Chapter 2 - Effectiveness of Security Agreement: Attachment of Security Interest: Rights of Parties to Security Agreement

California Commercial Code — §§ 9201-9210

Sections (10)

Amended by Stats. 2019, Ch. 143, Sec. 20. (SB 251) Effective January 1, 2020.

(a)Except as otherwise provided in this code, a security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.

(b)A transaction subject to this division is subject to any applicable rule of law which establishes a different rule for consumers; to Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code; Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code; the Retail Installment Sales Act, Chapter 1 (commencing with Section 1801) of Title 2 of Part 4 of Division 3 of the Civil Code; the Automobile Sales Finance Act, Chapter 2b (commencing with Section 2981)

of Title 14 of Part 4 of Division 3 of the Civil Code; Part 4 (commencing with Section 1738) of Division 3 of the Civil Code, with respect to the applicable provisions of Titles 1 (commencing with Section 1738), 1.3 (commencing with Section 1747), 1.3A (commencing with Section 1748.10), 1.3B (commencing with Section 1748.20), 1.4 (commencing with Section 1749), 1.5 (commencing with Section 1750), 1.6 (commencing with Section 1785.1), 1.61 (commencing with Section 1785.41), 1.6A (commencing with Section 1786), 1.6B (commencing with Section 1787.1), 1.6C (commencing with Section 1788), 1.6D (commencing with Section 1789), 1.6E (commencing with Section 1789.10), 1.6F (commencing with Section 1789.30), 1.7 (commencing with Section 1790), 1.8 (commencing with Section 1798), 1.83 (commencing with Section 1799.5), 1.84 (commencing with Section 1799.8), 1.85 (commencing with Section 1799.90), 1.86 (commencing with Section 1799.200), 2 (commencing with Section 1801), 2.4 (commencing with Section 1812.50), 2.5

(commencing with Section 1812.80), 2.6 (commencing with Section 1812.100), 2.7 (commencing with Section 1812.200), 2.8 (commencing with Section 1812.300), 2.9 (commencing with Section 1812.400), 2.95 (commencing with Section 1812.600), 2.96 (commencing with Section 1812.620), 3 (commencing with Section 1813), 4 (commencing with Section 1884), and 14 (commencing with Section 2872); the Industrial Loan Law, Division 7 (commencing with Section 18000) of the Financial Code; the Pawnbroker Law, Division 8 (commencing with Section 21000) of the Financial Code; the California Financing Law, Division 9 (commencing with Section 22000) of the Financial Code; and the Mobilehomes-Manufactured Housing Act of 1980, Part 2 (commencing with Section 18000) of Division 13 of the Health and Safety Code; and to any applicable consumer protection statute, regulation, or law.

(c)In case of conflict between this division and a rule of law, statute, or regulation

described in subdivision (b), the rule of law, statute, or regulation controls. Failure to comply with a statute or regulation described in subdivision (b) has only the effect the statute or regulation specifies.

(d)This division does not do either of the following:

(1)Validate any rate, charge, agreement, or practice that violates a rule of law, statute, or regulation described in subdivision (b).

(2)Extend the application of the rule of law, statute, or regulation to a transaction not otherwise subject to it.

§ 9202

Repealed and added by Stats. 1999, Ch. 991, Sec. 35. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991 and Section 9701.

Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of this article with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.

§ 9203

Amended by Stats. 2023, Ch. 210, Sec. 30. (SB 95) Effective January 1, 2024.

(a)A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.

(b)Except as otherwise provided in subdivisions (c) to (i), inclusive, a security interest is enforceable against the debtor and third parties with respect to the collateral only if each of the following conditions is satisfied:

(1)Value has been given.

(2)The debtor has rights in the collateral or the power to transfer rights in the

collateral to a secured party.

(3)One of the following conditions is met:

(A)The debtor has signed a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned.

(B)The collateral is not a certificated security and is in the possession of the secured party under Section 9313 pursuant to the debtor’s security agreement.

(C)The collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under Section 8301 pursuant to the debtor’s security agreement.

(D)The

collateral is controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property, or letter-of-credit rights and the secured party has control under Section 7106, 9104, 9105.1, 9106, 9107, or 9107.1 pursuant to the debtor’s security agreement.

(E)The collateral is chattel paper and the secured party has possession and control under Section 9314.1 pursuant to the debtor’s security agreement.

(c)Subdivision (b) is subject to Section 4210 on the security interest of a collecting bank, Section 5118 on the security interest of a letter-of-credit issuer or nominated person, Section 9110 on a security interest arising under Division 2 (commencing with Section 2101) or Division

10 (commencing with Section 10101), and Section 9206 on security interests in investment property.

(d)A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this division or by contract, either of the following conditions is satisfied:

(1)The security agreement becomes effective to create a security interest in the person’s property.

(2)The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

(e)If a new debtor becomes

bound as debtor by a security agreement entered into by another person, both of the following apply:

(1)The agreement satisfies paragraph (3) of subdivision (b) with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement.

(2)Another agreement is not necessary to make a security interest in the property enforceable.

(f)The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by Section 9315 and is also attachment of a security interest in a supporting obligation for the collateral.

(g)The attachment of a security interest in a right to

payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.

(h)The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.

(i)The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.

§ 9204

Amended by Stats. 2023, Ch. 210, Sec. 31. (SB 95) Effective January 1, 2024.

(a)Except as otherwise provided in subdivision (b), a security agreement may create or provide for a security interest in after-acquired collateral.

(b)Subject to subdivision (c), a security interest does not attach under a term constituting an after-acquired property clause to either of the following:

(1)Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value.

(2)A commercial tort claim.

(c)Subdivision (b) does not prevent a security interest from attaching to any of the following:

(1)Consumer goods as proceeds under subdivision (a) of Section 9315 or commingled goods under subdivision (c) of Section 9336.

(2)A commercial tort claim as proceeds under subdivision (a) of Section 9315.

(3)Property that is the proceeds of consumer goods or a commercial tort claim under an after-acquired property clause.

(d)A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or

other value, whether or not the advances or value are given pursuant to commitment.

§ 9205

Amended (as to be added by Stats. 1999, Ch. 991) by Stats. 2000, Ch. 1003, Sec. 8. Effective January 1, 2001. Addition and amendment operative July 1, 2001, by Stats. 1999, Ch. 991, Sec. 75, and Stats. 2000, Ch. 1003, Sec. 56.

(a)A security interest is not invalid or fraudulent against creditors solely because either of the following applies:

(1)The debtor has the right or ability to do any of the following:

(A)Use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods.

(B)Collect, compromise, enforce, or otherwise deal with collateral.

(C)Accept the return of collateral or make repossessions.

(D)Use, commingle, or dispose of proceeds.

(2)The secured party fails to require the debtor to account for proceeds or replace collateral.

(b)This section does not relax the requirements of possession if attachment, perfection, or enforcement of a security interest depends upon possession of the collateral by the secured party.

§ 9206

Repealed and added by Stats. 1999, Ch. 991, Sec. 35. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991 and Section 9701.

(a)A security interest in favor of a securities intermediary attaches to a person’s security entitlement if both of the following conditions are satisfied:

(1)The person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase.

(2)The securities intermediary credits the financial asset to the buyer’s securities account before the buyer pays the securities intermediary.

(b)The security interest described in subdivision (a) secures the person’s obligation to pay for the financial asset.

(c)A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if both of the following conditions are satisfied:

(1)The security or other financial asset satisfies both of the following:

(A)In the ordinary course of business it is transferred by delivery with any necessary endorsement or assignment.

(B)It is delivered under an agreement between persons in the business of dealing with those securities or financial assets.

(2)The agreement calls for delivery against payment.

(d)The security interest described in subdivision (c) secures the obligation to make payment for the delivery.

§ 9207

Amended by Stats. 2023, Ch. 210, Sec. 32. (SB 95) Effective January 1, 2024.

(a)Except as otherwise provided in subdivision (d), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party’s possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

(b)Except as otherwise provided in subdivision (d), if a secured party has possession of collateral, all of the following apply:

(1)Reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation,

use, or operation of the collateral are chargeable to the debtor and are secured by the collateral.

(2)The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage.

(3)The secured party shall keep the collateral identifiable, but fungible collateral may be commingled.

(4)The secured party may use or operate the collateral for any of the following purposes:

(A)For the purpose of preserving the collateral or its value.

(B)As permitted by an order of a court having competent jurisdiction.

(C)Except in the case of consumer goods, in the manner and to the extent agreed by the debtor.

(c)Except as otherwise provided in subdivision (d), a secured party having possession of collateral or control of collateral under Section 7106, 9104, 9105, 9105.1, 9106, 9107, or 9107.1 may or shall, as the case may be, do all of the following:

(1)May hold as additional security any proceeds, except money or funds, received from the collateral.

(2)Shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor.

(3)May create a security interest in the collateral.

(d)If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, both of the following apply:

(1)Subdivision (a) does not apply unless the secured party is entitled under an agreement to either of the following:

(A)To charge back uncollected collateral.

(B)Otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral.

(2)Subdivisions (b) and (c) do not apply.

§ 9208

Amended by Stats. 2023, Ch. 210, Sec. 33. (SB 95) Effective January 1, 2024.

(a)This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.

(b)Within 10 days after receiving a signed demand by the debtor, all of the following apply:

(1)A secured party having control of a deposit account under paragraph (2) of subdivision (a) of Section 9104 shall send to the bank with which the deposit account is maintained

a signed record that releases the bank from any further obligation to comply with instructions originated by the secured party.

(2)A secured party having control of a deposit account under paragraph (3) of subdivision (a) of Section 9104 shall do either of the following:

(A)Pay the debtor the balance on deposit in the deposit account.

(B)Transfer the balance on deposit into a deposit account in the debtor’s name.

(3)A secured party, other than a buyer, having control under Section 9105 of an authoritative electronic copy of a record evidencing chattel paper shall transfer control of the electronic copy to the debtor or a person

designated by the debtor.

(4)A secured party having control of investment property under paragraph (2) of subdivision (d) of Section 8106 or under subdivision (b) of Section 9106 shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained a signed record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party.

(5)A secured party having control of a letter-of-credit right under Section 9107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party a signed release from any further obligation to pay or

deliver proceeds of the letter of credit to the secured party.

(6)A secured party having control under Section 7106 of an authoritative electronic copy of an electronic document of title shall transfer control of the electronic copy to the debtor or a person designated by the debtor.

(7)A secured party having control under Section 9105.1 of electronic money shall transfer control of the electronic money to the debtor or a person designated by the debtor.

(8)A secured party having control under Section 12105 of a controllable electronic record, other than a buyer of a controllable account or controllable payment intangible evidenced by the controllable electronic record, shall transfer control of the controllable

electronic record to the debtor or a person designated by the debtor.

§ 9209

Amended by Stats. 2023, Ch. 210, Sec. 34. (SB 95) Effective January 1, 2024.

(a)Except as otherwise provided in subdivision (c), this section applies if both of the following conditions are satisfied:

(1)There is no outstanding secured obligation.

(2)The secured party is not committed to make advances, incur obligations, or otherwise give value.

(b)Within 10 days after receiving a signed demand by the debtor, a secured party shall send to an account debtor that has received notification under subdivision (a) of Section 9406 or subdivision (b) of Section 12106 of an assignment to the secured party as

assignee a signed record that releases the account debtor from any further obligation to the secured party.

(c)This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.

§ 9210

Amended by Stats. 2023, Ch. 210, Sec. 35. (SB 95) Effective January 1, 2024.

(a)In this section:

(1)“Request” means a record of a type described in paragraph (2), (3), or (4).

(2)“Request for an accounting” means a record signed by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request.

(3)“Request regarding a list of collateral” means a record

signed by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request.

(4)“Request regarding a statement of account” means a record signed by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.

(b)Subject to subdivisions (c), (d), (e), and (f), a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a

consignor, shall comply with a request within 14 days after receipt as follows:

(1)In the case of a request for an accounting, by signing and sending to the debtor an accounting.

(2)In the case of a request regarding a list of collateral or a request regarding a statement of account, by signing and sending to the debtor an approval or correction.

(c)A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor a signed record including a statement to that effect within 14 days after receipt.

(d)A person that receives a request

regarding a list of collateral, claims no interest in the collateral when it receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor a signed record that contains both of the following:

(1)It disclaims any interest in the collateral.

(2)If known to the recipient, it provides the name and mailing address of any assignee of or successor to the recipient’s interest in the collateral.

(e)A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier

time shall comply with the request within 14 days after receipt by sending to the debtor a signed record that contains both of the following:

(1)It disclaims any interest in the obligations.

(2)If known to the recipient, it provides the name and mailing address of any assignee of or successor to the recipient’s interest in the obligations.

(f)A debtor is entitled without charge to one response to a request under this section during any six-month period. The secured party may require payment of a charge not exceeding twenty-five dollars ($25) for each additional response.