HBA-ATS S.B. 1058 76(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 1058
By: Carona
Business & Industry
5/6/1999
Engrossed


BACKGROUND & PURPOSE 

Chapter 9 of the Business & Commerce Code is derived from Article 9 of the
Uniform Commercial Code (UCC), which became effective in 1966 and was
incorporated into the Business & Commerce Code one year later.  S.B. 1058
sets out revisions proposed in 1998 by a national drafting committee
appointed by the Permanent Editorial Board of the Uniform Commercial Code
and that have been approved by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws. This bill revises the
uniform law on secured transactions. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the secretary of state in ARTICLE 1
(Section 9.526, Business & Commerce Code) of this bill. 

SECTION BY SECTION ANALYSIS

ARTICLE 1.  SECURED TRANSACTIONS

SECTION 1.01.  Amends Chapter 9, Business & Commerce Code, as follows:

CHAPTER 9.  New Heading: SECURED TRANSACTIONS

SUBCHAPTER A.  New Heading: SHORT TITLE, DEFINITIONS, AND 
GENERAL CONCEPTS

Sec.  9.101.  SHORT TITLE.  Authorizes the citation of this chapter as
Uniform Commercial Code--Secured Transactions. 

Sec. 9.102. New Title: DEFINITIONS AND INDEX OF DEFINITIONS.  (a) Defines
"accession," "account," "account debtor," "accounting," "agricultural
lien," "as-extracted collateral," "authenticate," "bank," "cash proceeds,"
"certificate of title," "chattel paper," "collateral," "commercial tort
claim," "commodity account," "commodity contract," "commodity customer,"
"commodity intermediary," "communicate," "consignee," "consignment,"
"consignor," "consumer debtor," "consumer goods," "consumer-goods
transaction," "consumer obligor," "consumer transaction," "continuation
statement," "debtor," "deposit account," "document," "electronic chattel
paper," "encumbrance," "equipment," "farm products," "farming operation,"
"file number," "filing office," "filingoffice rule," "financing statement,"
"fixture filing," "fixtures," "general intangible," "good faith," "goods,"
"governmental unit," "health-care-insurance receivable," "instrument,"
"inventory," "investment property," "jurisdiction of organization,"
"letter-of-credit right," "lien creditor," "manufactured home,"
"manufactured-home transaction," "mortgage," "new debtor," "new value,"
"noncash proceeds," "nonnegotiable certificate of deposit," "obligor,"
"original debtor," "payment intangible," "person related to," with respect
to an individual, "person related to," with respect to an organization,
"proceeds," "promissory note," "proposal," "public-finance transaction,"
"pursuant to commitment," "record," "registered organization," "secondary
obligor," "secured party," "security agreement," "send," "software,"
"state," "supporting obligation," "tangible chattel paper," "termination
statement," and  "transmitting utility." 

 (b) Defines "applicant," "beneficiary," "broker," "certificated security,"
"check," "clearing corporation," "contract for sale," "customer,"
"entitlement holder," "financial asset," "holder in due course," "issuer"
(with respect to a letter of credit or letter-of-credit right), "issuer"
(with respect to a security), "lease," "lease agreement," "lease contract,"
"leasehold interest," "lessee," "lessee in ordinary course of business,"
"lessor," "lessor's residual interest," "letter of credit," "merchant,"
"negotiable instrument," "nominated person," "note," "proceeds of a letter
of credit," "prove," "sale," "securities account," "securities
intermediary," "security," "security certificate," "security entitlement,"
and "uncertificated security." 

(c) Redesignated from existing Subsection (d).

Deletes existing text concerning the policy and subject matter of the
chapter.  Deletes existing Section 9.103 concerning the perfection of
security interests in multiple state transactions.  Deletes existing
Section 9.104 concerning transactions excluded from this chapter.  Deletes
existing Section 9.105 providing definitions and an index to the
definitions. 


Sec. 9.103. PURCHASE-MONEY SECURITY INTEREST; APPLICATION OF PAYMENTS;
BURDEN OF ESTABLISHING.  (a) Defines "purchase-money collateral" and
"purchase-money obligation."  

(b) Sets forth to what extent a security interest in goods is a
purchase-money security interest.   

(c) Sets forth to what extent a security interest in software is a
purchase-money security interest.   

(d) Provides that the security interest of a consignor in goods that are
the subject of a consignment is a purchase-money security interest in
inventory.  

(e) Provides that, in a transaction other than a consumer-goods
transaction, the payment must be applied in a certain method or order under
certain conditions, if the extent to which a security interest is a
purchase-money security interest depends on the application of a payment to
a particular obligation.   

(f) Provides that in a transaction other than a consumer-goods transaction,
a purchasemoney security interest does not lose its status as such, even
under certain conditions.   

(g) Provides that in a transaction other than a consumer-goods transaction,
a secured party claiming a purchase-money security interest has the burden
of establishing the extent to which the security interest is a
purchase-money security interest.   

(h) Provides that the limitation of the rules in Subsections (e)-(g) to
transactions other than consumer-goods transactions is intended to leave to
the court the determination of the proper rules in consumer-goods
transactions.  Prohibits the court from inferring from that limitation the
nature of the proper rule in consumer-goods transactions, and authorizes
the court to continue to apply established approaches. 

Sec. 9.104. CONTROL OF DEPOSIT ACCOUNT. (a) Sets forth the conditions under
which a secured party has control of a deposit account.   

(b) Provides that a secured party that has satisfied Subsection (a) has
control, even if the debtor retains the right to direct the disposition of
funds from the deposit account. 

Sec. 9.105. CONTROL OF ELECTRONIC CHATTEL PAPER.  Sets forth the conditions
under which a secured party has control of electronic chattel paper. 

Sec. 9.106. CONTROL OF INVESTMENT PROPERTY.  Provides that a person has
control of a certificated security, uncertificated security, or security
entitlement as provided in  Section 8.106 (Control). Sets forth the
conditions under which a secured party has control of a commodity contract.
Provides that a secured party having control of all security entitlements
or commodity contracts carried in a securities account or commodity account
has control over the securities account or the commodity account. 

Sec. 9.107. CONTROL OF LETTER-OF-CREDIT RIGHT.  Provides that a secured
party has control of a letter-of-credit right to the extent of any right to
payment or performance by the issuer or any nominated person if the issuer
or nominated person has consented to an assignment of proceeds of the
letter of credit under Section 5.114(c) (Issuer's Duty and Privilege to
Honor: Right to Reimbursement) or otherwise applicable law or practice.
Deletes existing Section 9.106 defining "account" and "general
intangibles."  Deletes existing Section 9.107 defining "purchase money
security interest."  Deletes existing Section 9.108 concerning when after
acquired collateral is not security for an antecedent debt. Deletes
existing Section 9.109 defining "consumer goods," "equipment," "farm
products," and "inventory."   

Sec.  9.108.  SUFFICIENCY OF DESCRIPTION. Redesignated from existing
Section 9.110. (a) Provides that except as otherwise provided in
Subsections (c), (d), and (e), a description of personal and real property
is sufficient, whether or not it is specific, if it reasonably identifies
what is described. Makes conforming and nonsubstantive changes. 

(b) Provides that a description of collateral reasonably identifies the
collateral if it identifies the collateral by certain descriptions, except
as otherwise provided in Subsection (d).   

(c) Provides that the description of collateral as "all the debtor's
assets" or "all the debtor's personal property" or using words of similar
import does not reasonably identify the collateral.   

(d) Provides that a description of a security entitlement, securities
account, or commodity account is sufficient if it provides certain
descriptions, except as otherwise provided in Subsection (e). 

(e) Provides that a description only by type of collateral defined in this
title is an insufficient description of a commercial tort claim, or in
certain transactions, goods, or accounts. 

Sec. 9.109. SCOPE. (a) Sets forth the scope of application of this chapter,
except as otherwise provided in Subsections (c), (d), and (e).  

(b) Provides that the application of this chapter to a security interest in
a secured obligation is not affected by the fact that the obligation is
itself secured by a transaction or interest to which this chapter does not
apply.   

(c) Provides that this chapter does not apply to the extent that certain
laws preempt this chapter, or expressly govern a security interest, or the
rights of a transferee beneficiary or nominated person under a letter of
credit are independent or superior under Section 5.114.  
(d) Provides that this chapter does not apply to certain liens,
assignments, sales, transfers, rights of recoupments or set-offs, or the
creation or transfer of certain interests.   

(e) Provides that the application of this chapter to the sale of accounts,
chattel paper, payment intangibles, or promissory notes is not to
recharacterize that sale as a transaction to secure indebtedness but to
protect purchasers of those assets by providing a notice filing system.
Requires the parties' characterization of a transaction as a sale of such
assets, for all purposes, in the absence of fraud or intentional
misrepresentation, to be conclusive that the transaction is a sale and is
not a secured transaction and that title has passed to the party
characterized as the purchaser regardless of whether the secured party has
any recourse against the debtor, whether the debtor is entitled to any
surplus, or any  other term of the parties' agreement.  Deletes existing
Section 9.112  concerning transactions where collateral is not owned by the
debtor.  

Sec.  9.110.  New Title: SECURITY INTERESTS ARISING UNDER CHAPTER 2 OR 2A.
Provides that a security interest arising under, rather than solely under,
Section 2.401 (Passing of Title: Reservation for Security; Limited
Application of This Section), 2.505 (Seller's Shipment Under Reservation),
2.711(c) (Buyer's Remedies in General: Buyer's Security Interest in
Rejected Goods), or 2A.508(e) (Lessee's Remedies), rather than the chapter
on Sales (Chapter 2) or the chapter on Leases (Chapter 2A), is subject to
this chapter. Provides that until the debtor obtains possession of the
goods the security interest is enforceable, even if Section 9.203(b) has
not been satisfied, filing is not required to perfect the security
interest, the rights of the secured party after default by the debtor are
governed by Chapter 2 or 2A, and the security interest has priority over a
conflicting security interest created by the debtor, rather than the rights
of the secured party on default by the debtor being a governed by Chapters
2 and 2A, in the case of a security interest arising solely under such
chapter.  Deletes existing Section 9.114 regarding consignment.  Deletes
existing Section 9.115 regarding investment property.  Deletes existing
Section 9.116 regarding security interests arising in the purchase or
delivery of a financial asset.  Makes conforming and nonsubstantive
changes. Redesignated from existing Section 9.113. 

SUBCHAPTER B.  New Heading: EFFECTIVENESS OF SECURITY AGREEMENT; ATTACHMENT
OF SECURITY INTEREST; RIGHTS  
OF PARTIES TO SECURITY AGREEMENT

Sec.  9.201.  New Title: GENERAL EFFECTIVENESS OF SECURITY AGREEMENT. (a)
Makes a conforming change. 

(b)  Provides that a transaction subject to this chapter is subject to any
applicable rule of law that establishes a different rule for consumers and
to Title 4 (Regulations of Interest, Loans, and Financed Transactions),
Finance Code, and Chapter 17E.   

(c) Provides that in case of conflict between this chapter and a rule of
law, statute, or regulation  described in Subsection (b), the rule of law,
statute, or regulation controls. Provides that failure to comply with a
statute or regulation described in Subsection (b) has only the effect the
statute or regulation specifies.   

(d) Provides that this chapter does not validate any rate, charge,
agreement, or practice that violates a rule of law, statute, or regulation
described in Subsection (b), or extend the application of the rule of law,
rather than a practice that is illegal under any statute or regulation
extending its application to a transaction not otherwise subject to it.
Deletes text limiting the application of this chapter against the rules of
law, statutes, or regulations governing usury, small loans, retail
installment sales, or the like.  Makes nonsubstantive changes. 

Sec.  9.202.  TITLE TO COLLATERAL IMMATERIAL.  Provides that the provisions
of this chapter with regard to rights and obligations apply whether title
to collateral is in the secured party or the debtor, except as otherwise
provided with respect to consignments or sales of accounts, chattel paper,
payment intangibles, or promissory notes.  Deletes text providing that the
provisions of this chapter apply with regard to remedies.  Makes
nonsubstantive changes. 

Sec. 9.203. New Title: ATTACHMENT AND ENFORCEABILITY OF SECURITY INTEREST;
PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES.  (a) Provides that 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) Provides that a security interest is enforceable, rather than not,
against the debtor and third parties, rather than or third parties, with
respect to the collateral only if value has  been given, the debtor has
rights in the collateral or the power to transfer rights in the collateral
to a secured party, and one of several certain conditions is met, except as
otherwise provided in Subsections (c)-(j).  Deletes text regarding
collateral in the possession of the secured party to agreement. Deletes
text regarding when a security interest attaches.   

(c) Provides that Subsection (b) is subject to certain sections of this
chapter and to Sections 4.210 (Security Interest of Collecting Bank in
Items: Accompanying Documents and Proceeds) and 5.118 (Security Interest of
Issuer or Nominated Person).  

(d) Provides that a person becomes bound as debtor by a security agreement
entered into by another person if, by operation of law other than this
chapter or by contract certain conditions occur.  

(e) Provides that if a new debtor becomes bound as debtor by a security
agreement entered into by another person the agreement satisfies Subsection
(b) with respect to existing or after-acquired property of the new debtor
to the extent the property is described in the agreement and another
agreement is not necessary to make a security interest in the property
enforceable. 

(f) Provides that the attachment of a security interest in collateral gives
the secured party the rights to proceeds provided by Section 9.315, rather
than 9.306, and is also attachment of a security interest in a supporting
obligation for the collateral.  Deletes text regarding a security interest
in minerals. 

(g) Provides that 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) Provides that the attachment of a security interest in a securities
account is also an attachment of a security interest in the security
entitlements carried in the securities account.   

(i) Provides that 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.   


(j) Provides that if a secured party holds a security interest that applies
under this chapter to minerals upon their extraction, and the security
interest also qualifies under applicable law as a lien on those minerals
before their extraction, the security interest before and after production
is a single continuous and uninterrupted lien on the property.  Provides
that this subsection is a statement of the law of this state as it existed
before the effective date of this subsection and applies with respect to
minerals regardless of when the minerals were extracted. Deletes text
providing that a transaction, although subject to this chapter, is also
subject to Title 79 (Interest, Consumer Credit, Consumer Protection),
V.T.C.S., and that the provisions of any such statute control in case of
conflict. 

Sec. 9.204. AFTER-ACQUIRED PROPERTY; FUTURE ADVANCES. Authorizes a security
agreement to create or provide for a security interest in, rather than
authorizes a security agreement to provide that any or all obligations
covered by the security agreement are to be secured by, after-acquired
collateral, except as provided for in Subsection (b). Provides that a
security interest does not attach under a term constituting an
after-acquired property clause to certain goods and claims.  Authorizes a
security agreement, rather than authorizes obligations covered by a
security agreement, to provide that collateral secures, or that accounts,
chattel paper, payment intangibles, or promissory notes are sold in
connection with, future advances or other value.  Makes conforming and
nonsubstantive changes. 

Sec. 9.205. New Title: USE OR DISPOSITION OF COLLATERAL PERMISSIBLE.
Provides that a security interest is not invalid or fraudulent against
creditors solely because  the debtor has the right or ability to collect,
compromise, enforce, or otherwise deal with collateral, accept the return
of collateral or make repossessions, or the secured party fails to require
the debtor to account for proceeds or replace collateral.  Provides that
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, rather than by the secured party or
by a bailee.  Makes conforming and nonsubstantive changes. 

Sec. 9.206. New Title: SECURITY INTEREST ARISING IN PURCHASE OR DELIVERY OF
FINANCIAL ASSET. Provides that a security interest in favor of a securities
intermediary attaches to a person's security entitlement under certain
conditions.  Provides that the security interest in favor of a securities
intermediary secures the person's obligation to pay for the financial
asset.  Provides that 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 under certain
conditions, and the agreement calls for delivery against payment.  Provides
that the security interest in favor of a person that delivers a certified
security or other financial asset secures the obligation to make payment
for the delivery. Deletes existing section regarding agreement not to
assert defenses against assignees and the modification of sales warranties
where a security agreement exists. 


Sec. 9.207. New Title: RIGHTS AND DUTIES OF SECURED PARTY HAVING POSSESSION
OR CONTROL OF COLLATERAL. (a) Requires a secured party to, rather than
providing that a secured party must, use reasonable care in the custody and
preservation of collateral in the secured party's possession, except as
otherwise provided in Subsection (d). Makes nonsubstantive changes. 

(b) Requires the secured party, if the secured party has possession of the
collateral, to keep the collateral identifiable, but fungible collateral
may be commingled. Authorizes the secured party to use or operate the
collateral under certain conditions, except as otherwise provided by
Subsection (d). Deletes text authorizing the secured party to hold as
additional security any increase or profits (except money) received from
the collateral, and requiring money so received to be applied in reduction
of the secured obligation, unless remitted to the debtor. Deletes text
authorizing the secured party to repledge the collateral upon terms which
do not impair the debtor's right to redeem it. Makes conforming and
nonsubstantive changes. 

(c) Authorizes a secured party, except as provided in Subsection (d),
having possession or control of collateral under Section 9.104, 9.105,
9.106, or 9.107 to hold as additional security any proceeds, except money
or funds, received from the collateral.  Requires such secured party to
apply money or funds received from the collateral to reduce the secured
obligation, unless remitted to the debtor, and authorizes the secured party
to create a security interest in the collateral. Deletes text providing
that a secured party is liable for any loss caused by his failure to meet
any obligation imposed by the preceding subsections but does not lose his
security interest.   

(d) Provides that if the secured party is a buyer of accounts, chattel
paper, payment intangibles, or promissory notes or a cosignor, Subsection
(a) does not apply unless the secured party is provided certain
entitlements under an agreement, and Subsections (b) and (c) do not apply.
Deletes text authorizing a secured party to use or operate the collateral
for the purpose of preserving the collateral or its value or under a court
order or, except in the case of consumer goods, in the manner provided in a
security agreement. Makes conforming and nonsubstantive changes.   

Sec. 9.208. New Title: ADDITIONAL DUTIES OF SECURED PARTY HAVING CONTROL OF
COLLATERAL. Provides that 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.  Sets forth
requirements for a secured party, within 10 days after receiving an
authenticated demand by the debtor, who has control of a deposit account
under Section 9.104 a secured party, other than a buyer, having control of
electronic chattel paper under Section 9.105, a secured party having
control of investment  property under Section 8.106 or 9.106, and a secured
party having control of a letter-of-credit right under Section 9.107. 

Sec. 9.209. DUTIES OF SECURED PARTY IF ACCOUNT DEBTOR HAS BEEN NOTIFIED OF
ASSIGNMENT. Provides that this section apples under certain conditions,
except to an assignment constituting the sale of an account, chattel paper,
or payment intangible. Requires a secured party to send to an account
debtor that has received notification of an assignment to the secured party
as assignee under Section 9.406(a) , within 10 days after receiving an
authenticated demand by the debtor, an authenticated record that releases
the account debtor from any further obligation to the secured party. 

Sec. 9.210. New Title: REQUEST FOR ACCOUNTING; REQUEST REGARDING LIST OF
COLLATERAL OR STATEMENT OF ACCOUNT.  (a) Defines "request," "request for an
accounting," "request regarding a list of collateral," and "request
regarding a statement of account" in this section. Deletes text authorizing
a debtor, when the security agreement or any other record kept by the
secured party identifies the collateral, to request the secured party to
approve or correct a list of the collateral.  Deletes text authorizing a
debtor to sign certain statements. 

(b) Requires the secured party, rather than the secured party must, other
than a buyer of accounts, chattel paper, payment intangibles, or promissory
notes or a cosignor, rather than providing that the secured party must
comply with a request within 14 days after receipt, by performing certain
duties, subject to Subsections (c), (d), (e), and (f).  Deletes text
providing that if the secured party without reasonable excuse fails to
comply he is liable for any loss caused to the debtor.  Deletes text
requiring the secured party to disclose the name and address of any
successor in interest known to him.  Deletes text providing that a
successor in interest is not subject to this section until a request is
received by him. Makes nonsubstantive changes.  

(c) Authorizes a secured party that claims a security interest in all of a
particular type of collateral owned by the debtor to comply with a request
regarding a list of collateral by sending to the debtor an authenticated
record including a statement to that effect by a certain date. 

(d) Requires 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 to
comply with the request by a certain date by sending to the debtor an
authenticated record containing certain information.   

(e) Requires a person that receives a request regarding 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 to comply with the request
by a certain date by sending to the debtor an authenticated record
containing certain information.   

(f) Provides that a debtor is entitled without charge to one response to a
request under this section during any six-month period.  Authorizes a
secured party to require payment of a charge not exceeding $25 for each
additional response.  Deletes text providing that a debtor is entitled to a
statement in reply for a request once every six months without charge.
Deletes text authorizing the secured party to require payment of a charge
not exceeding $10 for each additional statement furnished.   

SUBCHAPTER C.  New Heading: PERFECTION AND PRIORITY

Sec. 9.301. New Title: LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY
INTERESTS. Sets forth rules governing perfection, the effect of perfection
or nonperfection, and the priority of a security interest in collateral,
except as otherwise provided in Sections 9.303-9.306. Deletes existing
section concerning persons who take priority over unperfected security
interests and the rights of a "lien creditor." 
 
Sec. 9.302. LAW GOVERNING PERFECTION AND PRIORITY OF AGRICULTURAL LIENS.
Provides that while farm products are located in a jurisdiction, the local
law of that jurisdiction governs perfections, the effect of perfection or
nonperfection, and the priority of an agricultural lien on the farm
products. 

Sec. 9.303. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
GOODS COVERED BY A CERTIFICATE OF TITLE. Provides that this section applies
to goods covered by a certificate of title.  Provides that goods become
covered by a certificate of title when a valid application for the
certificate title and the applicable fee are delivered to the appropriate
authority.  Provides that goods cease to be covered by a certificate of
title at the earlier of the time the certificate of title ceases to be
effective under the law of the issuing jurisdiction or the time the goods
become covered subsequently by a certificate of title issued by another
jurisdiction. Provides that the local law of the jurisdiction under whose
certificate of title the goods are covered governs perfection, the effect
of perfection or nonperfection, and the priority of a security interest in
goods covered by a certificate of title from the time the goods become
covered by the certificate of title until the goods cease to be covered by
the certificate of title. Deletes existing Section 9.303 regarding when a
security interest is perfected and the continuity of perfection. 

Sec. 9.304. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
DEPOSIT ACCOUNTS.  Provides that the local law of a bank's jurisdiction
governs perfection, the effect of perfection or nonperfection, and the
priority of a security interest in a deposit account maintained with that
bank.  Sets forth the rules determining a bank's jurisdiction for the
purposes of this subchapter.   

Sec. 9.305. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
INVESTMENT PROPERTY. Sets forth rules governing perfection and priority of
security interests in investment property, except when  local law of the
jurisdiction in which the debtor is located governs.  Sets forth rules
determining a commodity intermediary's jurisdiction for the purposes of
this subchapter.  

Sec. 9.306. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
LETTER-OF-CREDIT RIGHTS. Provides that, subject to Subsection (c) which
provides that this section does not apply to a security interest that is
perfected only under Section 9.308(d), the local law of the issuer's
jurisdiction or a nominated person's jurisdiction governs perfection, the
effect of perfection or nonperfection, and the priority of a security
interest in a letter-of-credit right if the issuer's jurisdiction or
nominated person's jurisdiction is a state.  Provides that for the purposes
of this subchapter, an issuer's jurisdiction or nominated person's
jurisdiction is the jurisdiction whose law governs the liability of the
issuer or nominated person with respect to the letter-of-credit right as
provided in Section 5.116 (Transfer and Assignment).  

Sec. 9.307. LOCATION OF DEBTOR. (a) Defines "place of business." 

(b) Sets forth rules determining a debtor's location, except as otherwise
provided in this section.  

(c) Provides that Subsection (b) applies only if a debtor's residence,
place of business, or chief executive office is located in a jurisdiction
whose law generally requires information concerning the existence of a
nonpossessory security interest to be made generally available in a filing,
recording, or registration system as a condition or result of the security
interest's obtaining  priority over the rights of a lien creditor with
respect to the collateral.  Provides that if Subsection (b) does not apply,
the debtor is located in the District of Columbia.   

(d) Provides that a person that ceases to exist, have a residence, or have
a place of business continues to be located in the jurisdiction specified
by Subsections (b) and (c).  
 (e) Provides that a registered organization that is organized under the
law of a state is located in that state.   

(f) Sets forth the rules determining where a registered organization that
is organized under the law of the United States and a branch or agency of a
bank that is not organized under the law of the United States or a state
are located, except as otherwise provided in Subsection (i).   

(g) Provides that a registered organization continues to be located in the
jurisdiction specified by Subsection (e) or (f) notwithstanding certain
actions affecting the registered organization.   

(h) Provides that the United States is located in the District of Columbia.

(i) Provides that a branch or agency of a bank that is not organized under
the law of the United States or a state is located in the state in which
the branch or agency is licensed, if all branches and agencies of the bank
are licensed in only one state.   

(j) Provides that a foreign air carrier under the Federal Aviation Air Act
of 1958, as amended, is located at the designated office of the agent upon
which service of process may be made on behalf of the carrier.  Provides
that this section applies only for the purposes of this subchapter. 

Sec. 9.308. WHEN SECURITY INTEREST OR AGRICULTURAL LIEN IS PERFECTED;
CONTINUITY OF PERFECTION. Provides that a security interest is perfected if
it has attached and all of the applicable requirements for perfection in
Sections 9.310-9.316 have been satisfied, except as otherwise provided in
this section and Section 9.309.  Provides that a security interest is
perfected when it attaches if the applicable requirements are satisfied
before the security interest attaches.  Provides that an agricultural lien
is perfected if it has become effective and all of the applicable
requirements for perfection in Section 9.310 have been satisfied.  Provides
that an agricultural lien is perfected when it becomes effective if the
applicable requirements are satisfied before the agricultural lien becomes
effective.  Provides that a security interest or agricultural lien is
perfected continuously if it is originally perfected by one method under
this chapter and is later perfected by another method under this chapter,
without an intermediate period when it was unperfected.  Provides that
perfection of a security interest in collateral also perfects a security
interest in a supporting obligation for the collateral.  Provides that
perfection of a security interest in a right to payment or performance also
perfects a security interest in a security interest, mortgage, or other
lien on personal or real property securing the right.  Provides that
perfection of a security interest in a securities account also perfects a
security interest in the security entitlements carried in the securities
account.  Provides that perfection of a security interest in a commodity
account also perfects a security interest in the commodities contracts
carried in the commodity account.  

Sec. 9.309. New Title: SECURITY INTEREST PERFECTED UPON ATTACHMENT. Sets
forth rules determining when security interests are perfected when they
attach. Deletes text regarding when filing is required to perfect a
security interest and setting forth the security interests to which filing
provisions of this article do not apply.  Redesignated from Section 9.302.
Makes conforming and nonsubstantive changes.   

Sec. 9.310. WHEN FILING REQUIRED TO PERFECT SECURITY INTEREST OR
AGRICULTURAL LIEN; SECURITY INTERESTS AND AGRICULTURAL LIENS TO WHICH
FILING PROVISIONS DO NOT APPLY. (a) Provides that a financing statement
must be filed to perfect all security interests and agricultural liens,
except as otherwise provided in Subsection (b) and Section 9.312(b).   

(b) Provides that the filing of a financing statement is not necessarily to
perfect a security interest under certain conditions.   

 (c) Provides that if a secured party assigns a perfected security interest
or agricultural lien, rather than just a security interest, a filing under
this chapter is not required to continue the perfected status of the
security interest against creditors of and transferees from the original
debtor.  Makes conforming and nonsubstantive changes. 

Sec. 9.311. PERFECTION OF SECURITY INTERESTS IN PROPERTY SUBJECT TO CERTAIN
STATUTES, REGULATIONS, AND TREATIES. (a) Provides that the filing of a
financing statement, rather than a financing statement otherwise required
by this chapter, is not necessary or effective to perfect a security
interest in property subject to a statute, regulation, or treaty of the
United States whose requirements for a security interest's obtaining
priority over the rights of a lien creditor with respect to the property
preempt Section 9.310(a), except as otherwise provided in Subsection (d).
Provides that the filing of a financing statement is not necessary or
effective to perfect a security interest in property subject to a
certificate of title statute relating to motor vehicles, vessels, and
outboard motors, and manufactured homes, or subject to a certificate of
title statute of another jurisdiction that provides for a security interest
to be indicated on the certificate as a condition or result of the security
interest's obtaining priority over the rights of a lien creditor with
respect to the property, rather than as a condition of perfection
(Subsection (b) of Section 9.103). Deletes text providing that filing is
not necessary to perfect a security interest in property subject to a
statute, or treaty of the United States which provides for a national or
international registration of certificate of title. Makes conforming and
nonsubstantive changes.   

(b) Provides that compliance with the requirements of a statute,
regulation, or treaty described in Subsection (a) is equivalent to the
filing of a financing statement under this chapter.  Authorizes a security
interest in property subject to a statute, regulation, or treaty described
in Subsection (a) to be perfected only by compliance with those
requirements, and provides that a security interest so perfected remains
perfected notwithstanding a change in the use or transfer of possession of
the collateral, except as provided in Subsection (d) and Sections 9.313 and
9.316(d) and (e) for goods covered by a certificate of title. Deletes text
providing that the filing provisions of this subchapter apply to a security
interest, except as provided in Section 9.103. Makes conforming and
nonsubstantive changes. 

(c) Provides that duration and renewal of perfection of a security interest
perfected by compliance with the requirements prescribed by a statute,
regulation, or treaty described in Subsection (a) are governed by the
statute, regulation, or treaty, except as provided by Subsection (d) and
Sections 9.316 (d) and (e). Makes conforming changes. 

(d) Provides that during any period in which collateral is inventory held
for sale or lease by a person or leased by that person as lessor and that
person is in the business of selling or leasing goods of that kind, this
section does not apply to a security interest in that collateral created by
that person as debtor. 

Sec. 9.312. New Title: PERFECTION OF SECURITY INTERESTS IN CHATTEL PAPER,
DEPOSIT ACCOUNTS, DOCUMENTS, AND GOODS COVERED BY DOCUMENTS, INSTRUMENTS,
INVESTMENT PROPERTY, LETTER-OF-CREDIT RIGHTS, AND MONEY; PERFECTION BY
PERMISSIVE FILING; TEMPORARY PERFECTION WITHOUT FILING OR TRANSFER OF
POSSESSION. Redesignated from existing Section 9.304. (a) Authorizes a
security interest in instruments or investment property to be perfected by
filing. Deletes text establishing the point when possession of a
nonnegotiable certificate of deposit in which the secured party is the
issuer of the document exists. Deletes text setting forth when such
possession takes priority. 

(b) Sets forth rules for perfection of security interests, with an
exception. Makes conforming changes. 

(c) Sets forth the procedure for perfection of a security interest in goods
that are in the possession of a bailee that has issued a negotiable
document covering the goods and the priority of such a security interest. 
 
(d) Sets forth the procedure for perfection of a security interest in goods
that are in the possession of a bailee that has issued a nonnegotiable
document covering the goods. Deletes text setting forth the procedure for
perfection of a security interest in goods in the possession of the issuer
of the negotiable document. Deletes text setting forth the procedure for
the perfection of security interest in goods in the possession of a bailee. 

(e) Provides that a security interest in  instruments is perfected without
filing or the taking of possession for a period of 20 days, rather than 21
days, from the time it attaches to the extent that it arises for new value
given under an authenticated, rather than a written, security agreement.
Redesignated from existing Subsection (d). Makes conforming and
nonsubstantive changes.   

(f) Provides that a perfected security interest in a negotiable document or
goods in possession of a bailee, other than one that has issued a
negotiable document for the goods, remains perfected for a period of 20
days, rather than 21 days, without filing if the secured party performs
certain actions.  Redesignated from Subsection (e). Makes conforming and
nonsubstantive changes.   

(g) Sets forth the conditions under which a perfected security interest in
a certificated security or instrument remains perfected for 20 days without
filing.  

(h) Provides that after the 20-day, rather than the 21-day, period
specified in Subsection (e), (f) or (g), rather than Subsection (d) and
(e), expires, perfection depends upon compliance with this chapter.
Redesignated from Subsection (f). Makes conforming and nonsubstantive
changes.   

Sec. 9.313. New Title: WHEN POSSESSION BY OR DELIVERY TO SECURED PARTY
PERFECTS SECURITY INTEREST WITHOUT FILING. Redesignated from existing
Section 9.305. (a) Authorizes a secured party to perfect a security
interest in negotiable documents, goods, instruments, money, or tangible
chattel paper by taking possession of the collateral, except as provided in
Subsection (b).  Authorizes a secured party to perfect a security interest
in certificated securities by taking delivery of the certificated
securities under Section 8.301 (Delivery). Deletes text authorizing a
security interest in letters of credit and advices of credit, goods,
instruments, money, negotiable documents or chattel paper being perfected
by the secured party's taking possession of the collateral. 

(b) Authorizes a secured party to perfect a security interest in goods
covered by a certificate of title by taking possession of the goods only
under certain circumstances.   

(c) Sets forth the circumstances under which a secured party takes
possession of collateral in the possession of a person other than the
debtor, with respect to collateral other than certificated securities and
goods covered by a document.   

(d) Provides that if perfection of a security interest depends upon
possession of the collateral by a secured party, perfection occurs no
earlier than the time the secured party takes possession and continues only
while the secured party retains possession.   

(e) Sets forth the procedure for the perfection by delivery and
continuation of perfection by delivery of a security interest in a
certificated security in registered form.   

(f) Provides that a person in possession of collateral is not required to
acknowledge that it holds possession for a secured party's benefit.   

(g) Provides that if a person acknowledges that it holds possession for the
secured party's benefit, the acknowledgment is effective under Subsection
(c) or Section 8.301(a), even if the acknowledgment violates the rights of
a debtor and the person does not owe any duty to the secured party and is
not required to confirm the acknowledgment to another person, unless
otherwise agreed.    
 
(h) Provides that a secured party having possession of collateral does not
relinquish possession by delivering the collateral to a person other than
the debtor or a lessee of the collateral from the debtor in the ordinary
course of the debtor's business if the person was instructed before or
contemporaneously with the delivery to perform certain actions.   

(i) Provides that a secured party does not relinquish possession, even if a
delivery under Subsection (h) violates the rights of a debtor.  Provides
that a person to which collateral is delivered does not owe any duty to the
secured party and is not required to confirm the delivery to another person
unless the person otherwise agrees or other law provides.   

Sec. 9.314. PERFECTION BY CONTROL. Authorizes a security interest in
investment property, deposit accounts, letter-of-credit rights, or
electronic chattel paper to be perfected by control of the collateral.
Provides that a security interest in deposit accounts, electronic chattel
paper, or letter-of-credit rights is perfected by control under Section
9.104, 9.105, or 9.107 when the secured party obtains control and remains
perfected by control only while the secured party retains control.  Sets
forth the circumstances under which a security interest in investment
property is perfected and remains perfected by control. Deletes text
relating to the possession of the collateral.   

Sec. 9.315. New Title: SECURED PARTY'S RIGHTS ON DISPOSITION OF COLLATERAL
AND IN PROCEEDS.   Redesignated from existing Section 9.306. (a) Provides
that a security interest or agricultural lien continues in collateral
notwithstanding lease or license unless the secured party authorized the
disposition free of the security interest or agricultural lien and  a
security interest attaches to any identifiable proceeds of collateral,
rather than proceeds including collections received by the debtor, except
as otherwise provided in this chapter and Section 2.403(b). Deletes the
definition of "proceeds." Makes conforming and nonsubstantive changes. 

(b) Provides that proceeds that are commingled with other property are
identifiable proceeds under certain circumstances.   

(c) Provides that a security interest in proceeds is a perfected security
interest, rather than a continuously perfected security interest, if the
interest in the original collateral was perfected, rather than perfected
but it ceases to be a perfected security interest and becomes unperfected
ten days after receipt of the proceeds by the debtor. Deletes certain
conditions required for a perfected security interest in proceeds to remain
perfected.  

(d) Provides that a perfected security interest in proceeds becomes
unperfected on the 21st day, rather than 10 days, after the security
interest attaches to receipt of the proceeds unless certain conditions are
satisfied. Deletes text regarding security interests in proceeds.  

(e) Provides that if a filed financing statement covers the original
collateral, a security interest in proceeds that remains perfected under
Subsection (d) becomes unperfected by a certain date. Deletes text
regarding a secured party's rights on the disposition of collateral.  Makes
conforming and nonsubstantive changes. 

Sec. 9.316. CONTINUED PERFECTION OF SECURITY INTEREST FOLLOWING CHANGE IN
GOVERNING LAW.  (a) Sets forth the circumstances under which a perfected
security interest becomes unperfected.   

(b) Provides that if a security interest described in Subsection (a)
becomes perfected under the law of another jurisdiction before the earliest
time or event described, it remains perfected thereafter.  Provides that if
the security interest does not become perfected under the law of the other
jurisdiction before the earliest time or event, it becomes unperfected and
is deemed never to have been perfected as against a purchaser of the
collateral for value.   

 (c) Provides that a possessory  security interest in collateral, other
than goods covered by a certificate of title and as-extracted collateral
consisting of goods, remains continuously perfected under certain
circumstances.   

(d) Provides that a security interest in goods covered by a certificate of
title that is perfected by any method under the law of another jurisdiction
when the goods become covered by a certificate of title from this state
remains perfected until the security interest would have become unperfected
under the law of the other jurisdiction had the goods not become so
covered, except as provided in Subsection (e).   

(e) Provides that a security interest described in Subsection (d) becomes
unperfected as against a purchaser of goods for value and is deemed never
to have been perfected as against a purchaser of the goods for value if the
applicable requirements for perfection are not satisfied by a certain date.

(f) Provides that a security interest in deposit accounts, letter-of-credit
rights, or investment property that is perfected under the law of the
bank's jurisdiction, the issuer's jurisdiction, a nominated person's
jurisdiction, the securities intermediary's jurisdiction, or the commodity
intermediary's jurisdiction remains perfected until a certain date.   

(g) Provides that if a security interest described in Subsection (f)
becomes perfected under the law of the other jurisdiction before the
earlier of the time or the end of the period described in that subsection,
it remains perfected thereafter.  Provides that if the security interest
does not become perfected under the law of the other jurisdiction before
the earlier of that time or the end of that period, it becomes unperfected
and is deemed never to have been perfected as against a purchaser of the
collateral for value.   

Sec. 9.317. INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE OF UNPERFECTED
SECURITY INTEREST OR AGRICULTURAL LIEN. (a) Provides that an unperfected
security interest or agricultural lien is subordinate to the rights of
certain persons.   

(b) Provides that a buyer, other than secured party, of tangible chattel
paper, documents, goods, instruments, or a security certificate takes free
of a security interest or agricultural lien if the buyer gives value and
receives delivery of the collateral without knowledge of the security
interest or agricultural lien and before it is perfected, except as
otherwise provided in Subsection (e).   

(c) Provides that a lessee of goods takes free of a security interest or
agricultural lien if the lessee gives value and receives delivery of the
collateral without knowledge of the security interest or agricultural lien
and before it is perfected.   

(d) Provides that a licensee of a general intangible or a buyer, other than
a secured party, of accounts, electronic chattel paper, general
intangibles, or investment property other than a certificated security
takes free of a security interest if the licensee or buyer gives value
without knowledge of the security interest and before it is perfected.   

(e) Provides that if a person files a financing statement with respect to a
purchase-money security interest before or within 20 days after the debtor
receives delivery of the collateral, the security interest takes priority
over the rights of the buyer, lessee, or lien creditor that arise between
the time the security interest attaches and the time of filing, except as
provided in Sections 9.320 and 9.321.   

Sec.  9.318.  NO INTEREST RETAINED IN RIGHT TO PAYMENT THAT IS SOLD; RIGHTS
AND TITLE OF SELLER OF ACCOUNT OR CHATTEL PAPER WITH RESPECT TO CREDITORS
AND PURCHASERS.  Provides that a debtor that has sold an account, chattel
paper, payment intangible, or promissory not does not retain a legal or
equitable interest in the collateral sold.  Provides that for purposes of
determining the rights of creditors of, and purchasers for value of an
account or chattel paper from, a debtor that has  sold an account or
chattel paper, while the buyer's security interest is unperfected, the
debtor is deemed to have rights and title to the account or chattel paper
identical to those the debtor sold.   

Sec.  9.319.  RIGHTS AND TITLE OF CONSIGNEE WITH RESPECT TO CREDITORS AND
PURCHASERS.  (a) Provides that for purposes of determining the rights of
creditors of, and purchasers for value of goods from, a consignee, while
the goods are in the possession of the consignee, the consignee is deemed
to have rights and title to the goods identical to those the consignor had
or had power to transfer, except as provided in Subsection (b).   

(b) Provides that for the purposes of determining the rights of a creditor
of a consignee, other law determines the rights and title of a consignee
while goods are in the consignee's possession if a perfected security
interest held by the consignor would have priority over the rights of the
creditor.   

Sec.  9.320. New Title: BUYERS OF GOODS.  (a) Makes conforming and
nonsubstantive changes.  Redesignated from Section 9.307.  

(b) Provides that a buyer of goods from a person who used or bought the
goods for personal, family, or household use takes free of a security
interest even if perfected, if the buyer buys primarily for the buyers
personal, family, or household purposes and before the filing of a
financing statement, rather than for personal, family, or household
purposes unless prior to the purchase the secured party has filed a
financing statement, covering the goods, except as provided by Subsection
(e). Makes conforming and nonsubstantive changes.  

(c) Provides that to the extent that it affects the priority of a security
interest over a buyer of goods under Subsection (b), the period of
effectiveness of a filing made in the jurisdiction in which the seller is
located is governed by Sections 9.316(a) and (b). Deletes text regarding
when a buyer other than a buyer in ordinary course of business takes free
of a security interest.  

(d) Provides that a buyer in ordinary course of business buying oil, gas,
or other minerals at the wellhead or minehead or after extraction takes
free of an interest arising out of an encumbrance. 

(e) Provides that Subsections (a) and (b) do not affect a security interest
in goods in the possession of the secured party under Section  9.313.
Deletes text prohibiting a secured party from enforcing a security interest
in farm products under certain circumstances.    

Sec.  9.321.  New Title: LICENSEE OF GENERAL INTANGIBLE AND LESSEE OF GOODS
IN ORDINARY COURSE OF BUSINESS.  Defines "licensee in ordinary course of
business" in this section.  Provides that a licensee in ordinary course of
business takes its rights under a nonexclusive license free of a security
interest in the general intangible created by the licensor, even if the
security interest is perfected and the licensee knows of its existence.
Provides that a lessee in ordinary course of business takes its leasehold
interest free of a security interest in the goods created by the lessor.
Deletes existing text providing that a purchaser of chattel paper or an
instrument who gives new value and takes possession of it in the ordinary
course of his business has priority over a security interest in the chattel
paper or instrument. Deletes existing Sections 9.309 (Protection of
Purchasers of Instruments, Documents, and Securities), 9.310 (Priority of
Certain Liens Arising by Operation of Law), and 9.311 (Alienability of
Debtor's Rights: Judicial Process). Redesignated from Section 9.308.   

Sec.  9.322.  New Title: PRIORITIES AMONG CONFLICTING SECURITY INTERESTS IN
AND AGRICULTURAL LIENS ON SAME COLLATERAL. Redesignated from existing
Section 9.312. (a) Sets forth rules determining priority among conflicting
security interests and agricultural liens in the same collateral, except as
provided in this section.  
 
(b) Sets forth provisions regarding the time of filing or perfection as to
a security interest in collateral.   

(c) Provides that a security interest in collateral that qualifies for
priority over a conflicting security interest under Section 9.327, 9.328,
9.329, 9.330, or 9.331 also has priority over a conflicting security
interest under certain circumstances, except as provided in Subsection (f).

(d) Provides that if a security interest in chattel paper, deposit
accounts, negotiable documents, instruments, investment property, or
letter-of-credit rights is perfected by a method other than  filing,
conflicting perfected security interests in proceeds of the collateral rank
according to priority in time of filing, subject to Subsection (e) and
except as otherwise provided in Subsection (f).   

(e) Provides that Subsection (d) applies only if the proceeds of the
collateral are not cash proceeds, chattel paper, negotiable documents,
investment property, or letter-of-credit rights.   

(f) Provides that Subsections (a)-(e) are subject to certain other
Sections.   

(g) Provides that a perfected agricultural lien on collateral has priority
over a conflicting security interest in or agricultural lien on the same
collateral if the statute creating the agricultural lien so provides. 

Sec.  9.323.  FUTURE ADVANCES.  (a) Provides that for the purposes of
determining the priority of a perfected security interest under Section
9.322(a)(1), perfection of the security interest dates from the time an
advance is made to the extent that the security interest secures certain
advances, except as provided in Subsection (c).   

(b) Provides that security interest is subordinate to the rights of a
person that becomes a lien creditor while the security interest is
perfected only to the extent that it secures certain advances unless the
advance is made under certain circumstances, except as provided in
Subsection (c).   

(c) Provides that Subsections (a) and (b) do not apply to a security
interest held by a secured party that is a buyer of accounts, chattel
paper, payment intangibles, or promissory notes or a consignor.   

(d) Provides that a buyer of goods other than a buyer in ordinary course of
business takes free of a security interest to the extent that it secures
advances made after a certain date, except as provided in Subsection (e).

(e) Provides that Subsection (d) does not apply if the advance is made
pursuant to a commitment entered into without knowledge of the buyer's
purchase and before the expiration of the 45-day period.   

(f) Provides that a lessee of goods, other than a lessee in ordinary course
of business, takes the leasehold interest free of a security interest to
the extent that it secures advances made after a certain date, except as
provided in Subsection (g).   

(g) Provides that Subsection (f) does not apply if the advance is made
pursuant to a commitment entered into without knowledge of the lease and
before the expiration of the 45-day period.   

Sec.  9.324.  PRIORITY OF PURCHASE-MONEY SECURITY INTERESTS.  (a) Provides
that a perfected purchase-money security interest in goods other than
inventory or livestock has priority over a conflicting security interest in
the same goods, except as provided in Subsection (g). Provides that a
perfected security interest in its identifiable proceeds also has
priority, if the purchase-money security interest is perfected when the
debtor receives possession of the collateral or within 20 days thereafter,
except as provided in Section 9.327.  

(b) Provides that a perfected purchase-money security interest in inventory
has priority over certain conflicting security interests and identifiable
cash proceeds of the inventory under certain circumstances, with certain
exceptions, and subject to certain Sections. Deletes existing text
providing for the rules of priority stated in other sections and for the
priority of a perfected security interest in crops for new value. Makes
conforming and nonsubstantive changes. 

(c) Provides that Subsections (b)(2) through (4) apply only if the holder
of the conflicting security interest had filed a financing statement
covering the same types of inventory under certain circumstances.   

(d) Provides that a perfected purchase-money security interest in livestock
that are farm products has priority over a conflicting security interest in
the same livestock, subject to Subsection (e) and except as provided in
Subsection (g), and provides that a perfected security interest in their
identifiable proceeds and identifiable products in their unmanufactured
states also has priority under certain circumstances, except as provided in
Section 9.327.  Deletes text relating to the conditions for which a
purchase money security interest in collateral other than inventory has
priority over a conflicting security interest. 

(e) Provides that Subsections (d)(2) through (4) apply only if the holder
of the conflicting security interest had filed a financing statement
covering the same types of livestock under certain circumstances. Deletes
text regarding rules for collateral. 

(f) Provides that a perfected purchase-money security interest in software
has priority over a conflicting security interest in the same collateral,
except as provided in Subsection (g), and provides that a perfected
security interest in its identifiable proceeds also has priority, except as
provided in Section 9.327.  Deletes text providing that a date of filing or
perfection as to collateral is also a date of filing or perfection as to
proceeds. 

(g) Provides that if more than one security interest qualifies for priority
in the same collateral under Subsection (a), (b), (d), or (f), a security
interest securing an obligation incurred as all or part of the price of the
collateral has priority over a security interest securing an obligation
incurred for value given to enable the debtor to acquire rights in or the
use of collateral, and in all other cases, Section 9.322(a) applies to the
qualifying security interests.  Deletes text regarding security interests
in future advances. 

Sec.  9.325.  PRIORITY OF SECURITY INTERESTS IN TRANSFERRED COLLATERAL.
(a) Sets forth conditions under which a security interest created by a
debtor is subordinate to a security interest in the same collateral created
by another person.   

(b) Sets forth conditions where Subsection (a) subordinates a security
interest. 

Sec.  9.326.  PRIORITY OF SECURITY INTERESTS CREATED BY NEW DEBTOR.  (a)
Provides that a security interest created by a new debtor that is perfected
by a filed financing statement that is effective solely under Section 9.508
in collateral in which a new debtor has or acquires rights is subordinate
to a security interest in the same collateral that is perfected other than
by a filed financing statement, subject to Subsection (b).   

(b) Provides that the other provisions of this subchapter determine the
priority among conflicting security interests in the same collateral
perfected by filed financing statements that are effective solely under
Section 9.508.  Provides that if the security agreements to which a new
debtor became bound as debtor were not entered into by the same original
debtor, the conflicting security interests rank according to priority in
time of the new debtor's having become bound.   

 Sec.  9.327.  PRIORITY OF SECURITY INTERESTS IN DEPOSIT ACCOUNT.  Sets
forth the rules governing priority among conflicting security interests in
the same deposit account.  
Sec.  9.328.  PRIORITY OF SECURITY INTERESTS IN INVESTMENT PROPERTY. Sets
forth the rules governing priority among conflicting security interests in
the same investment property. 

Sec.  9.329.  PRIORITY OF SECURITY INTERESTS IN LETTER-OF-CREDIT RIGHT.
Sets forth the rules governing priority among conflicting security
interests in the same letterof-credit right. 

Sec.  9.330.  PRIORITY OF PURCHASER OF CHATTEL PAPER OR INSTRUMENT. (a)
Provides that a purchaser of chattel paper has priority over a security
interest in the chattel paper that is claimed merely as proceeds of
inventory subject to a security interest under certain circumstances.   

(b) Provides that a purchaser of chattel paper has priority over a security
interest in the chattel paper that is claimed other than merely as proceeds
of inventory subject to a security interest if the purchaser gives new
value and takes possession of the chattel paper or obtains control of the
chattel paper in good faith, in the ordinary course of the purchaser's
business, and without knowledge that the purchase violates the rights of
the secured party.   

(c) Provides that a purchaser having priority in chattel paper also has
priority in proceeds of the chattel paper under certain circumstances,
except as provided in Section 9.327.   

(d) Provides that a purchaser of an instrument has priority over a security
interest in the instrument perfected by a method other than possession if
the purchaser gives value and takes possession of the instrument in good
faith and without knowledge that the purchase violates the rights of the
secured party, except as provided in Section 9.331(a).   


(e) Provides that, for the purposes of Subsections (a) and (b), the holder
of a purchasemoney security interest in inventory gives new value for
chattel paper constituting proceeds of the inventory.   

(f) Provides that, for the purposes of Subsections (b) and (d), if chattel
paper or an instrument indicates that it has been assigned to an identified
secured party other than the purchaser, a purchaser of the chattel paper or
instrument has knowledge that the purchase violates the rights of the
secured party. 

Sec. 9.331. PRIORITY OF RIGHTS OF PURCHASERS OF INSTRUMENTS, DOCUMENTS, AND
SECURITIES UNDER OTHER CHAPTERS; PRIORITY OF INTERESTS IN FINANCIAL ASSETS
AND SECURITY ENTITLEMENTS UNDER CHAPTER 8.  Provides that this chapter does
not limit the rights of a holder in due course of a negotiable instrument,
a holder to which a negotiable document of title has been duly negotiated,
or a protected purchaser of a security.  Provides that these holders or
purchasers take priority over an earlier security interest.  Provides that
this chapter does not limit the rights of or impose liability on a person
to the extent that the person is protected against the assertion of an
adverse claim.  Provides that filing does not constitute notice of a claim
or defense to certain holders, purchasers, or persons. 

Sec.  9.332.  TRANSFER OF MONEY; TRANSFER OF FUNDS FROM DEPOSIT ACCOUNT.
Provides that a transferee of money takes the money free of a security
interest unless the transferee acts in collusion with the debtor in
violating the rights of the secured party.  Provides that a transferee of
funds from a deposit account takes the funds free of a security interest in
the deposit account unless the transferee acts in collusion with the debtor
in violating the rights of the secured party.   

Sec.  9.333. PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW.
Defines "possessory lien" in this section. Provides that a possessory lien
on goods has priority over a security interest in the goods unless the lien
is created by a statute that expressly provides otherwise. 

Sec. 9.334. New Title: PRIORITY OF SECURITY INTERESTS IN FIXTURES AND
CROPS.  Redesignated from existing Section 9.313. (a) Authorizes a security
interest in this chapter to be created in goods that are fixtures or to
continue in goods that become fixtures. Provides that a security interest
does not exist under this chapter in ordinary building materials
incorporated into an improvement on land. Deletes definitions of
"fixtures," "fixture filing," and "construction mortgage." Makes conforming
and nonsubstantive changes. Redesignated from Subsection (b). 

(b) Redesignated from Subsection (c). Makes nonsubstantive changes.
 
(c) Provides that in cases not governed by Subsections (d)-(h), a security
interest in fixtures is subordinate to a conflicting interest of an
encumbrancer or owner of the related real property other than the debtor.   

(d) Provides that a perfected security interest in fixtures, except as
provided in Subsection (h), has priority over the conflicting interest of
an encumbrancer or owner of the real property if the debtor has an interest
of record in or is in possession of the real property and the security
interest is perfected by a fixture filing before the goods become fixtures
or within 20, rather than 10, days. Makes conforming and nonsubstantive
changes. 

(e) Provides that a perfected security interest in fixtures has priority
over a conflicting interest of an encumbrancer or owner of the real
property under certain circumstances. Makes conforming and nonsubstantive
changes. 

(f) Redesignated from Subsection (e). Makes conforming and nonsubstantive
changes.  

(g) Provides that the priority of the security interest under Subsection
(f) continues for a reasonable time if the debtor's right to remove the
goods as against the encumbrancer or owner terminates. Makes conforming and
nonsubstantive changes.   

(h) Provides that a mortgage is a construction mortgage to the extent that
it secures an obligation incurred for the construction of an improvement on
land, if a recorded record of the mortgage so indicates.  Provides that
mortgage has a certain priority to the same extent as a construction
mortgage to the extent that it is given to refinance a construction
mortgage. Makes conforming and nonsubstantive changes.   

(i) Provides that a perfected security interest in crops growing on real
property has priority over a conflicting interest of an encumbrancer or
owner of the real property if the debtor has an interest of record in or is
in possession of the real property. Deletes text concerning security
interests in fixtures in certain circumstances and text concerning
situations in which the secured party has priority over all owners and
encumbrances of the real property. 

Sec.  9.335.  ACCESSIONS.  Redesignated from existing Section 9.314.   (a)
Authorizes a security interest to be created in an accession and continues
in collateral that becomes an accession. Deletes text redefining
"accessions."   

(b) Provides that if a security interest is perfected when the collateral
becomes an accession, the security interest remains perfected in the
collateral. Deletes text concerning situations in which a security interest
attaches to goods after they become part of a whole.  
(c) Provides that the other provisions of this subchapter determine the
priority of a security interest in the accession, except as provided in
Subsection (d). Deletes text providing that the security interest described
in Subsections (a) and (b) does not take priority over certain people.  
 
(d) Provides that a security interest in an accession is subordinate to a
security interest in the whole that is perfected by compliance with the
requirements of a certificate-of-title statute under Section 9.311(b). 

(e) Authorizes a secured party, subject to certain provisions, to remove an
accession from other goods if the security interest in the accession has
priority over the claims of every person having an interest in the whole,
after default.   

(f) Requires a secured party that removes an accession from other goods
under Subsection (e) to promptly reimburse any holder of a security
interest or other lien on, or owner of, the whole or the other goods, other
than the debtor, for the cost of repair of any physical injury to the whole
or the other goods. Provides that a secured party need not reimburse the
holder or owner for any diminution in value of the whole or the other goods
caused by the absence of the accession, rather than goods, removed or by
any necessary for replacing it. Deletes text stating certain conditions
under which a secured party may remove collateral from the whole. Makes
conforming and nonsubstantive changes. 

Sec.  9.336.  New Title: COMMINGLED GOODS.  Redesignated from existing
Section 9.315.  Defines "commingled goods" in this section. Provides that a
security interest does not exist in commingled goods as such.  Authorizes a
security interest to attach to a product or mass that results when goods
become commingled goods. Provides that if collateral becomes commingled
goods, a security interest attaches to the product or mass. Provides that
if a security interest in collateral is perfected before the collateral
becomes commingled goods, the security interest that attaches to the
product or mass is perfected. Provides that the other provisions of this
subchapter determine the priority of a security interest that attaches to
the product or mass, with certain exceptions. Sets forth the rules
determining priority if more than one security interest attaches to the
product or mass.  Deletes text providing certain situations in which the
security interest continues in the product or mass. Deletes text specifying
that when more than one security interest attaches to the product or mass
they rank equally according to the ratio that the cost of the goods bears
to the cost of total product or mass. Makes conforming and nonsubstantive
changes.   

Sec. 9.337. PRIORITY OF SECURITY INTERESTS IN GOODS COVERED BY CERTIFICATE
OF TITLE.  Sets forth the consequences  if, while a security interest in
goods is perfected by any method under the law of another jurisdiction,
this state issues a certificate of title that does not show that the goods
are subject to the security interest or contain a statement that they may
be subject to security interests not shown on the certificate. 

Sec. 9.338. PRIORITY OF SECURITY INTEREST OR AGRICULTURAL LIEN PERFECTED BY
FILED FINANCING STATEMENT PROVIDING CERTAIN INCORRECT INFORMATION. Sets
forth rules governing when a security interest or agricultural lien is
perfected by a filed financing statement providing information that is
incorrect at the time the financing statement is filed. 

Sec. 9.339. PRIORITY SUBJECT TO SUBORDINATION.  Provides that this chapter
does not preclude subordination by agreement by a person entitled to
priority. Redesignated from Section 9.316. Makes conforming and
nonsubstantive changes.   

Sec.  9.340.  EFFECTIVENESS OF RIGHT OF RECOUPMENT OR SET-OFF AGAINST
DEPOSIT ACCOUNT.  Authorizes a bank with which a deposit account is
maintained to exercise any right of recoupment or set-off against a secured
party that holds a security interest in the deposit account, with an
exception. Provides that the application of this chapter to a security
interest in a deposit account does not affect a right of recoupment or
setoff of the secured party as to a deposit account maintained with the
secured party, with an exception. Provides that the exercise by a bank of a
set-off against a deposit account is ineffective against a secured party
that holds a security interest in the deposit account that is perfected by
control under Section 9.104(a), if the set-off is based on a claim against
the debtor. 
 
Sec. 9.341. BANK'S RIGHTS AND DUTIES WITH RESPECT TO DEPOSIT ACCOUNT.
Provides that a bank's rights and duties with respect to a deposit account
maintained with the bank are not terminated, suspended, or modified by
certain actions, except as otherwise provided in Section 9.340(c), and
unless the bank otherwise agrees in an authenticated record.   

Sec. 9.342. BANK'S RIGHT TO REFUSE TO ENTER INTO OR DISCLOSE EXISTENCE OF
CONTROL AGREEMENT.  Provides that this chapter does not require a bank to
enter into an agreement of the kind described in Section 9.104(a), even if
its customer so requests or directs. Provides that a bank that has entered
into such an agreement is not required to confirm the existence of the
agreement to another person unless requested to do so by its customer. 

Sec. 9.343. OIL AND GAS INTERESTS: SECURITY INTEREST PERFECTED WITHOUT
FILING; STATUTORY LIEN. (a) Provides that this section provides a security
interest in favor of interest owners, as secured parties, to secure the
obligations of the first purchaser of oil and gas production, as debtor, to
pay the purchase price.  Provides that an authenticated record giving the
interest owner a right under real property law operates as a security
agreement created under this chapter. Provides that the act of the first
purchaser in signing an agreement to purchase oil or gas production, in
issuing a division order, or in making any other voluntary communication to
the interest owner or any governmental agency recognizing the interest
owner's right operates as an authentication of a security agreement.  

(b) Provides that the security interest provided by this section is
perfected automatically. Provides that if the interest of the secured party
is evidenced by certain legal records recorded in the real property records
of a county clerk, that record is effective as a filed financing statement,
but no additional fee is required and there is no requirement of refiling
every five years to maintain effectiveness of the filing.   

(c) Provides that the security interest exists in oil and gas production,
and also in the identifiable proceeds of that production owned by, received
by, or due to the first purchaser for an unlimited time for certain
proceeds and for the length of time provided in Section 9.315 for all other
proceeds.  

(d) Provides that this section creates a lien that secures the payment of
all taxes that are or should be withheld or paid by the first purchaser and
a lien that secures the rights of any person who would be entitled to a
security interest under Subsection (a) except for lack of any adoption of a
security agreement by the first purchaser or a lack of possession or record
required by Section 9.203 for the security interest to be enforceable.   

(e) Provides that the security interest and liens created by this section
have priority over any purchaser who is not a buyer in the ordinary course
of the first purchaser's business, but are cut off by the sale to a buyer
from the first purchaser who is in the ordinary course of the first
purchaser's business under Section 9.320.  Provides that in either case, a
security interest will continue in the proceeds of the sale by the first
purchaser as provided in Subsection (c).   

(f) Sets forth the rules governing priorities of the security interests and
all liens created by this section over other Chapter 9 security interests.  

(g) Sets forth the rules governing priorities among the security interests
and liens created by this section.  

(h) Provides that the priorities for statutory liens mentioned in Section
9.333 do not apply to any security interest or statutory lien created by
this section.  Provides that if a pipeline common carrier has a statutory
or tariff lien that is effective and enforceable against a trustee in
bankruptcy and not invalidated by the Federal Tax Lien Act, that lien has
priority over the security interests and statutory liens created by this
section.   
 
(i) Provides that if oil and gas production in which there are security
interests or statutory liens created by this section is commingled with
inventory or other production, the rules of Section 9.336 apply.   

(j) Provides that a security interest or statutory lien created by this
section remains effective against the debtor and perfected against the
debtor's creditors even if assigned. Provides that if a deed, mineral deed,
assignment of oil and gas lease, or other such record evidencing the
assignment is filed in the real property records of the county, it will
have the same effect as filing an amended financing statement under Section
9.514.   

(k) Provides that this section does not impair an operator's right to
set-off or withhold funds from other interest owners as security for or in
satisfaction of any debt or security interest.  Provides that in case of a
dispute between an operator and another interest owner, a good faith tender
of funds by anyone to the person who the operator and other interest owner
agree on, to a person who otherwise shows himself or herself to be the one
entitled to the funds, or to a court of competent jurisdiction in the event
of litigation or bankruptcy operates as a tender of the funds to both.   

(l) Authorizes a first purchaser who acts in good faith to terminate an
interest owner's security interest or statutory lien under this section by
paying, or by making and keeping open a tender of, the amount the first
purchaser believes to be due to the interest owner to certain people under
certain circumstances.   

(m) Provides that a person who buys from a first purchaser can ensure that
the person buys free and clear of an interest owner's security interest or
statutory lien by performing certain actions.   

(n) Provides that if a tender that is valid thereafter fails, the security
interest and liens governed by this section remain effective.   

(o) Provides that in addition to the usual remedy of sequestration
available to secured parties, and the remedies given in Subchapter F, the
holders of security interests and liens create by this section have
available to them, to the extent constitutionally permitted, certain
remedies.   

(p) Provides that the rights of any person claiming under a security
interest or lien created by this section are governed by the other
provisions of this chapter except to the extent that this section
necessarily displaces those provisions.  Provides that this section does
not invalidate or otherwise affect the interests of any person in any real
property before severance of any oil or gas production.   

(q) Provides that the security interest created under Subsections (a) and
(b) do not apply to proceeds of gas production that have been withheld, in
cash or account form, by a purchaser under Section 201.204(c) (First
Purchaser to Pay Tax), Tax Code.   

(r) Defines "oil and gas production," "interest owner," "first purchaser,"
and "operator" in this section. Deletes existing Sections 9.317 (Secured
Party Not Obligated on Contract of Debtor), 9.318 (Defenses Against
Assignee; Modification of Contract After Notification of Assignment; Term
Prohibiting Assignment Ineffective; Identification and Proof of
Assignment), and 9.319 (Oil and Gas Interests: Security Interest Perfected
Without Filing; Statutory Lien). 

SUBCHAPTER D.  New Heading: RIGHTS OF THIRD PARTIES

Sec.  9.401.  ALIENABILITY OF DEBTOR'S RIGHTS.  Provides that whether a
debtor's rights in collateral are authorized to be voluntarily or
involuntarily transferred is governed by other law, with certain
exceptions. Provides that an agreement between the debtor and secured party
that prohibits a transfer of the debtor's rights in collateral or makes the
transfer  a default does not prevent the transfer from taking effect. 

Sec. 9.402. SECURED PARTY NOT OBLIGATED ON CONTRACT OF DEBTOR OR IN TORT.
Provides that the existence of a security interest, agricultural lien, or
authority given to a debtor to dispose of or use collateral, without more,
does not subject a secured party to liability in contract or tort for the
debtor's acts or omissions.   

Sec. 9.403. AGREEMENT NOT TO ASSERT DEFENSES AGAINST ASSIGNEE. (a) Defines
"value" in this section.  

(b) Provides that an agreement between an account debtor and an assignor
not to assert against an assignee any claim or defense that the account
debtor may have against the assignor is enforceable by an assignee that
takes certain assignments under certain conditions, except as provided by
this section.   

(c) Provides that Subsection(b) does not apply to defenses of a type that
may be asserted against a holder in due course of a negotiable instrument
under Section 3.305(b) (Defenses and Claims in Recoupment).   

(d) Provides that in a consumer transaction, if a record evidences the
account debtor's obligation, law other than this chapter requires that the
record include a statement to the effect that the rights of an assignee are
subject to claims and defenses that the account debtor could assert against
the original obligee, and the record does not include certain statements.   

(e) Provides that this section is subject to law other than this chapter
that establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal, family,
or household purposes.   

(f) Provides that this section does not displace law other than this
chapter that gives effect to an agreement by an account debtor not to
assert a claim or defense against an assignee, except as provided in
Subsection (d).   

Sec.  9.404.  RIGHTS ACQUIRED BY ASSIGNEE; CLAIMS AND DEFENSES AGAINST
ASSIGNEE.  (a) Provides that unless an account debtor has made an
enforceable agreement not to assert defenses or claims, and subject to
Subsection (b)-(e), the rights of an assignee are subject to certain terms,
defenses, and claims.   

(b) Authorizes the claim of an account debtor against an assignor to be
asserted against an assignee only to reduce the amount the account debtor
owes, subject to Subsection (c) and except as provided in Subsection (d).   

(c) Provides that this section is subject to law other than this chapter
that establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal, family,
or household purposes.   

(d) Provides that in a consumer transaction, if a record evidences the
account debtor's obligation, law other than this chapter requires that the
record include a statement to the effect that the account debtor's recovery
against an assignee with respect to claims and defenses against the
assignor may not exceed amounts paid by the account debtor under the
record, and the record does not include such a statement, the extent to
which a claim of an account debtor against the assignor may be asserted
against an assignee is determined as if the record included such a
statement.   

(e) Provides that this section does not apply to an assignment of a
health-care-insurance receivable.   

Sec. 9.405. MODIFICATION OF ASSIGNED CONTRACT. (a) Provides that a
modification of or substitution for an assigned contract is effective
against an assignee if  made in good faith. Provides that the assignee
acquires corresponding rights under the modified or substituted contract.
Authorizes the assignment to provide that the modification or substitution
is a breach of contract by the assignor.  Provides that this subsection is
subject to Subsections (b)-(d).   

(b) Sets forth the rights to payment to which Subsection (a) applies.  

(c) Provides that this section is subject to law other than this chapter
that establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal, family,
or household purposes.   

(d) Provides that this section does not apply to an assignment of a
health-care-insurance receivable. 

Sec. 9.406. DISCHARGE OF ACCOUNT DEBTOR; NOTIFICATION OF ASSIGNMENT;
IDENTIFICATION AND PROOF OF ASSIGNMENT; RESTRICTIONS ON ASSIGNMENT OF
ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES, AND PROMISSORY NOTES
INEFFECTIVE. (a) Authorizes an account debtor on an account, chattel paper,
or a payment intangible to discharge its obligation by paying the assignor
until, but not after, the account debtor receives a notification,
authenticated by the assignor or the assignee, that the amount due or to
become due has been assigned and that payment is to be made to the
assignee, subject to Subsections (b)-(i).  Authorizes the account debtor,
after receipt of the notification, to discharge its obligation by paying
the assignee, and prohibits the discharge of the obligation by paying the
assignor.   

(b) Provides that notification is ineffective under Subsection (a) under
certain circumstances, subject to Subsection (h).   

(c) Requires an assignee to seasonably furnish reasonable proof that the
assignment has been made, if requested by the account debtor, subject to
Subsection (h).  Authorizes the account debtor to discharge its obligation
by paying the assignor, unless the assignee complies.   

(d) Sets forth actions the extent to which a term in an agreement between
the account debtor and an assignor or in a promissory note is ineffective.

(e) Provides that Subsection (d) does not apply to the sale of a payment
intangible or promissory note.   

(f) Provides that a rule of law, statute, or regulation that prohibits,
restricts, or requires the consent of a government, governmental body or
official, or account debtor to the assignment or transfer of, or creation
of a security interest in, an account or chattel paper is ineffective to a
certain extent.   

(g) Prohibits an account debtor from waiving or varying its option under
Subsection (b)(3), subject to Subsection (h).   

(h) Provides that this section is subject to law other than this chapter
that establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal, family,
or household purposes.   

(i) Provides that this section does not apply to an assignment of a
health-care-insurance receivable.   

Sec. 9.407. RESTRICTIONS ON CREATION OR ENFORCEMENT OF SECURITY INTEREST IN
LEASEHOLD INTEREST OR IN LESSOR'S RESIDUAL INTEREST. (a) Sets forth the
rules governing when a term in a lease agreement is ineffective, except as
otherwise provided in Subsection (b).   

 (b) Sets forth the rules governing when a term described in Subsection
(a)(2) is effective, except as provided in Section 2A.303(g).   

(c) Provides that the creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease contract or the
lessor's residual interest in the goods is not a transfer that materially
impairs the lessee's prospect of obtaining return performance or materially
changes the duty of or materially increase the burden or risk imposed on
the lessee within the purview of Section 2A.303(d) unless enforcement
actually results in a delegation of material performance of the lessor. 

Sec.  9.408.  RESTRICTIONS ON ASSIGNMENT OF PROMISSORY NOTES,
HEALTHCARE-INSURANCE RECEIVABLES, AND CERTAIN GENERAL INTANGIBLES
INEFFECTIVE. (a) Provides that, except as provided by Subsection (b), a
term in a promissory note or in an agreement between an account debtor and
a debtor that relates to a health-care-insurance receivable or a general
intangible, and which term prohibits, restricts, or requires the consent of
the person obligated  on the promissory note or the account debtor to, the
assignment or transfer of, or creation, attachment, or perfection of a
security interest in the promissory note, health-care-insurance receivable,
or general intangible, is ineffective to the extent that certain events may
occur.   

(b) Provides that Subsection (a) applies to a security interest in a
payment intangible or promissory note only if the security interest arises
out of a sale of the payment intangible or promissory note.   

(c) Provides that a rule of law, statute, or regulation that prohibits,
restricts, or requires the consent of certain entities or persons to the
assignment or transfer of, or creation of a security interest in, a
promissory note, health-care-insurance receivable, or general intangible
between an account debtor and a debtor, is ineffective to a certain extent.

(d) Provides that to the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor that relates to a
health-care-insurance receivable or general intangible or a rule of law,
statute, or regulation described in Subsection (c) would be effective under
other law but is ineffective under Subsection (a) or (c), the creation,
attachment, or perfection of a security interest in the promissory note,
health-careinsurance receivable, or general intangible is not enforceable
against certain people, and does not require, impose on a duty on, or
entitle certain people to perform certain actions.  
Sec. 9.409. RESTRICTIONS ON ASSIGNMENT OF LETTER-OF-CREDIT RIGHTS
INEFFECTIVE. (a) Provides that a term in a letter of credit or a rule of
law, statute, regulation, custom, or practice applicable to the letter of
credit that prohibits, restricts, or requires the consent of an applicant,
issuer, or nominated person to a beneficiary's assignment of or creation of
a security interest in a letter-of-credit right is ineffective to a certain
extent.   

(b) Provides that to the extent that a term in a letter of credit is
ineffective under Subsection (a) but would be effective under law other
than this chapter or a custom or practice applicable to the letter of
credit, to the transfer of a right to draw or otherwise demand performance
under the letter of credit, or to the assignment of a right to proceeds of
the letter of credit, the creation, attachment, or perfection of a security
interest in the letter-of-credit right is not enforceable against certain
people, imposes no duties on certain people, and does not require certain
people to recognize the security interest or pay or render performance to
the secured party, or accept payment or other performance from the secured
party. 

SUBCHAPTER E.  FILING

Sec. 9.501. New Title: FILING OFFICE. Redesignated from existing Section
9.401. (a) Sets forth the correct office in which to file a financing
statement to perfect certain security interests or agricultural liens,
except as provided in Subsection (b). Deletes text concerning  the proper
place to file in order to perfect certain security interests.   

(b) Sets forth the proper place to file a financing statement to perfect a
security interest in collateral of a transmitting utility.  Provides that
the financing statement also constitutes a fixture filing as to the
collateral indicated in the financing statement that is or is to become
fixtures. Deletes text concerning erroneous filing and the removal of
collateral and continuation statements. 

Sec. 9.502. New Title: CONTENTS OF FINANCING STATEMENT; RECORD OF MORTGAGE
AS FINANCING STATEMENT; TIME OF FILING FINANCING STATEMENT. Redesignated
from existing Section 9.402. (a) Provides that a financing statement is
sufficient only if the statement includes certain information, subject to
Subsection (b).  Deletes text setting forth formal requisites of a
financing statement and its form. 

(b) Modifies certain information required to be in a financing statement
that covers asextracted collateral or timber to be cut, or that is filed as
a fixture filing and covers goods that are or are to become fixtures, and
provides Section 9.501(b) as an exception. Makes conforming and
nonsubstantive changes.   

(c) Modifies the conditions under which a record of a mortgage is effective
as a financing statement filed as a fixture filing or as a financing
statement covering as-extracted collateral or timber to be cut, rather than
a financing statement covering timber to be cut or covering minerals or the
like including oil and gas or certain accounts. Deletes certain conditions
under which a record of a mortgage is effective as a financing statement.
Makes conforming and nonsubstantive changes. 

(d) Authorizes a financing statement to be filed before a security
agreement is made or a security interest otherwise attaches. 

Sec. 9.503. NAME OF DEBTOR AND SECURED PARTY. (a) Sets forth the rules
governing when a financing statement sufficiently provides the name of the
debtor. Deletes text setting forth additional rules governing when a
financing statement sufficiently provides the name of the debtor.     

(b) Provides that a financing statement that provides the name of the
debtor in accordance with Subsection (a) is not rendered ineffective by the
absence of certain information.  

(c) Provides that a financing statement that provides only the debtor's
trade name does not sufficiently provide the name of the debtor.   

(d) Provides that failure to indicate the representative capacity of a
secured party or representative of a secured party does not affect the
sufficiency of a financing statement.  
(e) Authorizes a financing statement to provide the name of more than one
debtor and the name of more than one secured party.  

Sec. 9.504. INDICATION OF COLLATERAL. Provides that a financing statement
sufficiently indicates the collateral that it covers only if the financing
statement provides certain information. 

Sec. 9.505. FILING AND COMPLIANCE WITH OTHER STATUTES AND TREATIES FOR
CONSIGNMENTS, LEASES, OTHER BAILMENTS, AND OTHER TRANSACTIONS. (a)
Authorizes a consignor, lessor, or other bailor of goods, a licensor, or a
buyer of a payment intangible or promissory note to use in a financing
statement or use to comply with a statute or treaty described in Section
9.311(a), certain terms.  

(b) Provides that this subchapter applies to the filing of a financing
statement under Subsection (a) and to compliance that is equivalent to
filing a financing statement under  Section 9.311(b), but the filing or
compliance is not of itself a factor in determining whether the collateral
secures an obligation.  Provides that if it is determined for another
reason that the collateral secures an obligation, a security interest held
by the consignor, lessor, bailor, licensor, owner, or buyer that attaches
to the collateral is perfected by the filing or compliance. 

Sec. 9.506. EFFECT OF ERRORS OR OMISSIONS. (a) Provides that a financing
statement substantially satisfying with the requirements of this subchapter
is effective, even if it has minor errors or omissions, unless the errors
or omissions make the financing statement seriously misleading. Makes
conforming and nonsubstantive changes. 

(b) Provides that a financing statement that fails sufficiently to provide
the name of the debtor in accordance with Section 9.503(a) is seriously
misleading, except as provided in Subsection (c).  

(c) Provides that if a search of the records of the filing office under the
debtor's correct name, using the filing office's standard search logic,
would disclose a financing statement that fails sufficiently to provide the
name of the debtor in accordance with Section 9.503(a), the name provided
does not make the financing statement seriously misleading.  
(d) Defines "debtor's correct name."

Sec. 9.507. New Title: EFFECT OF CERTAIN EVENTS ON EFFECTIVENESS OF
FINANCING STATEMENT. Redesignated from existing Section 9.403.  (a)
Provides that a filed financing statement remains effective with respect to
collateral that is sold, exchanged, leased, licensed, or otherwise disposed
of and in which a security interest or agricultural lien continues. Deletes
text stating what constitutes filing. Deletes text concerning the duration
of a filing and the effect of a lapsed filing. 

(b) Provides that a financing statement is not rendered ineffective if,
after the financing statement is filed, the information provided in the
financing statement becomes seriously misleading under Section 9.506,
except as provided in Subsection (c) and Section 9.508.   
(c) Sets forth the effects if a debtor so changes its name that a filed
financing statement becomes seriously misleading under Section 9.506.
Deletes text relating to the filing of the continuation statement and the
duties of a filing officer. Deletes Subsection (d)-(h) relating to the
labeling and fees for a filing statement, and the effectiveness of a
mortgage. 

Sec. 9.508. EFFECTIVENESS OF FINANCING STATEMENT IF NEW DEBTOR BECOMES
BOUND BY SECURITY AGREEMENT. (a) Provides that a filed financing statement
naming an original debtor is effective to perfect a security interest in
collateral in which a new debtor has or acquires rights to the extent that
the financing statement would have been effective had the original debtor
acquired rights in the collateral.   

(b) Sets forth the effects if the difference between the name of the
original debtor and that of the new debtor causes a filed financing
statement that is effective under Subsection (a) to be seriously misleading
under Section 9.506.   

(c) Provides that this section does not apply to collateral as to which a
filed financing statement remains effective against the new debtor under
Section 9.507(a).   

Sec. 9.509. PERSONS ENTITLED TO FILE A RECORD. (a) Authorizes a person to
file an initial financing statement, amendment that adds collateral covered
by a financing statement, or amendment that adds a debtor to a financing
statement only under certain conditions.  

(b) Provides that a debtor or new debtor authorizes the filing of an
initial financing statement covering certain collateral and property, by
authenticating or becoming bound as a debtor by a security agreement.   

 (c) Provides that a debtor authorizes the filing of an initial financing
statement, and an amendment, covering the collateral and property that
becomes collateral  under Section 9.315(a) by acquiring collateral in which
a security interest or agricultural lien continues under Section 9.315(a).

(d) Authorizes a person to file an amendment other than an amendment that
adds collateral covered by a financing statement or an amendment that adds
a debtor to a financing statement only under certain conditions.   

(e) Authorizes each secured party of record to authorize the filing of an
amendment under Subsection (d).   

Sec. 9.510. EFFECTIVENESS OF FILED RECORD. Provides that a filed record is
effective only to the extent that it was filed by a person that may file it
under Section 9.509.  Provides that a record authorized by one secured
party of record does not affect the financing statement with respect to
another secured party of record.  Provides that a continuation statement
that is not filed within the six-month period prescribed by Section
9.515(d) is ineffective. 

Sec. 9.511. SECURED PARTY OF RECORD. Provides that a secured party of
record with respect to a financing statement is a person whose name is
provided as the name of the secured party or a representative of the
secured party in an initial financing statement that has been filed.
Provides that the assignee named in the initial financing statement is the
secured party of record with respect to the financing statement, if an
initial financing statement is filed under Section 9.514(a).  Provides that
the person named in a filed amendment of a financing statement that
provides the name of a person as a secured party or a representative of a
secured party is a secured party of record. Provides that the assignee
named in an amendment filed under Section 9.514(b) is a secured party of
record.  Provides that a person remains a secured party of record until the
filing of an amendment of the financing statement that deletes the person.

Sec. 9.512. AMENDMENT OF FINANCING STATEMENT. (a) Authorizes a person to
amend a financing statement, subject to Section 9.509, by filing an
amendment containing certain information.   

(b) Provides that the filing of an amendment does not extend the period of
effectiveness of the financing statement, except as provided in Section
9.515.   

(c) Provides that an amended financing statement with an amendment that
adds collateral is effective as to the added collateral only from the date
of the filing of the amendment.  
(d) Provides that an amended financing statement with an amendment adding a
debtor is effective as to the added debtor only from the date of the filing
of the amendment.   

(e) Sets forth the extent to which an amendment is ineffective. 

(f) Authorizes a secured party to change the name or mailing address of the
secured party in more than one filing statement by filing a master
amendment setting forth certain information.  Provides that the secured
party to also provide filing information in computer-readable form
prescribed by the Secretary of State.   

Sec. 9.513. TERMINATION STATEMENT. Redesignated from existing Section
9.404. (a) Requires a secured party to cause the secured party of record
for a financing statement to file a termination statement for the financing
statement under certain conditions. 

(b) Requires a secured party to cause the secured party of record to file
the termination statement by a certain date to comply with Subsection (a).
Deletes text concerning the date by which a secured party must file the
termination statement and the requirements for a termination statement and
other filing requirements. Deletes text providing that a  secured party
must send the debtor a termination statement, whenever there is no
outstanding secured obligation and no commitment to make advances, incur
obligations or otherwise give value. 

(c) Requires the secured party to cause the secured party of record for a
financing statement to send the debtor a termination statement for the
financing statement or file the termination statement in the filing office
under certain circumstances, within 20 days after a secured party receives
an authenticated demand from a debtor, in cases not governed by Subsection
(a). Provides that the financing statement to which the termination
statement relates ceases to be effective upon the filing of a termination
statement, except as provided in Section 9.510. Deletes text regarding the
presentation of the filing statement to the filing officer. Deletes text
regarding the filing fee. Makes conforming and nonsubstantive changes.  

Sec. 9.514. New Title: ASSIGNMENT OF POWERS OF SECURED PARTY OF RECORD.
Redesignated from existing Section 9.405. (a) Authorizes an initial
financing statement to reflect an assignment of all of the secured party's
power to authorize an amendment to the financing statement by providing the
name and mailing address of the assignee as the name and address of the
secured party, except as provided in Subsection (c). Makes conforming and
nonsubstantive changes.  

(b) Authorizes a secured party of record to assign of record all or a part
of its power to authorize an amendment to a financing statement by filing
an amendment to the financing statement containing certain information,
except as provided by Subsection (c). Makes conforming and nonsubstantive
changes. Deletes text concerning the assignment of security interests.  

(c) Authorizes an assignment of record of a security interest in a fixture
covered by a record or a mortgage to be made only by an assignment of
record of the mortgage in the manner provided by the law of this state.
Deletes text providing that after the disclosure of filing of an
assignment, the assignee is the secured party of record. 

(d) Authorizes a secured party of record to assign of record all of the
secured party's rights under more than one financing statement by filing a
master assignment. Provides that the secured party must provide filing
information in computer-readable form prescribed by the secretary of state.
Deletes text concerning fees.  

Sec. 9.515. DURATION AND EFFECTIVENESS OF FINANCING STATEMENT; EFFECT OF
LAPSED FINANCING STATEMENT. (a) Provides that a filed financing statement
is effective for a period of five years after the date of filing, except as
provided in Subsections (b)-(g).   

(b) Provides that an initial financing statement filed in connection with a
public-finance transaction or manufactured-home transaction, so indicated,
is effective for a period of 30 years, except as provided in Subsections
(e) - (g).   

(c) Provides that the effectiveness of a filed financing statement lapses
on the expiration of the effectiveness period unless a continuation
statement is filed prior to the lapse. Provides that upon lapse, a
financing statement ceases to be effective and any perfected security
interest or agricultural lien becomes unperfected, unless perfected
otherwise. Provides that if the security interest or agricultural lien
become unperfected upon lapse, it is deemed never to have been perfected as
against a purchaser of the collateral for value.  
(d) Authorizes a continuation statement to be filed for a certain finite
period.   

(e) Provides the effective period for a properly filed continuation
statement, except as provided in Section 9.510.  Provides that upon the
expiration of a continuation statement, the financing statement lapses in
the same manner as provided in Subsection (c), unless another continuation
statement is filed before the lapse.  Authorizes succeeding  continuation
statements to be filed in the same manner.   

(f) Provides that the financing statement is effective until a termination
statement is filed if the debtor is a transmitting utility and a filed
financing statement so indicates.   

(g) Provides that a record of a mortgage that is effective as a financing
statement filed as a fixture filing remains effective until the mortgage is
release or satisfied of record or its effectiveness otherwise terminates.   


Sec. 9.516. WHAT CONSTITUTES FILING; EFFECTIVENESS OF FILING. (a) Provides
that communication of a record to a filing office and tender of the filing
fee or acceptance of the record by the filing office constitutes filing,
with an exception.  

(b) Sets forth the conditions where filing does not occur with respect to a
record that a filing office refuses to accept.   

(c) Sets forth the conditions under which a record does not provide
information or does not indicate that it is an amendment of the relating
initial financing statement.  

(d) Provides that a record that is communicated to the filing office with
tender of the filing fee, but that the filing office refuses to accept for
a reason other than one set forth in Subsection (b), is effective as a
filed record except as against certain purchasers of the collateral. 

Sec. 9.517. EFFECT OF INDEXING ERRORS. Provides that the failure of the
filing office to index a record correctly does not affect the effectiveness
of the filed record. 

Sec. 9.518. CLAIM CONCERNING INACCURATE OR WRONGFULLY FILED RECORD.
Authorizes a person to file in the filing office a correction statement if
the person believes the record is inaccurate or wrongfully filed. Provides
the provisions for a correction statement. Provides that the filing of a
correction statement does not affect the effectiveness of an initial
financing statement or other filed record. 

Sec. 9.5185. FRAUDULENT FILING. (a) Prohibits a person from intentionally
or knowingly presenting for filing certain financing statements.   

(b) Sets forth penalties for the violation of Subsection (a).  

(c) Provides that a person who violates Subsection (a) may also be
prosecuted under Section 37.101 (Fraudulent Filing of Financing Statement),
Penal Code.   

(d) Authorizes an owner of property covered by a fraudulent financing
statement described in Subsection (a) to file a suit in a court requesting
specific relief.  Provides that a successful plaintiff is entitled to
reasonable attorney's fees and court costs assessed against the person who
filed the fraudulent financing statement.  Provides for notice by
publication for an unknown defendant in a suit over a fraudulent financing
statement.   

Sec. 9.519. NUMBERING, MAINTAINING, AND INDEXING RECORDS; COMMUNICATING
INFORMATION PROVIDED IN RECORDS.  Sets forth requirements for the filing
office, for each record filed in a filing office.  Sets forth requirements
for file numbers assigned after January 1, 2002, with an exception. Sets
forth requirements for the filing office. Sets forth requirements for the
filing office for a financing statement filed as a fixture filing or
covering as-extracted collateral or timber to be cut.  Requires the filing
office to index an assignment or an amendment, if a financing statement is
filed as a fixture filing or covers as-extracted collateral or timber to be
cut. Requires the filing office to maintain certain capabilities.
Prohibits a filing office from removing a debtor's name from the index for
a certain period. Sets a required time period for which acts in this
section must be performed.  Establishes provisions that do not apply to a
filing office described in Section 9.501(a).   
 
Sec. 9.520. ACCEPTANCE AND REFUSAL TO ACCEPT RECORD.  Requires a filing
office to refuse to accept a record for filing for a reason set forth in
Section 9.516(b) and authorizes a filing office to refuse to accept a
record for filing only for a reason set forth in Section 9.516(b).
Requires a filing office that refuses to accept a record for filing to
communicate to the person that presented the record the fact and reason for
refusal and the date and time the record would have been filed had the
filing office accepted it.  Provides that the communication must be made at
a certain time period and in a certain manner. Provides that a filed
financing statement satisfying Sections 9.502(a) and (b) is effective, even
if the filing office is required to refuse to accept it.  Provides that
Section 9.338 applies to a filed financing statement providing information
described in Section 9.516(b)(5) that is incorrect at the time the
financing statement is filed.  Provides that this subchapter applies as to
each debtor separately, if a record communicated to a filing office
provides information that relates to more than one debtor.   

Sec. 9.521. UNIFORM FORM OF WRITTEN FINANCING STATEMENT AND AMENDMENT.
Prohibits a filing office that accepts written records from refusing to
accept a written initial financing statement and a written record in the
form and format set forth except for a reason in Section 9.516(b). Sets
forth the uniform form of the written financing statement and amendment. 

Sec. 9.522. MAINTENANCE AND DESTRUCTION OF RECORDS.  Requires the filing
office to maintain a record of the information provided in a filed
financing statement for a certain period.  Provides that the record must be
retrievable by certain information. Authorizes the filing office to
immediately destroy any written record evidencing a financing statement,
but requires the filing office to maintain another record of the financing
statement, except to the extent other law provides otherwise.   

Sec. 9.523. INFORMATION FROM FILING OFFICE; SALE OR LICENSE OF RECORDS.
Requires the filing office to send certain information to a person
requesting an acknowledgment of the filing. Authorizes the filing office to
send a copy, furnished by the person requesting acknowledgment, with
certain information.  Requires the filing office to communicate to the
person an acknowledgment that provides certain information, if a person
files a record other than a written record. Requires the filing office to
communicate or otherwise make available in a record certain information if
a person requests it. Authorizes the filing office to communicate such
information in any medium. Requires the filing office to communicate
information by issuing its written certificate, if requested. Requires the
filing office to perform the acts required in this section at a certain
time and manner. Requires the secretary of state to offer to sell or
license to the public copies of all records filed with the secretary in
every medium, at least weekly.   

Sec.  9.524.  DELAY BY FILING OFFICE.  Sets forth the circumstances in
which delay by the filing office beyond the prescribed time is excused. 

Sec. 9.525. FEES. Sets the fee for filing and indexing a record under this
chapter, with certain exceptions. Sets the fee for filing and indexing an
initial financing statement, with an exception.  Provides that the number
of names required to be indexed does not affect the fees. Sets the fee for
responding to a request for information from the filing office.  Provides
that this section does not require a fee with respect to a record of a
mortgage that is effective as a financing statement filed as a fixture
filing or as a financing statement covering asextracted collateral or
timber to be cut. Provides that the applicable recording and satisfaction
fees apply to the record of the mortgage. Sets the fee for filing,
indexing, and furnishing filing data about a statement of master amendment
or master assignment. 

Sec. 9.526. FILING-OFFICE RULES. Requires the secretary of state to adopt
and publish rules to implement this chapter.  Provides that the
filing-office rules must be consistent with this chapter.  Sets forth
requirements for the secretary of state to keep the filing-office rules and
practices in harmony with other filing offices in other jurisdictions.   

 Sec. 9.527. DUTY TO REPORT. Requires the secretary of state to report to
the legislature by January 1 biannually on the operation of the filing
office.  Provides that the report must contain certain information.
Deletes existing Sections 9.406 (Release of Collateral; Duties of Filing
Officer: Fees), 9.407 (Information From Filing Officer), 9.408 (Financing
Statements Covering Consigned or Leased Goods), 9.409 (Prescribed Forms),
9.410 (Master Assignment and Amendment), 9.411 (Rules), and 9.412
(Fraudulent Filing). 

SUBCHAPTER F.  DEFAULT
Redesignated from Subchapter E.

Sec. 9.601. New Title: RIGHTS AFTER DEFAULT; JUDICIAL ENFORCEMENT;
CONSIGNOR OR BUYER OF ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES, OR
PROMISSORY NOTES. Redesignated from existing Section 9.501. (a) Changes the
exception, for which a secured party has the rights provided under this
subchapter. Sets forth certain actions a secured party may take after
default. Makes conforming and nonsubstantive changes.  

(b) Provides that a secured party in possession of collateral or control of
collateral under certain sections has the rights and remedies provided in
Section 9.207.   

(c) Authorizes the rights to be exercised simultaneously and provides that
the rights are cumulative. Makes conforming and nonsubstantive changes. 

(d) Provides that a debtor and an obligor have the rights provided by this
subchapter and by agreement of the parties, after default. Deletes text
regarding the prohibition against the rights being waived. Deletes text
authorizing the secured party to proceed if the security agreement covers
both real and personal property.  

(e) Sets forth the dates for a judgment to relate back a lien of any levy
that may be made upon the collateral.  Makes conforming and nonsubstantive
changes.  

(f) Provides that a sale, rather than a judicial sale, pursuant to an
execution is a foreclosure of the security interest or agricultural lien by
judicial procedure. Makes conforming and nonsubstantive changes.  

(g) Provides that this subchapter, with an exception, imposes no duties
upon a secured party that is a consignor or is a buyer of accounts, chattel
paper, payment intangibles, or promissory notes. 

Sec. 9.602. WAIVER AND VARIANCE OF RIGHTS AND DUTIES.  Sets forth the rules
that the debtor or obligor is prohibited from waiving or varying. 

Sec. 9.603. AGREEMENT ON STANDARDS CONCERNING RIGHTS AND DUTIES. (a)
Authorizes the parties to determine by agreement the standards measuring
the fulfillment of the rights of a debtor or obligor and the duties of the
secured party if the standards are not manifestly unreasonable.  

(b) Provides that Subsection (a) does not apply to the duty under Section
9.609 to refrain from breaching the peace. 

Sec. 9.604. PROCEDURE IF SECURITY AGREEMENT COVERS REAL PROPERTY OR
FIXTURES. (a) Authorizes a secured party to proceed as to certain personal
property and real property if a security agreement covers both personal and
real property.  

(b) Authorizes a secured party to proceed under this subchapter or in
accordance with the rights with respect to real estate if a security
agreement covers goods that are or become fixtures.  

(c) Authorizes the secured party, after default, to remove the collateral
from the real  property if a secured party holding a security interest in
fixtures has priority over all owners and encumbrances of the real
property.  

(d) Requires a secured party that removes collateral to promptly reimburse
any encumbrancer or owner of the real property, other than the debtor, for
the cost of repair of any physical injury caused by the removal. Provides
that the secured party need not reimburse the encumbrancer or owner for any
diminution in value of the real property caused by the removal or necessity
to replace the goods. Authorizes a person entitled to reimbursement to
refuse permission to remove until the secured party gives adequate
assurance of reimbursement. 

Sec. 9.605. UNKNOWN DEBTOR OR SECONDARY OBLIGOR. Provides that a secured
party does not owe a duty based on its status as secured party to certain
people. 

Sec.  9.606.  TIME OF DEFAULT FOR AGRICULTURAL LIEN.  Provides that a
default occurs in connection with an agricultural lien at the time the
secured party becomes entitled to enforce the lien in accordance with the
statute under which it was created.  

Sec. 9.607. New Title: COLLECTION AND ENFORCEMENT BY SECURED PARTY.
Redesignated from existing Section 9.502. (a) Authorizes, rather than
entitles, a secured party, after default, or if so agreed, to notify an
account debtor or other person obligated on collateral to make payment or
render performance to or for the benefit of the secured party, take
entitled proceeds, enforce certain obligations, apply the balance of the
deposit account to the secured obligation, and instruct the bank to pay the
balance of the deposit account to or for the benefit of the secured party.
Makes conforming and nonsubstantive changes. 

(b) Authorizes the secured party to record in the office in which a record
of the mortgage is recorded certain documents if necessary to enable a
secured party to exercise under Subsection (a) the right of a debtor to
enforce a mortgage nonjudicially. 

(c) Requires a secured party to proceed in a commercially reasonable manner
in certain circumstances. Redesignated from Subsection (b). Deletes text
concerning uncollected collateral. Makes conforming and nonsubstantive
changes.  

(d) Authorizes a secured party to deduct from the collections made pursuant
to Subsection (c) reasonable expenses of collection and enforcement, rather
than reasonable expenses of realization from the collections. Makes
conforming and nonsubstantive changes.  

(e) Provides that this section does not determine whether an account
debtor, bank, or other person obligated on collateral owes a duty to a
secured party. 

Sec. 9.608. APPLICATION OF PROCEEDS OF COLLECTION OR ENFORCEMENT; LIABILITY
FOR DEFICIENCY AND RIGHT TO SURPLUS.  Sets forth the rules governing
instances in which a security interest or agricultural lien secures payment
or performance of an obligation. Provides that if the underlying
transaction is a sale of accounts, chattel paper, payment intangibles, or
promissory notes, the debtor is not entitled to any surplus, and the
obligor is not liable for any deficiency. Deletes text concerning
conditions in which a secured party must account to the debtor for any
surplus.   

Sec.  9.609.  SECURED PARTY'S RIGHT TO TAKE POSSESSION AFTER DEFAULT.
Authorizes a secured party to take possession of collateral, without
removal to render equipment unusable, and dispose of collateral on a
debtor's premises under Section 9.610, after default.  Authorizes a secured
party to proceed with or without judicial process, if it proceeds without
breach of the peace. Redesignated from existing Section 9.503. Makes
conforming and nonsubstantive changes.   

Sec. 9.610. New Title: DISPOSITION OF COLLATERAL AFTER DEFAULT.
Redesignated from existing Section 9.504. (a) Authorizes a secured party to
sell, lease, license, or otherwise dispose of any or all of the collateral
in its present condition or  following any commercially reasonable
preparation or processing after default. Makes conforming and
nonsubstantive changes.  

(b) Provides that every aspect of a disposition of collateral must be
commercially reasonable.  Authorizes a secured party to dispose of the
collateral under certain procedures, if commercially reasonable. Deletes
text requiring the proceeds of disposition to be applied in a certain
manner. Deletes text providing that the secured party must report any
surplus. Deletes text concerning a secured party's right to dispose of
collateral after default and the effect of the disposition.   

(c) Authorizes a secured party to purchase collateral at certain
dispositions. 

(d) Provides that a contract for the sale, lease, license, or other
disposition includes the warranties relating to title, possession, quiet
enjoyment, and the like that by operation of law accompany a voluntary
disposition of property of the kind subject to the contract.  

(e) Authorizes a secured party to disclaim or modify warranties under
Subsection (d) in a certain manner.  

(f) Provides that a record is sufficient to disclaim warranties under
Subsection (e) if it contains certain words or words of similar import. 

Sec. 9.611. NOTIFICATION BEFORE DISPOSITION OF COLLATERAL. (a) Defines
"notification date" in this section.  

(b) Requires a secured party that disposes of collateral under Section
9.610 to send to specified persons a reasonable authenticated notification
of disposition.  

(c) Requires the secured party to send an authenticated notification of
disposition to certain people.  

(d) Provides that Subsection (b) does not apply to perishable collateral or
to collateral that is of a type customarily sold on a recognized market.  

(e) Sets forth the notification requirements for a secured party.   

Sec. 9.612. TIMELINESS OF NOTIFICATION BEFORE DISPOSITION OF COLLATERAL.
(a) Provides that whether a notification is sent within a reasonable time
is a question of fact, except as provided by Subsection (b).  

(b) Provides that, in a transaction other than a consumer transaction a
notification of disposition sent after default and 10 days or more before
the earliest time of disposition set forth in the notification is sent
within a reasonable time before the disposition.   

Sec. 9.613. CONTENTS AND FORM OF NOTIFICATION BEFORE DISPOSITION OF
COLLATERAL: GENERAL. Sets forth the rules governing the contents and form
of a notification before the disposition of collateral, except in a
consumer-goods transaction.   

Sec. 9.614. CONTENTS AND FORM OF NOTIFICATION BEFORE DISPOSITION OF
COLLATERAL: CONSUMER-GOODS TRANSACTION.   Sets forth the rules governing
the contents and form of a notification before the disposition of
collateral in a consumergoods transaction.   

Sec. 9.615. APPLICATION OF PROCEEDS OF DISPOSITION; LIABILITY FOR
DEFICIENCY AND RIGHT TO SURPLUS.  (a) Requires a secured party to apply or
pay over for application the cash proceeds of disposition in a certain
order to certain expenses and obligations.  

(b) Requires a holder of a subordinate security interest or other lien to
furnish reasonable  proof of the interest or lien within a reasonable time,
if requested by a secured party. Provides that the secured party need not
comply with the holder's demand under Subsection (a), unless the holder
provides the reasonable proof of the security interest or lien.  

(c) Provides that a secured party need not apply or pay over for
application noncash proceeds of disposition unless the failure to do so
would be commercially unreasonable. Requires a secured party that applies
or pays over for application noncash proceeds to do so in a commercially
reasonable manner.  

(d) Requires a secured party to account to and pay a debtor for any
surplus, and the obligor is liable for any deficiency if the security
interest under which a disposition is made secures payment or performance
of an obligation, after making the required payments and applications.  

(e) Provides that the debtor is not entitled to any surplus, and the
obligor is not liable for any deficiency if the underlying transaction is a
sale of accounts, chattel paper, payment intangible, or promissory notes.  

(f) Sets forth the procedure for calculating the surplus or deficiency
following a disposition.  

(g) Sets forth the effect of a secured party that receives cash proceeds of
a disposition in good faith and without knowledge that the receipt violates
the rights of the holder of the security interest or other lien that is not
subordinate to the security interest or agricultural lien.   

Sec. 9.616. EXPLANATION OF CALCULATION OF SURPLUS OR DEFICIENCY.  (a)
Defines "explanation" and "request" in this section.  

(b) Requires the secured party to perform certain actions in a
consumer-goods transaction in which the debtor is entitled to a surplus or
a consumer obligor is liable for a deficiency.  
(c) Sets forth the provisions for a writing to comply with Subsection (a)
in a certain order.  

(d) Provides that a particular phrasing is not required.  Provides that an
explanation complying substantially with the requirements is sufficient.  

(e) Provides that a debtor or consumer obligor is entitled without charge
to one response to a request during any six-month period in which the
secured party did not send an explanation pursuant to Subsection (b).
Authorizes the secured party to require payment of a charge not exceeding
$25 for each additional response.   

Sec. 9.617. RIGHTS OF TRANSFEREE OF COLLATERAL. Provides that the
transferee takes the collateral subject to certain rights and interest if a
transferee does not take free of the rights and interests. Deletes text
concerning the rights of a transferee of collateral at certain dispositions
and the rights and duties for a person who is liable to a secured party
under a guaranty, indorsement, or a repurchase agreement. Makes conforming
and nonsubstantive changes. 

Sec. 9.618. RIGHTS AND DUTIES OF CERTAIN SECONDARY OBLIGORS. Provides that
a secondary obligor acquires the rights and becomes obligated to perform
the duties of the secured party after the secondary obligor performs
certain actions. Sets forth certain stipulations concerning an assignment,
transfer, or subrogation. 

Sec. 9.619. TRANSFER OF RECORD OR LEGAL TITLE. Defines "transfer statement"
in this section. Provides that a transfer statement entitles the transferee
to the transfer of record of all rights of the debtor in the collateral
specified in the statement in any official filing, recording, registration,
or certificate-of-title system. Requires the official or office
responsible for maintaining the system to perform certain actions if a
transfer statement is presented with the applicable fee and request form.
Provides that a transfer of the record or legal title to collateral to a
secured party or otherwise is not of itself a disposition of collateral
under this chapter and does not of itself relieve the secured party of its
duties. 

Sec. 9.620. New Title: ACCEPTANCE OF COLLATERAL IN FULL OR PARTIAL
SATISFACTION OF OBLIGATION; COMPULSORY DISPOSITION OF COLLATERAL.
Redesignated from existing Section 9.505. Authorizes a secured party to
accept collateral in full or partial satisfaction of the obligation it
secures only under certain circumstances, with an exception.  Sets forth
the circumstances in which the acceptance of collateral is ineffective.
Sets forth the conditions under which a debtor consents to an acceptance of
collateral in partial or full satisfaction of the obligation.  Sets forth
the date by which a notification of objection must be received by the
secured party to be effective under different circumstances. Sets forth the
conditions under which a secured party that has taken possession of
collateral is required to dispose of the collateral under Section 9.610
within a certain time period. Requires the secured party to dispose of the
collateral by certain time periods.  Prohibits a secured party from
accepting collateral in partial satisfaction of the obligation it secures,
in a consumer transaction. Deletes text providing that a secured party who
has taken possession of collateral must dispose of it under Section 9.504.
Makes conforming and nonsubstantive changes.   

Sec. 9.621. NOTIFICATION OF PROPOSAL TO ACCEPT COLLATERAL. Requires a
secured party that desires to accept collateral in full or partial
satisfaction of the obligation it secures to send its proposal to certain
people within a certain time period. Requires a secured party that desires
to accept collateral in partial satisfaction of the obligation it secures
to send its proposal to any secondary obligor in addition to certain
persons.  Makes conforming and nonsubstantive changes. 

Sec. 9.622. EFFECT OF ACCEPTANCE OF COLLATERAL. Sets forth the effect of a
secured party's acceptance of collateral in full or partial satisfaction of
the obligation it secures. Provides that a subordinate interest is
discharged or terminated, even if the secured party fails to comply with
this article. Deletes text authoring a secured party to retain the
collateral in certain circumstances. Deletes text concerning required
written notice of a proposal for partial or full satisfaction of the
obligation by acceptance of collateral. 

Sec. 9.623. New Title: RIGHT TO REDEEM COLLATERAL. Authorizes a debtor, any
secondary obligor, or any other secured party or lienholder to redeem
collateral.  Requires a person to tender the fulfillment of all obligations
secured by the collateral and reasonable expenses and attorneys' fees, to
redeem collateral. Authorizes a redemption to occur at any time before a
secured party has performed certain actions. Deletes certain requirements
to redeem collateral.  Redesignated from existing Section 9.506. Makes
conforming and nonsubstantive changes. 

Sec. 9.624. WAIVER. Authorizes a debtor or secondary obligor to waive the
right to notification of disposition of collateral under Section 9.611 only
by an agreement to that effect entered into and authenticated after
default.  Authorizes a debtor to waive the right to require disposition of
collateral under Section 9.620(e) only by agreement to that effect entered
into and authenticated afer default. Authorizes a debtor or secondary
obligor to waive the right to redeem collateral under Section 9.623 only by
an agreement to that effect entered into and authenticated after default,
except in a consumer-goods transaction.   

Sec. 9.625. New Title: REMEDIES FOR SECURED PARTY'S FAILURE TO COMPLY WITH
CHAPTER. Redesignated from existing Section 9.507. (a) Sets forth certain
remedies a court is authorized to order for failing to comply with this
chapter, rather than authorizing a disposition to be ordered or restrained
if a secured party fails to comply. Makes conforming and nonsubstantive
changes. 

(b) Provides that person is liable for damages in the amount of any loss
caused by a failure to comply with this chapter, subject to Subsections
(c), (d), and (f). Authorizes loss caused  by a failure to comply with a
request under Section 9.210 to include loss resulting from the debtor's
inability to obtain, or increased costs of, alternative financing. Deletes
text allowing the debtor or any entitled person to recover any loss caused
by a failure to comply after the disposition. Makes conforming and
nonsubstantive changes. 

(c) Sets forth conditions under which certain persons may recover certain
damages, with exceptions. Makes conforming and nonsubstantive changes. 

(d) Authorizes a debtor whose deficiency is eliminated under Section 9.626
to recover damages for the loss of any surplus. Prohibits a debtor or
secondary obligor whose deficiency is eliminated or reduced under Section
9.626 from otherwise recovering under Subsection (b) for noncompliance with
the provisions of this subchapter.  

(e) Authorizes the debtor, consumer obligor, or person named as a debtor in
a filed record, to recover $500 in each case from certain people.  

(f) Authorizes a debtor or consumer obligor to recover damages under
Subsection (b) and $500 in each case from a person that, without reasonable
cause, fails to comply with a request under Section 9.210. Provides that a
recipient of a request under Section 9.210 that never claimed an interest
in the collateral or obligations that are the subject of a request under
that section has a reasonable excuse for failure to comply.  

(g) Authorizes the secured party to claim a security interest only as shown
in the statement included in the request as against a person that is
reasonably misled by the failure, if a secured party fails to comply with a
request regarding a list of collateral or a statement of account. 

Sec. 9.626. ACTION IN WHICH DEFICIENCY OR SURPLUS IS IN ISSUE. Sets forth
the rules governing in an action arising from a transaction, other than a
consumer transaction, in which the amount of a deficiency or surplus is in
issue.  Provides that the limitation of the rules to transactions other
than consumer transactions is intended to leave to the court the
determination of the proper rules in consumer transactions.  Prohibits the
court from inferring from that limitation the nature of the proper rule in
consumer transactions and authorizes the court to continue to apply
established approaches. 

Sec. 9.627. DETERMINATION OF WHETHER CONDUCT WAS COMMERCIALLY REASONABLE.
(a) Provides that the fact that a greater amount could have been obtained
by a collection, enforcement, disposition, or acceptance at a different
time or in a different method is not of itself sufficient to preclude the
secured party from establishing that the action was performed in a
commercially reasonable manner. Makes conforming and nonsubstantive
changes.  

(b) Sets forth the requirements for a disposition of collateral to be made
in a commercially reasonable manner. Makes conforming and nonsubstantive
changes. 

(c) Sets forth the requirements for a collection, enforcement, disposition,
or acceptance to be commercially reasonable. Makes conforming and
nonsubstantive changes. 

(d) Provides that approval under Subsection (c) need not be obtained, and
lack of approval does not mean that the collection, enforcement,
disposition, or acceptance is not commercially reasonable.  Deletes text
setting forth conditions under which a disposition is conclusively deemed
commercially reasonable.  Makes conforming and nonsubstantive changes. 

Sec. 9.628. NONLIABILITY AND LIMITATION ON LIABILITY OF SECURED PARTY;
LIABILITY OF SECONDARY OBLIGOR. Sets forth the conditions under which a
secured party's liability is limited. Sets forth the conditions where a
secured party is not liable because of its status as secured party.
Provides that a secured party is not liable to any person, and a person's
liability for a deficiency is not affected, because of any act or omission
arising  out of the secured party's reasonable belief that a transaction is
not a consumer-goods transaction or a consumer transaction or that goods
are not consumer goods, if the secured party's belief is based on certain
representations. Provides that a secured party is not liable to any person
under Section 9.625(c) for its failure to comply with Section 9.616, and is
not liable more than once with respect to any one secured obligation. 

ARTICLE 2.  CONFORMING AMENDMENTS

SECTION  2.01.  Amends Section 128.015(a), Agriculture Code, to make a
conforming change. 

SECTION  2.02.  Amends Section 128.016, Agriculture Code,  to make a
conforming change. 

SECTION  2.03.  Amends Section 128.018, Agriculture Code,  to make a
conforming change. 

SECTION  2.04.  Amends Section 128.038(e), Agriculture Code,  to make a
conforming change. 

SECTION  2.05.  Amends Section 128.039(b), Agriculture Code,  to make a
conforming change. 

SECTION  2.06.  Amends Section 188.015(a), Agriculture Code,  to make a
conforming change. 

SECTION  2.07.  Amends Section 188.016, Agriculture Code,  to make
conforming changes. 

SECTION  2.08.  Amends Section 188.018, Agriculture Code,  to make a
conforming change. 

SECTION  2.09.  Amends Section 188.038(e), Agriculture Code,  to make a
conforming change. 

SECTION  2.10.  Amends Section 188.039(b), Agriculture Code, to make a
conforming change. 

SECTION  2.11.  Amends Section 1.105(b), Business & Commerce Code,  to make
conforming changes. 

SECTION  2.12.  Amends Sections 1.201(9) and (32), Business & Commerce
Code, to modify the definitions of "buyer in ordinary course of business"
and "purchase," and make conforming changes. 

SECTION  2.13.  Amends Section 1.201(37)(A), Business & Commerce Code, to
modify the definition of "security interest." 

SECTION  2.14.  Amends Section 2.103(c), Business & Commerce Code,  to make
conforming changes. 

SECTION  2.15.  Amends Sections 2.210(c)-(e), Business & Commerce Code,  to
make conforming changes. 

SECTION  2.16.  Amends Section 2.326, Business & Commerce Code, as follows:

Sec.  2.326. New Title: SALE ON APPROVAL AND SALE OR RETURN; RIGHTS OF
CREDITORS.  Deletes text concerning consignment sales.  Makes  conforming
changes. 

SECTION  2.17.  Amends Section 2.502, Business & Commerce Code, as follows:

Sec. 2.502. New Title: BUYER'S RIGHT TO GOODS ON SELLER'S REPUDIATION,
FAILURE TO DELIVER, OR INSOLVENCY. Makes conforming changes.  

SECTION 2.18.  Amends Section 2.716(c), Business & Commerce Code, to make a
conforming change. 

SECTION 2.19.  Amends Section 2A.103(c), Business & Commerce Code, to make
conforming changes. 

 SECTION 2.20.  Amends Section 2A.303, Business & Commerce Code, to make
conforming changes. 

SECTION 2.21.  Amends Sections 2A.307(b)-(d), Business & Commerce Code, to
make conforming changes. 

SECTION 2.22.  Amends Section 2A.309(a), Business & Commerce Code, to
modify the definition for "fixture filing." 

SECTION 2.23.  Amends Section 4.210(c), Business & Commerce Code, to make a
conforming change. 

SECTION 2.24.  Amends Chapter 5, Business & Commerce Code, by adding
Section 5.118, as follows: 

Sec. 5.118. SECURITY INTEREST OF ISSUER OR NOMINATED PERSON. Sets forth
requirements for an issuer or nominated person to have a security interest
in a document presented under a letter of credit.  Sets forth the
conditions under which a security interest continues and is subject to
Chapter 9, and provides the applicable exceptions to those conditions. 

SECTION 2.25.  Amends Section 7.503(a), Business & Commerce Code, to make a
conforming change. 

SECTION 2.26.  Amends Section 8.103(f), Business & Commerce Code, to make a
conforming change. 

SECTION 2.27.  Amends Sections 8.106(d) and (f), Business & Commerce Code,
to make conforming changes. 

SECTION 2.28.  Amends Section 8.110(e), Business & Commerce Code, to make
conforming changes. 

SECTION 2.29.  Amends Section 8.301(a), Business & Commerce Code, to make
conforming changes. 

SECTION 2.30.  Amends Section 8.302(a), Business & Commerce Code, to make
conforming changes. 

SECTION 2.31.  Amends Sections 8.510(a) and (c), Business & Commerce Code,
to set forth the priority for a purchaser for value of a security
entitlement, in a case not covered by Chapter 9.  

SECTION 2.32.  Amends Section 221.032, Health and Safety Code, to make a
conforming change. 

SECTION 2.33.  Amends Section 31.053(d), Parks and Wildlife Code, to make a
conforming change. 

SECTION 2.34.  Amends Section 14.004(a), Property Code, to make a
conforming change. 

SECTION 2.35.  Amends Section 24.0062(j), Property Code, to make conforming
changes. 

SECTION 2.36.  Amends Section 42.002(b), Property Code, to make a
conforming change. 

SECTION 2.37.  Amends Sections 61.001(2) and (3), Property Code, to make
conforming changes. 

SECTION 2.38.  Amends Section 70.001(b), Property Code, to make a
conforming change. 

SECTION 2.39.  Amends Section 70.003(d)(1), Property Code, to make a
conforming change. 

 SECTION 2.40.  Amends Section 70.005(c), Property Code, to make a
conforming change. 

SECTION 2.41.  Amends Section 70.302(b), Property Code, to make a
conforming change. 

SECTION 2.42.  Amends Section 501.002(9), Transportation Code, to make a
conforming change. 

SECTION 2.43.  Amends Section 4.053, Article 717s, V.T.C.S. (Public
Facility Corporation Act), to make a conforming change. 

SECTION 2.44.   Amends Sections 19(a)(1), (5), (10), and (12), Article
5221f, V.T.C.S. (Texas Manufactured Housing Standards Act), to make
conforming changes. 

SECTION 2.45.  Amends Section 19(n), Article 5221f, V.T.C.S., to make a
conforming change. 

ARTICLE 3.  EFFECTIVE DATE; TRANSITION; EMERGENCY

SECTION 3.01.   EFFECTIVE DATE.  Effective date: July 1, 2001.

SECTION 3.02.  SAVING CLAUSE.  Provides that this Act applies to a
transaction or lien within its scope, even if the transaction or lien was
entered into or created before this Act takes effect. Makes application of
this Act prospective regarding transactions and liens.  Provides that this
Act does not affect an action, case, or proceeding commenced before the
effective date of this Act. 

SECTION 3.03.  SECURITY INTEREST PERFECTED BEFORE EFFECTIVE DATE.  Sets
forth the conditions under which a security interest that is enforceable
immediately before the effective date of this Act and would have priority
over the rights of a person that becomes a lien creditor at that time is a
perfected security interest.  Sets forth the status of a security interest
that is enforceable and would have priority over the rights of a person
that becomes a lien creditor at that time, but the applicable requirements
for enforceability or perfection under Chapter 9 (existing title: Secured
Transactions; Sales of Accounts and Chattel Paper), Business & Commerce
Code, are not satisfied when this Act takes effect. 

SECTION 3.04.  SECURITY INTEREST UNPERFECTED BEFORE EFFECTIVE DATE.  Sets
forth the conditions under which a security interest that is enforceable
immediately before the effective date of this Act but would be subordinate
to the rights of a person that becomes a lien creditor at that time is
enforceable or becomes a perfected security interest.   

SECTION 3.05.  EFFECTIVENESS OF ACTION TAKEN BEFORE EFFECTIVE DATE.  (a)
Provides that if action, other than the filing of a financing statement is
taken before the effective date of this Act and the action would have
resulted in priority of a security interest over the rights of a person
that becomes a lien creditor had the security interest become enforceable
before this Act takes effect, the action is effective to perfect a security
interest that attaches under Chapter 9, Business & Commerce Code, within
one year after the effective date of this Act.   

(b) Provides that the filing of a financing statement before the effective
date of this Act is effective to perfect a security interest to the extent
the filing would satisfy the applicable requirements for perfection under
Chapter 9, Business & Commerce Code, as amended.   

(c) Provides that this Act does not render ineffective an effective
financing statement that, before the effective date of this Act, is filed
and satisfies the applicable requirements for perfection under the law of
the jurisdiction governing perfection as it existed immediately before the
effective date of this Act. Provides that the financing statement ceases to
be effective at a certain date.   

(d) Provides that the filing of a continuation statement after this Act
takes effect does not continue the effectiveness of the financing statement
filed before this Act takes effect. Provides that upon the timely filing of
a continuation statement after this Act takes effect and in accordance with
the law of the jurisdiction governing perfection the effectiveness  of a
financing statement filed in the same office in that jurisdiction before
this Act takes effect continues for the period provided by the law of that
jurisdiction.   

(e) Provides that Subsection (c) of this section applies to a financing
statement that, before this Act takes effect, is filed against a
transmitting utility and satisfies the applicable requirements for
perfection under the law of the jurisdiction governing perfection as it
existed immediately before the effective date of this Act to a certain
extent.   

(f) Sets forth the extent to which a financing statement that includes a
financing statement filed before this Act takes effect and a continuation
statement filed after this Act takes effect is effective. 

SECTION 3.06. WHEN INITIAL FINANCING STATEMENT SUFFICES TO CONTINUE
EFFECTIVENESS OF FINANCING STATEMENT.  Sets forth the conditions in which
the filing of an initial financing statement in a certain office continues
the effectiveness of a financing statement filed before this Act takes
effect.  Sets forth the conditions under which the filing of an initial
financing statement continues the effectiveness of the pre-effective-date
financing statement. Requires the initial financing statement to satisfy
certain requirements and contain certain information to be effective. 

SECTION 3.07. PERSONS ENTITLED TO FILE INITIAL FINANCING STATEMENT OR
CONTINUATION STATEMENT.  Authorizes a person to file an initial financing
statement or a continuation statement under certain conditions. 

SECTION 3.08.  PRIORITY.  Makes application of this Act prospective
regarding the priority of conflicting claims to collateral. 

SECTION 3.09.  REPORT TO LEGISLATURE.  Requires the secretary of state to
file the initial report under Section 9.527, Business & Commerce Code, by
January 1, 2003. 

SECTION 3.10.  EMERGENCY.  Emergency clause.