfer.
NEW SECTION. Section 54. Duty of issuer to register transfer. (1) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security, the issuer shall register the transfer as requested if:
(c) reasonable assurance is given that the indorsement or instruction is genuine and authorized ([section 55]);
(e) the transfer does not violate any restriction on transfer imposed by the issuer in accordance with [section 40];
(f) a demand that the issuer not register transfer has not become effective under [section 56], or the issuer has complied with [section 56(2)] but no legal process or indemnity bond is obtained as provided in [section 56(4)]; and
NEW SECTION. Section 55. Assurance that indorsement or instruction is effective. (1) An issuer may require the following assurance that each necessary indorsement or each instruction is genuine and authorized:
(c) if the indorsement is made or the instruction is originated by a fiduciary pursuant to [section 27(1)(d) or (1)(e)], appropriate evidence of appointment or incumbency;
NEW SECTION. Section 56. Demand that issuer not register transfer. (1) A person who is an appropriate person to make an indorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it.
(2) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to:
(a) the person who initiated the demand at the address provided in the demand; and
(b) the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating that:
(i) the certificated security has been presented for registration of transfer or the instruction for registration of transfer of the uncertificated security has been received;
(3) The period described in subsection (2)(b)(iii) may not exceed 30 days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.
NEW SECTION. Section 57. Wrongful registration. (1) Except as otherwise provided in [section 59], an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to it, and the transfer was registered:
(b) after a demand that the issuer not register transfer became effective under [section 56(1)] and the issuer did not comply with [section 56(2)];
(2) An issuer that is liable for wrongful registration of transfer under subsection (1) on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer's liability to provide the person with a like security is governed by [section 46].
(3) Except as otherwise provided in subsection (1) or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if registration was made pursuant to an effective indorsement or instruction.
NEW SECTION. Section 58. Replacement of lost, destroyed, or wrongfully taken security certificate. (1) If an owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed, or wrongfully taken, the issuer shall issue a new certificate if the owner:
(2) If, after the issue of a new security certificate, a protected purchaser of the original certificate presents it for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer's liability is governed by [section 46]. In addition to any rights on the indemnity bond, an issuer may recover the new certificate from a person to whom it was issued or any person taking under that person, except a protected purchaser.
NEW SECTION. Section 59. Obligation to notify issuer of lost, destroyed, or wrongfully taken security certificate. If a security certificate has been lost, apparently destroyed, or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after the owner has notice of it and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under [section 57] or a claim to a new security certificate under [section 58].
NEW SECTION. Section 60. Authenticating trustee, transfer agent, and registrar. A person acting as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions.
NEW SECTION. Section 61. Securities account -- acquisition of security entitlement from securities intermediary. (1) "Securities account" means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
(2) Except as otherwise provided in subsections (4) and (5), a person acquires a security entitlement if a securities intermediary:
(3) If a condition of subsection (2) has been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.
NEW SECTION. Section 62. Assertion of adverse claim against entitlement holder. An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who acquires a security entitlement under [section 61] for value and without notice of the adverse claim.
NEW SECTION. Section 63. Property interest of entitlement holder in financial asset held by securities intermediary. (1) To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in [section 71].
(2) An entitlement holder's property interest with respect to a particular financial asset under subsection (1) is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.
(3) An entitlement holder's property interest with respect to a particular financial asset under subsection (1) may be enforced against the securities intermediary only by exercise of the entitlement holder's rights under [sections 65 through 68].
(4) An entitlement holder's property interest with respect to a particular financial asset under subsection (1) may be enforced against a purchaser of the financial asset or interest therein only if:
(c) the securities intermediary violated its obligations under [section 64] by transferring the financial asset or interest therein to the purchaser; and
(d) the purchaser is not protected under subsection (6).
(5) The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitlement holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser.
(6) An action based on the entitlement holder's property interest with respect to a particular financial asset under subsection (1), whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary's obligations under [section 64].
NEW SECTION. Section 64. Duty of securities intermediary to maintain financial asset. (1) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has established in favor of its entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one or more other securities intermediaries.
(2) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant any security interests in a financial asset it is obligated to maintain pursuant to subsection (1).
(3) A securities intermediary satisfies the duty in subsection (1) if:
NEW SECTION. Section 65. Duty of securities intermediary with respect to payments and distributions. (1) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if:
NEW SECTION. Section 66. Duty of securities intermediary to exercise rights as directed by entitlement holder. A securities intermediary shall exercise rights with respect to a financial asset if directed to do so by an entitlement holder. A securities intermediary satisfies the duty if:
NEW SECTION. Section 67. Duty of securities intermediary to comply with entitlement order. (1) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if:
NEW SECTION. Section 68. Duty of securities intermediary to change entitlement holder's position to other form of security holding. A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible, or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if:
NEW SECTION. Section 69. Specification of duties of securities intermediary by other statute or regulation -- manner of performance of duties of securities intermediary and exercise of rights of entitlement holder. (1) If the substance of a duty imposed upon a securities intermediary by [sections 64 through 68] is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty.
(3) The obligation of a securities intermediary to perform the duties imposed by [sections 64 through 68] is subject to:
(4) [Sections 64 through 68] do not require a securities intermediary to take any action that is prohibited by other statute, regulation, or rule.
NEW SECTION. Section 70. Rights of purchaser of security entitlement from entitlement holder. (1) An action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.
(2) If an adverse claim could not have been asserted against an entitlement holder under [section 62], the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.
(3) In a case not covered by the priority rules in chapter 9, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Purchasers who have control rank equally, except that a securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.
NEW SECTION. Section 71. Priority among security interests and entitlement holders. (1) Except as otherwise provided in subsections (2) and (3), if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.
Section 72. Section 30-9-103, MCA, is amended to read:
"30-9-103. Perfection of security interests in multiple state transactions. (1) (a) Subsection (1) applies to documents and instruments and to goods other than those covered by a certificate of title described in subsection (2), mobile goods described in subsection (3), and minerals described in subsection (5).
(b) Except as otherwise provided in subsection (1), perfection and the effect of perfection or nonperfection of a security interest in collateral are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected.
(d) When collateral is brought into and kept in this state while subject to a security interest perfected under the law of the jurisdiction from which the collateral was removed, the security interest remains perfected, but if action is required by part 3 of this chapter to perfect the security interest:
(i) if the action is not taken before the expiration of the period of perfection in the other jurisdiction or the end of 4 months after the collateral is brought into this state, whichever period first expires, the security interest becomes unperfected at the end of that period and is thereafter considered to have been unperfected as against a person who became a purchaser after removal;
(ii) if the action is taken before the expiration of the period specified in (1)(d)(i), the security interest continues perfected thereafter;
(iii) for the purpose of priority over a buyer of consumer goods (30-9-307(2)), the period of the effectiveness of a filing in the jurisdiction from which the collateral is removed is governed by the rules with respect to perfection in (1)(d)(i) and (ii).
(2) (a) Subsection (2) applies to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection.
(b) Except as otherwise provided in subsection (2), perfection and the effect of perfection or nonperfection of the security interest are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until 4 months after the goods are removed from that jurisdiction and thereafter until the goods are registered in another jurisdiction, but in any event not beyond surrender of the certificate. After the expiration of that period, the goods are not covered by the certificate of title within the meaning of this section.
(c) Except with respect to the rights of a buyer described in (2)(d), a security interest, perfected in another jurisdiction otherwise than by notation on a certificate of title, in goods brought into this state and thereafter covered by a certificate of title issued by this state is subject to the rules stated in (1)(d).
(d) If goods are brought into this state while a security interest therein is perfected in any manner under the law of the jurisdiction from which the goods are removed and a certificate of title is issued by this state and the certificate does not show that the goods are subject to the security interest or that they may be subject to security interests not shown on the certificate, the security interest is subordinate to the rights of a buyer of the goods who is not in the business of selling goods of that kind to the extent that he the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest.
(3) (a) Subsection (3) applies to accounts (other than an account described in subsection (5) on minerals) and general intangibles (other than uncertificated securities) and to goods which are mobile and which are of a type normally used in more than one jurisdiction, such as motor vehicles, trailers, rolling stock, airplanes, shipping containers, road building and construction machinery, and commercial harvesting machinery, and the like, if the goods are equipment or are inventory leased or held for lease by the debtor to others and are not covered by a certificate of title described in subsection (2).
(c) If, however, the debtor is located in a jurisdiction which is not a part of the United States and which does not provide for perfection of the security interest by filing or recording in that jurisdiction, the law of the jurisdiction in the United States in which the debtor has its major executive office in the United States governs the perfection and the effect of perfection or nonperfection of the security interest through filing. In the alternative, if the debtor is located in a jurisdiction which is not a part of the United States or Canada and the collateral is accounts or general intangibles for money due or to become due, the security interest may be perfected by notification to the account debtor. As used in subsection (3)(c), "United States" includes its territories and possessions and the Commonwealth of Puerto Rico.
(d) A debtor shall be considered located at his the debtor's place of business if he the debtor has one, at his the chief executive office if he the debtor has more than one place of business, otherwise at his the debtor's residence. If, however, the debtor is a foreign air carrier under the Federal Aviation Act, it shall be considered located at the designated office of the agent upon whom service of process may be made on behalf of the foreign air carrier.
(e) A security interest perfected under the law of the jurisdiction of the location of the debtor is perfected until the expiration of 4 months after a change of the debtor's location to another jurisdiction or until perfection would have ceased by the law of the first jurisdiction, whichever period first expires. Unless perfected in the new jurisdiction before the end of that period, it becomes unperfected thereafter and is considered to have been unperfected as against a person who became a purchaser after the change.
(4) The rules stated for goods in subsection (1) apply to a possessory security interest in chattel paper. The rules stated for accounts in subsection (3) apply to a nonpossessory security interest in chattel paper, but the security interest may not be perfected by notification to the account debtor.
(5) Perfection and the effect of perfection or nonperfection of a security interest which is created by a debtor who has an interest in minerals or the like (including oil and gas) before extraction and which attaches thereto as extracted or which attaches to an account resulting from the sale thereof at the wellhead or minehead are governed by the law (including the conflict of laws rules) of the jurisdiction wherein the wellhead or minehead is located.
(6) (a) The law (including the conflict of laws rules) of the jurisdiction of organization of the issuer governs the perfection and the effect of perfection or nonperfection of a security interest in uncertificated securities. This subsection (6) applies to investment property.
(b) Except as otherwise provided in subsection (6)(f), during the time that a security certificate is located in a jurisdiction, perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security are governed by the local law of that jurisdiction.
(c) Except as otherwise provided in subsection (6)(f), perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security are governed by the local law of the issuer's jurisdiction as specified in [section 30(4)].
(d) Except as otherwise provided in subsection (6)(f), perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account are governed by the local law of the securities intermediary's jurisdiction as specified in [section 30(5)].
(e) Except as otherwise provided in subsection (6)(f), perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account are governed by the local law of the commodity intermediary's jurisdiction. The following rules determine a "commodity intermediary's jurisdiction" for purposes of this subsection (6)(e):
(i) If an agreement between the commodity intermediary and commodity customer specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(ii) If an agreement between the commodity intermediary and commodity customer does not specify the governing law as provided in subsection (6)(e)(i), but expressly specifies that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(iii) If an agreement between the commodity intermediary and commodity customer does not specify a jurisdiction as provided in subsections (6)(e)(i) or (6)(e)(ii), the commodity intermediary's jurisdiction is the jurisdiction in which is located the office identified in an account statement as the office serving the commodity customer's account.
(iv) If an agreement between the commodity intermediary and commodity customer does not specify a jurisdiction as provided in subsections (6)(e)(i) or (6)(e)(ii) and an account statement does not identify an office serving the commodity customer's account as provided in subsection (6)(e)(iii), the commodity intermediary's jurisdiction is the jurisdiction in which is located the chief executive office of the commodity intermediary.
(f) Perfection of a security interest by filing, automatic perfection of a security interest in investment property granted by a broker or securities intermediary, and automatic perfection of a security interest in a commodity contract or commodity account granted by a commodity intermediary are governed by the local law of the jurisdiction in which the debtor is located."
Section 73. Section 30-9-104, MCA, is amended to read:
"30-9-104. Transactions excluded from chapter. This chapter does not apply:
(1) to a security interest subject to any statute of the United States such as the Ship Mortgage Act, 1920, to the extent that the statute governs the rights of parties to and third parties affected by transactions in particular types of property;
(2) to a landlord's lien;
(3) to a lien given by statute or other rule of law for services or materials except as provided in 30-9-310 on priority of such liens;
(4) to a transfer of a claim for wages, salary, or other compensation of an employee;
(5) to a transfer by a government or governmental subdivision or agency;
(6) to a sale of accounts or chattel paper as part of a sale of the business out of which they arose, or an assignment of accounts or chattel paper which is for the purpose of collection only, or a transfer of a right to payment under a contract to an assignee who is also to do the performance under the contract, or a transfer of a single account to an assignee in whole or partial satisfaction of a preexisting indebtedness;
(7) to a transfer of an interest or claim in or under any policy of insurance, except as provided with respect to proceeds (30-9-306) and priorities in proceeds (30-9-312);
(8) to a right represented by a judgment (other than a judgment taken on a right to payment which was collateral);
(9) to any right of setoff;
(10) except to the extent that provision is made for fixtures in 30-9-313, to the creation or transfer of an interest in or lien on real estate, including a lease or rents under the lease;
(11) to a transfer in whole or in part of any claim arising out of tort;
(12) to a transfer of an interest in any deposit account (30-9-105(1)), except as provided with respect to proceeds (30-9-306) and priorities in proceeds (30-9-312); or
(13) to liquor in an agency liquor store as defined in 16-1-106; or
(14) to a transfer of an interest in a letter of credit other than the rights to proceeds of a written letter of credit."
Section 74. Section 30-9-105, MCA, is amended to read:
"30-9-105. Definitions and index of definitions. (1) In this chapter, the following definitions apply unless the context otherwise requires:
(a) "Account debtor" means the person who is obligated on an account, chattel paper, or general intangible.
(d) "Debtor" means the person who owes payment or other performance of the obligation secured, whether or not he owns or has rights in the collateral, and includes the seller of accounts or chattel paper. When the debtor and the owner of the collateral are not the same person, the term "debtor" means the owner of the collateral in any provision of the chapter dealing with the collateral, the obligor in any provision dealing with the obligation, and may include both where the context so requires.
(e) "Deposit account" means a demand, time, savings, passbook, or like account maintained with a bank, savings and loan association, credit union, or like organization, other than an account evidenced by a certificate of deposit.
(f) "Document" means document of title as defined in the general definitions of chapter 1 (30-1-201) and a receipt of the kind described in 30-7-201(2).
(h) "Goods" includes all things which are movable at the time the security interest attaches or which are fixtures (30-9-313), but does not include money, documents, instruments, investment property, accounts, chattel paper, general intangibles, or minerals or the like (including oil and gas) before extraction. "Goods" also includes standing timber that is to be cut and removed under a conveyance or contract for sale, the unborn young of animals, and growing crops.
(i) "Instrument" means a negotiable instrument (defined in 30-3-104), or a certificated security (defined in 30-8-102) or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in ordinary course of business transferred by delivery with any necessary endorsement or assignment. The term does not include investment property.
(k) An advance is made "pursuant to commitment" if the secured party has bound himself the secured party to make it, whether or not a subsequent event of default or other event not within his the secured party's control has relieved or may relieve him the secured party from his the secured party's obligation.
(l) "Security agreement" means an agreement which creates or provides for a security interest.
(m) "Secured party" means a lender, seller, or other person in whose favor there is a security interest, including a person to whom accounts or chattel paper have been sold. When the holders of obligations issued under an indenture of trust, equipment trust agreement, or the like are represented by a trustee or other person, the representative is the secured party.
(n) "Transmitting utility" means any person primarily engaged in the railroad, street railway, or trolley bus business; the electric or electronics communications transmission business; the transmission of goods by pipeline; or the transmission or the production and transmission of electricity, steam, gas, or water or the provision of sewer service.
"Account". 30-9-106.
"Attach". 30-9-203.
"Commodity contract". [section 76].
"Commodity customer". [section 76].
"Commodity intermediary". [section 76].
"Construction mortgage". 30-9-313(1).
"Consumer goods". 30-9-109(1).
"Control". [section 76].
"Equipment". 30-9-109(2).
"Farm products". 30-9-109(3).
"Fixture". 30-9-313(1).
"Fixture filing". 30-9-313.
"General intangibles". 30-9-106.
"Inventory". 30-9-109(4).
"Investment property". [section 76].
"Lien creditor". 30-9-301(3).
"Proceeds". 30-9-306(1).
"Purchase money security interest". 30-9-107.
"United States". 30-9-103.
"Broker". [section 22].
"Certificated security". [section 22].
"Clearing corporation". [section 22].
"Contract for sale". 30-2-106.
"Control". [section 26].
"Delivery". [section 47].
"Entitlement holder". [section 22].
"Financial asset". [section 22].
"Letter of credit". [section 6].
"Note". 30-3-104.
"Proceeds of a letter of credit". [section 18(1)].
"Sale". 30-2-106.
"Securities intermediary". [section 22].
"Security". [section 22].
"Security certificate". [section 22]
"Security entitlement". [section 22].
"Uncertificated security". [section 22].
(4) In addition Chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter."
Section 75. Section 30-9-106, MCA, is amended to read:
"30-9-106. Definitions -- "account" -- "general intangibles". "Account" means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance. "General intangibles" means any personal property (including things in action) other than goods, accounts, chattel paper, documents, instruments, investment property, rights to proceeds of written letters of credit, and money. All rights to payment earned or unearned under a charter or other contract involving the use or hire of a vessel and all rights incident to the charter or contract are accounts."
NEW SECTION. Section 76. Investment property. (1) In this chapter:
(a) "Commodity account" means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.
(b) "Commodity contract" means a commodity futures contract, an option on a commodity futures contract, a commodity option, or other contract that, in each case, is:
(i) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to the federal commodities laws; or
(ii) traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.
(c) "Commodity customer" means a person for whom a commodity intermediary carries a commodity contract on its books.
(d) "Commodity intermediary" means:
(i) a person who is registered as a futures commission merchant under the federal commodities laws; or
(ii) a person who in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to the federal commodities laws.
(e) "Control" with respect to a certificated security, uncertificated security, or security entitlement has the meaning specified in [section 26]. A secured party has control over a commodity contract if by agreement among the commodity customer, the commodity intermediary, and the secured party, the commodity intermediary has agreed that it will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer. If a commodity customer grants a security interest in a commodity contract to its own commodity intermediary, the commodity intermediary as secured party has control. A secured party has control over a securities account or commodity account if the secured party has control over all security entitlements or commodity contracts carried in the securities account or commodity account.
(f) "Investment property" means:
(i) a security, whether certificated or uncertificated;
(ii) a security entitlement;
(iii) a securities account;
(iv) a commodity contract; or
(v) a commodity account.
(2) Attachment or perfection of a security interest in a securities account is also attachment or perfection of a security interest in all security entitlements carried in the securities account. Attachment or perfection of a security interest in a commodity account is also attachment or perfection of a security interest in all commodity contracts carried in the commodity account.
(3) A description of collateral in a security agreement or financing statement is sufficient to create or perfect a security interest in a certificated security, uncertificated security, security entitlement, securities account, commodity contract, or commodity account whether it describes the collateral by those terms, or as investment property, or by description of the underlying security, financial asset, or commodity contract. A description of investment property collateral in a security agreement or financing statement is sufficient if it identifies the collateral by specific listing, by category, by quantity, by a computational or allocational formula or procedure, or by any other method, if the identity of the collateral is objectively determinable.
(4) Perfection of a security interest in investment property is governed by the following rules:
(a) A security interest in investment property may be perfected by control.
(b) Except as otherwise provided in subsections (4)(c) and (4)(d), a security interest in investment property may be perfected by filing.
(c) If the debtor is a broker or securities intermediary, a security interest in investment property is perfected when it attaches. The filing of a financing statement with respect to a security interest in investment property granted by a broker or securities intermediary has no effect for purposes of perfection or priority with respect to that security interest.
(d) If a debtor is a commodity intermediary, a security interest in a commodity contract or a commodity account is perfected when it attaches. The filing of a financing statement with respect to a security interest in a commodity contract or a commodity account granted by a commodity intermediary has no effect for purposes of perfection or priority with respect to that security interest.
(5) Priority between conflicting security interests in the same investment property is governed by the following rules:
(a) A security interest of a secured party who has control over investment property has priority over a security interest of a secured party who does not have control over the investment property.
(b) Except as otherwise provided in subsections (5)(c) and (5)(d), conflicting security interests of secured parties each of whom has control rank equally.
(c) Except as otherwise agreed by the securities intermediary, a security interest in a security entitlement or a securities account granted to the debtor's own securities intermediary has priority over any security interest granted by the debtor to another secured party.
(d) Except as otherwise agreed by the commodity intermediary, a security interest in a commodity contract or a commodity account granted to the debtor's own commodity intermediary has priority over any security interest granted by the debtor to another secured party.
(e) Conflicting security interests granted by a broker, a securities intermediary, or a commodity intermediary which are perfected without control rank equally.
(f) In all other cases, priority between conflicting security interests in investment property is governed by 30-9-312(5), (6), and (7). Section 30-9-312(4) does not apply to investment property.
(6) If a security certificate in registered form is delivered to a secured party pursuant to agreement, a written security agreement is not required for attachment or enforceability of the security interest, delivery suffices for perfection of the security interest, and the security interest has priority over a conflicting security interest perfected by means other than control, even if a necessary indorsement is lacking.
NEW SECTION. Section 77. Security interest arising in purchase or delivery of financial asset. (1) If a person buys a financial asset through a securities intermediary in a transaction in which the buyer is obligated to pay the purchase price to the securities intermediary at the time of the purchase, and the securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary, the securities intermediary has a security interest in the buyer's security entitlement securing the buyer's obligation to pay. A security agreement is not required for attachment or enforceability of the security interest, and the security interest is automatically perfected.
(2) If a certificated security, or other financial asset represented by a writing which in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment is delivered pursuant to an agreement between persons in the business of dealing with such securities or financial assets and the agreement calls for delivery versus payment, the person delivering the certificate or other financial asset has a security interest in the certificated security or other financial asset securing the seller's right to receive payment. A security agreement is not required for attachment or enforceability of the security interest, and the security interest is automatically perfected.
Section 78. Section 30-9-203, MCA, is amended to read:
"30-9-203. Attachment and enforceability of security interest -- proceeds, formal requisites. (1) Subject to the provisions of 30-4-208 on the security interest of a collecting bank, 30-8-321 [sections 76 and 77] on security interests in securities investment property, and 30-9-113 on a security interest arising under the Chapter on Sales, a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:
(a) the collateral is in the possession of the secured party pursuant to agreement, the collateral is investment property and the secured party has control pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned;
(3) Unless otherwise agreed a security agreement gives the secured party the rights to proceeds provided by 30-9-306.
(4) A transaction, although subject to this chapter, is also subject to Title 23, chapter 2, part 5, to Title 23, chapter 2, part 6, to Title 32, chapter 5, as enacted by Chapter 283, Laws of Montana 1959, to Title 31, chapter 1, part 2, as enacted by Chapter 282, Laws of Montana 1959, and to 81-8-301 through 81-8-305, Title 61, chapter 3, Title 16, chapters 1 through 6, and Title 31, chapter 1, part 4, as amended, and in the case of conflict between the provisions of this chapter and any such statute, the provisions of such statute control. Failure to comply with any applicable statute has only the effect which is specified therein."
Section 79. Section 30-9-301, MCA, is amended to read:
"30-9-301. Persons who take priority over unperfected security interests -- right of "lien creditor". (1) Except as otherwise provided in subsection (2), an unperfected security interest is subordinate to the rights of:
(a) persons entitled to priority under 30-9-312;
(b) a person who becomes a lien creditor before the security interest is perfected;
(c) in the case of goods, instruments, documents, and chattel paper, a person who is not a secured party and who is a transferee in bulk or other buyer not in ordinary course of business or is a buyer of farm products in ordinary course of business, to the extent that he the person gives value and receives delivery of the collateral without knowledge of the security interest and before it is perfected;
(d) in the case of accounts, and general intangibles, and investment property, a person who is not a secured party and who is a transferee to the extent that he the person gives value without knowledge of the security interest and before it is perfected.
(2) If the secured party files with respect to a purchase money security interest before or within 20 days after the debtor receives possession of the collateral, he the secured party takes priority over the rights of a transferee in bulk or of a lien creditor which arise between the time the security interest attaches and the time of filing.
(3) A "lien creditor" means a creditor who has acquired a lien on the property involved by attachment, levy, or the like and includes an assignee for benefit of creditors from the time of assignment and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment.
(4) A person who becomes a lien creditor while a security interest is perfected takes subject to the security interest only to the extent that it secures advances made before he the person becomes a lien creditor or within 45 days thereafter or made without knowledge of the lien or pursuant to a commitment entered into without knowledge of the lien."
Section 80. Section 30-9-302, MCA, is amended to read:
"30-9-302. When filing is required to perfect security interest -- security interests to which filing provisions of this chapter do not apply. (1) A financing statement must be filed to perfect all security interests except the following:
(a) a security interest in collateral in possession of the secured party under 30-9-305;
(b) a security interest temporarily perfected in instruments, certificated securities, or documents without delivery under 30-9-304 or in proceeds for a 10-day period under 30-9-306;
(c) a security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;
(d) a purchase money security interest in consumer goods; but filing is required for a motor vehicle required to be registered, and fixture filing is required for priority over conflicting interests in fixtures to the extent provided in 30-9-313;
(e) an assignment of accounts which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts of the assignor;
(f) a security interest of a collecting bank (30-4-208), in securities (30-8-321), or arising under the Chapter on Sales or covered in subsection (3) of this section;
(g) an assignment for the benefit of all creditors of the transferor, and subsequent transfers by the assignee thereunder;
(h) a security interest in investment property that is perfected without filing under [section 76 or 77].
(2) If a secured party assigns a perfected security interest, no filing under this chapter is required in order to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
(3) The filing of a financing statement otherwise required by this chapter is not necessary or effective to perfect a security interest in property subject to:
(a) a statute or treaty of the United States which provides for a national or international registration or a national or international certificate of title or which specifies a place of filing different from that specified in this chapter for filing of the security interest; or
(b) the following statutes of this state: Title 61, chapter 3; Title 23, chapter 2, parts 5 and 6; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of this chapter (part 4) apply to a security interest in that collateral created by him the person as debtor; or
(c) a certificate of title statute of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection (30-9-103(2)).
(4) Compliance with a statute or treaty described in subsection (3) is equivalent to the filing of a financing statement under this chapter, and a security interest in property subject to the statute or treaty can be perfected only by compliance therewith except as provided in 30-9-103 on multiple state transactions. Duration and renewal of perfection of a security interest perfected by compliance with the statute or treaty are governed by the provisions of the statute or treaty; in other respects the security interest is subject to this chapter."
Section 81. Section 30-9-303, MCA, is amended to read:
"30-9-303. When security interest is perfected -- continuity of perfection. (1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in [section 76], 30-9-302, 30-9-304, 30-9-305, and 30-9-306. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches.
(2) If a security interest is originally perfected in any way permitted under this chapter and is subsequently perfected in some other way under this chapter, without an intermediate period when it was unperfected, the security interest shall be deemed to be perfected continuously for the purposes of this chapter."
Section 82. Section 30-9-304, MCA, is amended to read:
"30-9-304. Perfection of security interest in instruments, documents, proceeds of a written letter of credit, and goods covered by documents -- perfection by permissive filing -- temporary perfection without filing or transfer of possession. (1) A security interest in chattel paper or negotiable documents may be perfected by filing. A security interest in the right to proceeds of a written letter of credit can be perfected only by the secured party's taking possession of the letter of credit. A security interest in money or instruments (other than certificated securities or instruments which constitute part of chattel paper) can be perfected only by the secured party's taking possession, except as provided in subsections (4) and (5) of this section and subsections (2) and (3) of 30-9-306 on proceeds.
(2) During the period that goods are in the possession of the issuer of a negotiable document therefor, a security interest in the goods is perfected by perfecting a security interest in the document, and any security interest in the goods otherwise perfected during such period is subject thereto.
(3) A security interest in goods in the possession of a bailee other than one who has issued a negotiable document therefor is perfected by issuance of a document in the name of the secured party or by the bailee's receipt of notification of the secured party's interest or by filing as to the goods.
(4) A security interest in instruments, (other than certificated securities), or negotiable documents is perfected without filing or the taking of possession for a period of 21 days from the time it attaches to the extent that it arises for new value given under a written security agreement.
(5) A security interest remains perfected for a period of 21 days without filing where a secured party having a perfected security interest in an instrument, (other than a certificated security), a negotiable document, or goods in possession of a bailee other than one who has issued a negotiable document therefor:
(a) makes available to the debtor the goods or documents representing the goods for the purpose of ultimate sale or exchange or for the purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange; but priority between conflicting security interests in the goods is subject to 30-9-312(3); or
(b) delivers the instrument or certificated security to the debtor for the purpose of ultimate sale or exchange or of presentation, collection, renewal or registration of transfer.
(6) After the 21-day period in subsections (4) and (5), perfection depends upon compliance with applicable provisions of this chapter."
Section 83. Section 30-9-305, MCA, is amended to read:
"30-9-305. When possession by secured party perfects security interest without filing. A security interest in letters of credit and advices of credit (subsection 30-5-116(2)(a)), goods, instruments (other than certificated securities), money, negotiable documents, or chattel paper may be perfected by the secured party's taking possession of the collateral. A security interest in the right to proceeds of a written letter of credit may be perfected by the secured party's taking possession of the letter of credit. If such collateral other than goods covered by a negotiable document is held by a bailee, the secured party is deemed to have possession from the time the bailee receives notification of the secured party's interest. A security interest is perfected by possession from the time possession is taken without relation back and continues only so long as possession is retained, unless otherwise specified in this chapter. The security interest may be otherwise perfected as provided in this chapter before or after the period of possession by the secured party."
Section 84. Section 30-9-306, MCA, is amended to read:
"30-9-306. "Proceeds" -- secured party's rights on disposition of collateral. (1) "Proceeds" includes whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds. Insurance payable by reason of loss or damage to the collateral is proceeds, except to the extent that it is payable to a person other than a party to the security agreement. Any payments or distributions made with respect to investment property collateral are proceeds. Money, checks, deposit accounts, and the like are "cash proceeds". All other proceeds are "noncash proceeds".
(3) (a) The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected, but it ceases to be a perfected security interest and becomes unperfected 10 days after receipt of the proceeds by the debtor unless:
(i) a filed financing statement covers the original collateral and the proceeds are collateral in which a security interest may be perfected by filing in the office or offices where the financing statement has been filed and, if the proceeds are acquired with cash proceeds, the description of collateral in the financing statement indicates the types of property constituting the proceeds;
(ii) a filed financing statement covers the original collateral and the proceeds are identifiable cash proceeds; or
(iii) the original collateral was investment property and the proceeds are identifiable cash proceeds; or
(iii)(iv) the security interest in the proceeds is perfected before the expiration of the 10-day period.
(b) Except as provided in this section, a security interest in proceeds can be perfected only by the methods or under the circumstances permitted in this chapter for original collateral of the same type.
(4) In the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security interest in proceeds has a perfected security interest only in the following proceeds:
(a) in identifiable noncash proceeds and in separate deposit accounts containing only proceeds;
(b) in identifiable cash proceeds in the form of money which is neither commingled with other money nor deposited in a deposit account prior to the insolvency proceedings;
(c) in identifiable cash proceeds in the form of checks and the like which are not deposited in a deposit account prior to the insolvency proceedings; and
(d) in all cash and deposit accounts of the debtor in which proceeds have been commingled with other funds, but the perfected security interest under this paragraph subsection (4)(d) is:
(i) subject to any right of setoff; and
(ii) limited to an amount not greater than the amount of any cash proceeds received by the debtor within 10 days before the institution of the insolvency proceedings less the sum of:
(A) the payments to the secured party on account of cash proceeds received by the debtor during such period; and
(B) the cash proceeds received by the debtor during such period to which the secured party is entitled under subsections (4)(a) through (4)(c).
(5) If a sale of goods results in an account or chattel paper which is transferred by the seller to a secured party, and if the goods are returned to or are repossessed by the seller or the secured party, the following rules determine priorities:
(a) If the goods were collateral at the time of sale for an indebtedness of the seller which is still unpaid, the original security interest attaches again to the goods and continues as a perfected security interest if it was perfected at the time when the goods were sold. If the security interest was originally perfected by a filing which is still effective, nothing further is required to continue the perfected status; in any other case, the secured party must take possession of the returned or repossessed goods or must file.
(b) An unpaid transferee of the chattel paper has a security interest in the goods against the transferor. Such The security interest is prior to a security interest asserted under paragraph subsection (5)(a) to the extent that the transferee of the chattel paper was entitled to priority under 30-9-308.
(c) An unpaid transferee of the account has a security interest in the goods against the transferor. Such The security interest is subordinate to a security interest asserted under paragraph subsection (5)(a).
(d) A security interest of an unpaid transferee asserted under paragraph subsection (5)(b) or (5)(c) must be perfected for protection against creditors of the transferor and purchasers of the returned or repossessed goods."
Section 85. Section 30-9-309, MCA, is amended to read:
"30-9-309. Protection of purchasers of instruments, documents, and securities. Nothing in this chapter limits the rights of a holder in due course of a negotiable instrument (30-3-302) or a holder to whom a negotiable document of title has been duly negotiated (30-7-501) or a bona fide protected purchaser of a security (30-8-302 [section 49]), and such the holders or purchasers take priority over an earlier security interest even though perfected. Filing under this chapter does not constitute notice of the security interest to such the holders or purchasers."
Section 86. Section 30-9-312, MCA, is amended to read:
"30-9-312. Priorities among conflicting security interests in the same collateral. (1) The rules of priority stated in other sections of this part and in the following sections shall govern where applicable: 30-4-208 30-4-210 with respect to the security interest of collecting banks in items being collected, accompanying documents, and proceeds; 30-9-103 on security interests related to other jurisdictions; and 30-9-114 on consignments; and [section 76] on security interests in investment property.
(2) A perfected security interest in crops for new value given to enable the debtor to produce the crops during the production season and given not more than 3 months before the crops become growing crops by planting or otherwise takes priority over an earlier perfected security interest to the extent that such the earlier interest secures obligations due more than 6 months before the crops become growing crops by planting or otherwise, even though the person giving new value had knowledge of the earlier security interest.
(3) A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory and also has priority in identifiable cash proceeds received on or before the delivery of the inventory to a buyer if:
(b) the purchase money secured party gives notification in writing to the holder of the conflicting security interest if the holder had filed a financing statement covering the same types of inventory:
(i) before the date of the filing made by the purchase money secured party; or
(ii) before the beginning of the 21-day period if the purchase money security interest is temporarily perfected without filing or possession (30-9-304(5)); and
(c) the holder of the conflicting security interest receives notification within 5 years before the debtor receives possession of the inventory; and
(d) the notification states that the person giving the notice has or expects to acquire a purchase money security interest in inventory of the debtor, describing such the inventory by item or type.
(4) A purchase money security interest in collateral other than inventory has priority over a conflicting security interest in the same collateral or its proceeds if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within 20 days thereafter.
(5) In all cases not governed by other rules stated in this section (including cases of purchase money security interests which do not qualify for the special priorities set forth in subsections (3) and (4) of this section), priority between conflicting security interests in the same collateral shall must be determined according to the following rules:
(a) Conflicting security interests rank according to priority in the time of filing or perfection. Priority dates from the time a filing is first made covering the collateral or the time the security interest is first perfected, whichever is earlier, provided that there is no period thereafter when there is neither filing nor perfection.
(6) For the purposes of subsection (5), a date of filing or perfection as to collateral is also a date of filing or perfection as to proceeds.
(7) If future advances are made while a security interest is perfected by filing, the taking of possession, or under 30-8-321 on securities [section 76 or 77] on investment property, the security interest has the same priority for the purposes of subsection (5) or [section 76(5)] with respect to the future advances as it does with respect to the first advance. If a commitment is made before or while the security interest is so perfected, the security interest has the same priority with respect to advances made pursuant thereto. In other cases a perfected security interest has priority from the date the advance is made."
Section 87. Section 32-1-426, MCA, is amended to read:
"32-1-426. Deposit of securities in central depository. (1) Notwithstanding any other provision of law, any fiduciary, as defined in 32-1-425, holding securities in its fiduciary capacity, any bank or trust company holding securities as a custodian or managing agent, and any bank or trust company holding securities as custodian for a fiduciary is authorized to deposit or arrange for the deposit of the securities in a clearing corporation, as defined in 30-8-102 [section 22]. When the securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such the clearing corporation with any other such securities deposited in such the clearing corporation by any person regardless of the ownership of the securities, and certificates of small denomination may be merged into one or more certificates of larger denomination. The records of such the fiduciary and the records of such the bank or trust company acting as custodian, as managing agent, or a custodian for a fiduciary shall must at all times show the name of the party for whose account the securities are deposited. Title to the securities may be transferred by bookkeeping entry on the books of the clearing corporation without physical delivery of certificates representing such the securities. A bank or trust company so depositing securities pursuant to this section is subject to rules which in the case of state chartered institutions, the state banking board and, in the case of national banking associations, the comptroller of the currency, may from time to time adopt. A bank or trust company acting as custodian for a fiduciary shall, on demand of the fiduciary, certify in writing to the fiduciary the securities so deposited by the bank or trust company in the clearing corporation for the account of such the fiduciary. A fiduciary shall, on demand by any party to a judicial proceeding for the settlement of the fiduciary's account or on demand by the attorney for such the party, certify in writing to the party the securities deposited by the fiduciary in the clearing corporation for its account as such the fiduciary.
(2) This section shall apply applies to any fiduciary holding securities in its fiduciary capacity and to any bank or trust company holding securities as a custodian, managing agent, or custodian for a fiduciary acting on July 1, 1977, or who thereafter may act regardless of the date of the agreement, instrument, or court order by which it is appointed and regardless of whether or not such the fiduciary, custodian, managing agent, or custodian for a fiduciary owns capital stock of such the clearing corporation."
NEW SECTION. Section 88. Repealer. Sections 30-5-102, 30-5-103, 30-5-104, 30-5-105, 30-5-106, 30-5-107, 30-5-108, 30-5-109, 30-5-110, 30-5-111, 30-5-112, 30-5-113, 30-5-114, 30-5-115, 30-5-116, 30-5-117, 30-8-102, 30-8-103, 30-8-104, 30-8-105, 30-8-106, 30-8-107, 30-8-108, 30-8-201, 30-8-202, 30-8-203, 30-8-204, 30-8-205, 30-8-206, 30-8-207, 30-8-208, 30-8-301, 30-8-302, 30-8-303, 30-8-304, 30-8-305, 30-8-306, 30-8-307, 30-8-308, 30-8-309, 30-8-310, 30-8-311, 30-8-312, 30-8-313, 30-8-314, 30-8-315, 30-8-316, 30-8-317, 30-8-318, 30-8-319, 30-8-320, 30-8-321, 30-8-401, 30-8-402, 30-8-403, 30-8-404, 30-8-405, 30-8-406, 30-8-407, 30-8-408, 30-10-401, 30-10-402, 30-10-403, 30-10-404, 30-10-405, 30-10-406, 30-10-407, 30-10-408, 30-10-409, 30-10-410, and 30-10-411, MCA, are repealed.
NEW SECTION. Section 89. Codification instructions. (1) [Sections 6 through 21] are intended to be codified as an integral part of Title 30, chapter 5, and the provisions of Title 30, chapter 5, apply to [sections 6 through 21].
(2) [Sections 22 through 71] are intended to be codified as an integral part of Title 30, chapter 8, and the provisions of Title 30, chapter 5, apply to [sections 22 through 71].
(3) [Sections 76 and 77] are intended to be codified as an integral part of Title 30, chapter 9, part 1, and the provisions of Title 30, chapter 9, part 1, apply to [sections 76 and 77].