CHAPTER 9. SECURED TRANSACTIONS

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BUSINESS AND COMMERCE CODE

TITLE 1. UNIFORM COMMERCIAL CODE

CHAPTER 9. SECURED TRANSACTIONS

SUBCHAPTER A. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS

Sec. 9.101. SHORT TITLE. This chapter may be cited as Uniform

Commercial Code--Secured Transactions.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.102. DEFINITIONS AND INDEX OF DEFINITIONS. (a) In this

chapter:

(1) "Accession" means goods that are physically united with

other goods in such a manner that the identity of the original

goods is not lost.

(2) "Account," except as used in "account for," means a right to

payment of a monetary obligation, whether or not earned by

performance, (i) for property that has been or is to be sold,

leased, licensed, assigned, or otherwise disposed of, (ii) for

services rendered or to be rendered, (iii) for a policy of

insurance issued or to be issued, (iv) for a secondary obligation

incurred or to be incurred, (v) for energy provided or to be

provided, (vi) for the use or hire of a vessel under a charter or

other contract, (vii) arising out of the use of a credit or

charge card or information contained on or for use with the card,

or (viii) as winnings in a lottery or other game of chance

operated or sponsored by a state, governmental unit of a state,

or person licensed or authorized to operate the game by a state

or governmental unit of a state. The term includes

health-care-insurance receivables. The term does not include (i)

rights to payment evidenced by chattel paper or an instrument,

(ii) commercial tort claims, (iii) deposit accounts, (iv)

investment property, (v) letter-of-credit rights or letters of

credit, or (vi) rights to payment for money or funds advanced or

sold, other than rights arising out of the use of a credit or

charge card or information contained on or for use with the card.

(3) "Account debtor" means a person obligated on an account,

chattel paper, or general intangible. The term does not include

persons obligated to pay a negotiable instrument, even if the

instrument constitutes part of chattel paper.

(4) "Accounting," except as used in "accounting for," means a

record:

(A) authenticated by a secured party;

(B) indicating the aggregate unpaid secured obligations as of a

date not more than 35 days earlier or 35 days later than the date

of the record; and

detail.

(5) "Agricultural lien" means an interest in farm products:

(A) that secures payment or performance of an obligation for:

(i) goods or services furnished in connection with a debtor's

farming operation; or

(ii) rent on real property leased by a debtor in connection with

its farming operation;

(B) that is created by statute in favor of a person that:

(i) in the ordinary course of its business furnished goods or

services to a debtor in connection with a debtor's farming

operation; or

(ii) leased real property to a debtor in connection with the

debtor's farming operation; and

possession of the personal property.

(6) "As-extracted collateral" means:

(A) oil, gas, or other minerals that are subject to a security

interest that:

(i) is created by a debtor having an interest in the minerals

before extraction; and

(ii) attaches to the minerals as extracted; or

(B) accounts arising out of the sale at the wellhead or minehead

of oil, gas, or other minerals in which the debtor had an

interest before extraction.

(7) "Authenticate" means:

(A) to sign; or

(B) to execute or otherwise adopt a symbol, or encrypt or

similarly process a record in whole or in part, with the present

intent of the authenticating person to identify the person and

adopt or accept a record.

(8) "Bank" means an organization that is engaged in the business

of banking. The term includes savings banks, savings and loan

associations, credit unions, and trust companies.

(9) "Cash proceeds" means proceeds that are money, checks,

deposit accounts, or the like.

(10) "Certificate of title" means a certificate of title with

respect to which a statute provides for the security interest in

question 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 collateral.

(11) "Chattel paper" means a record or records that evidence

both a monetary obligation and a security interest in specific

goods, a security interest in specific goods and software used in

the goods, a security interest in specific goods and license of

software used in the goods, a lease of specific goods, or a lease

of specific goods and license of software used in the goods. In

this subdivision, "monetary obligation" means a monetary

obligation secured by the goods or owed under a lease of the

goods and includes a monetary obligation with respect to software

used in the goods. The term does not include (i) charters or

other contracts involving the use or hire of a vessel or (ii)

records that evidence a right to payment arising out of the use

of a credit or charge card or information contained on or for use

with the card. If a transaction is evidenced by records that

include an instrument or series of instruments, the group of

records taken together constitutes chattel paper.

(12) "Collateral" means the property subject to a security

interest or agricultural lien. The term includes:

(A) proceeds to which a security interest attaches;

(B) accounts, chattel paper, payment intangibles, and promissory

notes that have been sold; and

(13) "Commercial tort claim" means a claim arising in tort with

respect to which:

(A) the claimant is an organization; or

(B) the claimant is an individual and the claim:

(i) arose in the course of the claimant's business or

profession; and

(ii) does not include damages arising out of personal injury to

or the death of an individual.

(14) "Commodity account" means an account maintained by a

commodity intermediary in which a commodity contract is carried

for a commodity customer.

(15) "Commodity contract" means a commodity futures contract, an

option on a commodity futures contract, a commodity option, or

another contract if the contract or option is:

(A) traded on or subject to the rules of a board of trade that

has been designated as a contract market for such a contract

pursuant to federal commodities laws; or

(B) traded on a foreign commodity board of trade, exchange, or

market and is carried on the books of a commodity intermediary

for a commodity customer.

(16) "Commodity customer" means a person for which a commodity

intermediary carries a commodity contract on its books.

(17) "Commodity intermediary" means a person that:

(A) is registered as a futures commission merchant under federal

commodities law; or

(B) in the ordinary course of its business provides clearance or

settlement services for a board of trade that has been designated

as a contract market pursuant to federal commodities law.

(18) "Communicate" means:

(A) to send a written or other tangible record;

(B) to transmit a record by any means agreed upon by the persons

sending and receiving the record; or

office, to transmit a record by any means prescribed by

filing-office rule.

(19) "Consignee" means a merchant to which goods are delivered

in a consignment.

(20) "Consignment" means a transaction, regardless of its form,

in which a person delivers goods to a merchant for the purpose of

sale and:

(A) the merchant:

(i) deals in goods of that kind under a name other than the name

of the person making delivery;

(ii) is not an auctioneer; and

(iii) is not generally known by its creditors to be

substantially engaged in selling the goods of others;

(B) with respect to each delivery, the aggregate value of the

goods is $1,000 or more at the time of delivery;

delivery;

(D) the transaction does not create a security interest that

secures an obligation; and

(E) the transaction does not involve delivery of a work of art

to an art dealer or delivery of a sound recording to a

distributor if Chapter 2101, Occupations Code, applies to the

delivery.

(21) "Consignor" means a person that delivers goods to a

consignee in a consignment.

(22) "Consumer debtor" means a debtor in a consumer transaction.

(23) "Consumer goods" means goods that are used or bought for

use primarily for personal, family, or household purposes.

(24) "Consumer-goods transaction" means a consumer transaction

in which:

(A) an individual incurs an obligation primarily for personal,

family, or household purposes; and

(B) a security interest in consumer goods secures the

obligation.

(25) "Consumer obligor" means an obligor who is an individual

and who incurred the obligation as part of a transaction entered

into primarily for personal, family, or household purposes.

(26) "Consumer transaction" means a transaction in which (i) an

individual incurs an obligation primarily for personal, family,

or household purposes, (ii) a security interest secures the

obligation, and (iii) the collateral is held or acquired

primarily for personal, family, or household purposes. The term

includes consumer-goods transactions.

(27) "Continuation statement" means an amendment of a financing

statement that:

(A) identifies, by its file number, the initial financing

statement to which it relates; and

(B) indicates that it is a continuation statement for, or that

it is filed to continue the effectiveness of, the identified

financing statement.

(28) "Debtor" means:

(A) a person having an interest, other than a security interest

or other lien, in the collateral, whether or not the person is an

obligor;

(B) a seller of accounts, chattel paper, payment intangibles, or

promissory notes; or

(29) "Deposit account" means a demand, time, savings, passbook,

or similar account maintained with a bank. The term includes a

nonnegotiable certificate of deposit. The term does not include

investment property or accounts evidenced by an instrument.

(30) "Document" means a document of title or a receipt of the

type described in Section 7.201(b).

(31) "Electronic chattel paper" means chattel paper evidenced by

a record or records consisting of information stored in an

electronic medium.

(32) "Encumbrance" means a right, other than an ownership

interest, in real property. The term includes mortgages and other

liens on real property.

(33) "Equipment" means goods other than inventory, farm

products, or consumer goods.

(34) "Farm products" means goods, other than standing timber,

with respect to which the debtor is engaged in a farming

operation and which are:

(A) crops grown, growing, or to be grown, including:

(i) crops produced on trees, vines, and bushes; and

(ii) aquatic goods produced in aquacultural operations;

(B) livestock, born or unborn, including aquatic goods produced

in aquacultural operations;

(D) products of crops or livestock in their unmanufactured

states.

(35) "Farming operation" means raising, cultivating,

propagating, fattening, grazing, or any other farming, livestock,

or aquacultural operation.

(36) "File number" means the number assigned to an initial

financing statement pursuant to Section 9.519(a).

(37) "Filing office" means an office designated in Section 9.501

as the place to file a financing statement.

(38) "Filing-office rule" means a rule adopted pursuant to

Section 9.526.

(39) "Financing statement" means a record or records composed of

an initial financing statement and any filed record relating to

the initial financing statement.

(40) "Fixture filing" means the filing of a financing statement

covering goods that are or are to become fixtures and satisfying

Sections 9.502(a) and (b). The term includes the filing of a

financing statement covering goods of a transmitting utility that

are or are to become fixtures.

(41) "Fixtures" means goods that have become so related to

particular real property that an interest in them arises under

the real property law of the state in which the real property is

situated.

(42) "General intangible" means any personal property, including

things in action, other than accounts, chattel paper, commercial

tort claims, deposit accounts, documents, goods, instruments,

investment property, letter-of-credit rights, letters of credit,

money, and oil, gas, or other minerals before extraction. The

term includes payment intangibles and software.

(43) Reserved.

(44) "Goods" means all things that are movable when a security

interest attaches. The term includes (i) fixtures, (ii) standing

timber that is to be cut and removed under a conveyance or

contract for sale, (iii) the unborn young of animals, (iv) crops

grown, growing, or to be grown, even if the crops are produced on

trees, vines, or bushes, and (v) manufactured homes. The term

also includes a computer program embedded in goods and any

supporting information provided in connection with a transaction

relating to the program if (i) the program is associated with the

goods in such a manner that it customarily is considered part of

the goods, or (ii) by becoming the owner of the goods, a person

acquires a right to use the program in connection with the goods.

The term does not include a computer program embedded in goods

that consist solely of the medium in which the program is

embedded. The term also does not include accounts, chattel paper,

commercial tort claims, deposit accounts, documents, general

intangibles, instruments, investment property, letter-of-credit

rights, letters of credit, money, or oil, gas, or other minerals

before extraction.

(45) "Governmental unit" means a subdivision, agency,

department, county, parish, municipality, or other unit of the

government of the United States, a state, or a foreign country.

The term includes an organization having a separate corporate

existence if the organization is eligible to issue debt on which

interest is exempt from income taxation under the laws of the

United States.

(46) "Health care insurance receivable" means an interest in or

claim under a policy of insurance that is a right to payment of a

monetary obligation for health care goods or services provided or

to be provided.

(47) "Instrument" means a negotiable instrument or any other

writing that evidences a right to the payment of a monetary

obligation, is not itself a security agreement or lease, and is

of a type that in ordinary course of business is transferred by

delivery with any necessary indorsement or assignment. The term

does not include (i) investment property, (ii) letters of credit,

(iii) writings that evidence a right to payment arising out of

the use of a credit or charge card or information contained on or

for use with the card, or (iv) nonnegotiable certificates of

deposit.

(48) "Inventory" means goods, other than farm products, that:

(A) are leased by a person as lessor;

(B) are held by a person for sale or lease or to be furnished

under a contract of service;

(D) consist of raw materials, work in process, or materials used

or consumed in a business.

(49) "Investment property" means a security, whether

certificated or uncertificated, security entitlement, securities

account, commodity contract, or commodity account.

(50) "Jurisdiction of organization," with respect to a

registered organization, means the jurisdiction under whose law

the organization is organized.

(51) "Letter-of-credit right" means a right to payment or

performance under a letter of credit, whether or not the

beneficiary has demanded or is at the time entitled to demand

payment or performance. The term does not include the right of a

beneficiary to demand payment or performance under a letter of

credit.

(52) "Lien creditor" means:

(A) a creditor that has acquired a lien on the property involved

by attachment, levy, or the like;

(B) an assignee for benefit of creditors from the time of

assignment;

petition; or

(D) a receiver in equity from the time of appointment.

(53) "Manufactured home" means a structure, transportable in one

or more sections, that, in the traveling mode, is eight body feet

or more in width or 40 body feet or more in length, or, when

erected on site, is 320 or more square feet, and that is built on

a permanent chassis and designed to be used as a dwelling with or

without a permanent foundation when connected to the required

utilities, and includes the plumbing, heating, air-conditioning,

and electrical systems contained therein. The term includes any

structure that meets all of the requirements of this subdivision

except the size requirements and with respect to which the

manufacturer voluntarily files a certification required by the

United States secretary of housing and urban development and

complies with the standards established under Title 42 of the

United States Code.

(54) "Manufactured-home transaction" means a secured

transaction:

(A) that creates a purchase-money security interest in a

manufactured home, other than a manufactured home held as

inventory; or

(B) in which a manufactured home, other than a manufactured home

held as inventory, is the primary collateral.

(55) "Mortgage" means a consensual interest in real property,

including fixtures, that secures payment or performance of an

obligation.

(56) "New debtor" means a person that becomes bound as debtor

under Section 9.203(d) by a security agreement previously entered

into by another person.

(57) "New value" means (i) money, (ii) money's worth in

property, services, or new credit, or (iii) release by a

transferee of an interest in property previously transferred to

the transferee. The term does not include an obligation

substituted for another obligation.

(58) "Noncash proceeds" means proceeds other than cash proceeds.

(59) "Nonnegotiable certificate of deposit" means a writing

signed by a bank that:

(A) states on its face that it is a certificate of deposit, as

defined in Section 3.104, or receipt for a book entry;

(B) contains an acknowledgement that a sum of money has been

received by the bank, with an express or implied agreement that

the bank will repay the sum of money; and

(60) "Obligor" means a person that, with respect to an

obligation secured by a security interest in or an agricultural

lien on the collateral, (i) owes payment or other performance of

the obligation, (ii) has provided property other than the

collateral to secure payment or other performance of the

obligation, or (iii) is otherwise accountable in whole or in part

for payment or other performance of the obligation. The term does

not include issuers or nominated persons under a letter of

credit.

(61) "Original debtor," except as used in Section 9.310(c),

means a person that, as debtor, entered into a security agreement

to which a new debtor has become bound under Section 9.203(d).

(62) "Payment intangible" means a general intangible under which

the account debtor's principal obligation is a monetary

obligation.

(63) "Person related to," with respect to an individual, means:

(A) the spouse of the individual;

(B) a brother, brother-in-law, sister, or sister-in-law of the

individual;

individual's spouse; or

(D) any other relative, by blood or marriage, of the individual

or the individual's spouse who shares the same home with the

individual.

(64) "Person related to," with respect to an organization,

means:

(A) a person directly or indirectly controlling, controlled by,

or under common control with the organization;

(B) an officer or director of, or a person performing similar

functions with respect to, the organization;

functions with respect to, a person described in Paragraph (A);

(D) the spouse of an individual described in Paragraph (A), (B),

or (C); or

(E) an individual who is related by blood or marriage to an

individual described in Paragraph (A), (B), (C), or (D) and

shares the same home with the individual.

(65) "Proceeds," except as used in Section 9.609(b), means the

following property:

(A) whatever is acquired upon the sale, lease, license,

exchange, or other disposition of collateral;

(B) whatever is collected on, or distributed on account of,

collateral;

(D) to the extent of the value of collateral, claims arising out

of the loss, nonconformity, or interference with the use of,

defects or infringement of rights in, or damage to the

collateral; or

(E) to the extent of the value of collateral and to the extent

payable to the debtor or the secured party, insurance payable by

reason of the loss or nonconformity of, defects or infringement

of rights in, or damage to the collateral.

(66) "Promissory note" means an instrument that evidences a

promise to pay a monetary obligation, does not evidence an order

to pay, and does not contain an acknowledgement by a bank that

the bank has received for deposit a sum of money or funds.

(67) "Proposal" means a record authenticated by a secured party

that includes the terms on which the secured party is willing to

accept collateral in full or partial satisfaction of the

obligation it secures pursuant to Sections 9.620, 9.621, and

9.622.

(68) "Public-finance transaction" means a secured transaction in

connection with which:

(A) debt securities are issued;

(B) all or a portion of the securities issued have an initial

stated maturity of at least 20 years; and

person obligated on collateral, assignor or assignee or a secured

obligation, or assignor or assignee of a security interest is a

state or a governmental unit of a state.

(69) "Pursuant to commitment," with respect to an advance made

or other value given by a secured party, means pursuant to the

secured party's obligation, whether or not a subsequent event of

default or other event not within the secured party's control has

relieved or may relieve the secured party from its obligation.

(70) "Record," except as used in "for record," "of record,"

"record or legal title," and "record owner," means information

that is inscribed on a tangible medium or that is stored in an

electronic or other medium and is retrievable in perceivable

form.

(71) "Registered organization" means an organization organized

solely under the law of a single state or the United States and

as to which the state or the United States must maintain a public

record showing the organization to have been organized.

(72) "Secondary obligor" means an obligor to the extent that:

(A) the obligor's obligation is secondary; or

(B) the obligor has a right of recourse with respect to an

obligation secured by collateral against the debtor, another

obligor, or property of either.

(73) "Secured party" means:

(A) a person in whose favor a security interest is created or

provided for under a security agreement, whether or not any

obligation to be secured is outstanding;

(B) a person that holds an agricultural lien;

(D) a person to which accounts, chattel paper, payment

intangibles, or promissory notes have been sold;

(E) a trustee, indenture trustee, agent, collateral agent, or

other representative in whose favor a security interest or

agricultural lien is created or provided for; or

(F) a person that holds a security interest arising under

Section 2.401, 2.505, 2.711(c), 2A.508(e), 4.210, or 5.118.

(74) "Security agreement" means an agreement that creates or

provides for a security interest.

(75) "Send," in connection with a record or notification, means:

(A) to deposit in the mail, deliver for transmission, or

transmit by any other usual means of communication, with postage

or cost of transmission provided for, addressed to any address

reasonable under the circumstances; or

(B) to cause the record or notification to be received within

the time that it would have been received if properly sent under

Paragraph (A).

(76) "Software" means a computer program and any supporting

information provided in connection with a transaction relating to

the program. The term does not include a computer program that is

included in the definition of "goods."

(77) "State" means a state of the United States, the District of

Columbia, Puerto Rico, the United States Virgin Islands, or any

territory or insular possession subject to the jurisdiction of

the United States.

(78) "Supporting obligation" means a letter-of-credit right or

secondary obligation that supports the payment or performance of

an account, chattel paper, a document, a general intangible, an

instrument, or investment property.

(79) "Tangible chattel paper" means chattel paper evidenced by a

record or records consisting of information that is inscribed on

a tangible medium.

(80) "Termination statement" means an amendment of a financing

statement that:

(A) identifies, by its file number, the initial financing

statement to which it relates; and

(B) indicates either that it is a termination statement or that

the identified financing statement is no longer effective.

(81) "Transmitting utility" means a person primarily engaged in

the business of:

(A) operating a railroad, subway, street railway, or trolley

bus;

(B) transmitting communications electrically,

electromagnetically, or by light;

(D) transmitting or producing and transmitting electricity,

steam, gas, or water.

(b) The following definitions in other chapters apply to this

chapter:

"Applicant"

Section 5.102.

"Beneficiary"

Section 5.102.

"Broker"

Section 8.102.

"Certificated security"

Section 8.102.

"Check"

Section 3.104.

"Clearing corporation"

Section 8.102.

"Contract for sale"

Section 2.106.

"Control" (with respect to a document of title)

Section 7.106.

"Customer"

Section 4.104.

"Entitlement holder"

Section 8.102.

"Financial asset"

Section 8.102.

"Holder in due course"

Section 3.302.

"Issuer" (with respect to a letter of credit

or letter-of-credit right)

Section 5.102.

"Issuer" (with respect to a security)

Section 8.201.

"Lease"

Section 2A.103.

"Lease agreement"

Section 2A.103.

"Lease contract"

Section 2A.103.

"Leasehold interest"

Section 2A.103.

"Lessee"

Section 2A.103.

"Lessee in ordinary course of business"

Section 2A.103.

"Lessor"

Section 2A.103.

"Lessor's residual interest"

Section 2A.103.

"Letter of credit"

Section 5.102.

"Merchant"

Section 2.104.

"Negotiable instrument"

Section 3.104.

"Nominated person"

Section 5.102.

"Note"

Section 3.104.

"Proceeds of a letter of credit"

Section 5.114.

"Prove"

Section 3.103.

"Sale"

Section 2.106.

"Securities account"

Section 8.501.

"Securities intermediary"

Section 8.102.

"Security"

Section 8.102.

"Security certificate"

Section 8.102.

"Security entitlement"

Section 8.102.

"Uncertificated security"

Section 8.102.

construction and interpretation applicable throughout this

chapter.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001; Acts 2001, 77th Leg., ch. 705, Sec. 1, eff. June 13, 2001;

Acts 2001, 77th Leg., ch. 1420, Sec. 14.728, eff. Sept. 1, 2001;

Acts 2003, 78th Leg., ch. 542, Sec. 19, eff. Sept. 1, 2003; Acts

2003, 78th Leg., ch. 917, Sec. 1, 2, eff. Sept. 1, 2003.

Amended by:

Acts 2005, 79th Leg., Ch.

122, Sec. 19, eff. September 1, 2005.

Acts 2005, 79th Leg., Ch.

233, Sec. 3, eff. May 27, 2005.

Sec. 9.103. PURCHASE-MONEY SECURITY INTEREST; APPLICATION OF

PAYMENTS; BURDEN OF ESTABLISHING. (a) In this section:

(1) "Purchase-money collateral" means goods or software that

secures a purchase-money obligation incurred with respect to that

collateral.

(2) "Purchase-money obligation" means an obligation of an

obligor incurred as all or part of the price of the collateral or

for value given to enable the debtor to acquire rights in or the

use of the collateral if the value is in fact so used.

(b) A security interest in goods is a purchase-money security

interest:

(1) to the extent that the goods are purchase-money collateral

with respect to that security interest;

(2) if the security interest is in inventory that is or was

purchase-money collateral, also to the extent that the security

interest secures a purchase-money obligation incurred with

respect to other inventory in which the secured party holds or

held a purchase-money security interest; and

(3) also to the extent that the security interest secures a

purchase-money obligation incurred with respect to software in

which the secured party holds or held a purchase-money security

interest.

interest to the extent that the security interest also secures a

purchase-money obligation incurred with respect to goods in which

the secured party holds or held a purchase-money security

interest if:

(1) the debtor acquired its interest in the software in an

integrated transaction in which it acquired an interest in the

goods; and

(2) the debtor acquired its interest in the software for the

principal purpose of using the software in the goods.

(d) The security interest of a consignor in goods that are the

subject of a consignment is a purchase-money security interest in

inventory.

(e) In a transaction other than a consumer-goods transaction, 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, the payment must be applied:

(1) in accordance with any reasonable method of application to

which the parties agree;

(2) in the absence of the parties' agreement to a reasonable

method, in accordance with any intention of the obligor

manifested at or before the time of payment; or

(3) in the absence of an agreement to a reasonable method and a

timely manifestation of the obligor's intention, in the following

order:

(A) to obligations that are not secured; and

(B) if more than one obligation is secured, to obligations

secured by purchase-money security interests in the order in

which those obligations were incurred.

(f) In a transaction other than a consumer-goods transaction, a

purchase-money security interest does not lose its status as

such, even if:

(1) the purchase-money collateral also secures an obligation

that is not a purchase-money obligation;

(2) collateral that is not purchase-money collateral also

secures the purchase-money obligation; or

(3) the purchase-money obligation has been renewed, refinanced,

consolidated, or restructured.

(g) 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) The limitation of the rules in Subsections (e), (f), and (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. The court may not infer

from that limitation the nature of the proper rule in

consumer-goods transactions and may continue to apply established

approaches.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.104. CONTROL OF DEPOSIT ACCOUNT. (a) A secured party

has control of a deposit account if:

(1) the secured party is the bank with which the deposit account

is maintained;

(2) the debtor, secured party, and bank have agreed in an

authenticated record that the bank will comply with instructions

originated by the secured party directing disposition of the

funds in the deposit account without further consent by the

debtor; or

(3) the secured party becomes the bank's customer with respect

to the deposit account.

(b) 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.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001; Acts 2001, 77th Leg., ch. 705, Sec. 2, eff. June 13, 2001.

Sec. 9.105. CONTROL OF ELECTRONIC CHATTEL PAPER. A secured

party has control of electronic chattel paper if the record or

records comprising the chattel paper are created, stored, and

assigned in such a manner that:

(1) a single authoritative copy of the record or records exists

that is unique, identifiable and, except as otherwise provided in

Subdivisions (4), (5), and (6), unalterable;

(2) the authoritative copy identifies the secured party as the

assignee of the record or records;

(3) the authoritative copy is communicated to and maintained by

the secured party or its designated custodian;

(4) copies or revisions that add or change an identified

assignee of the authoritative copy can be made only with the

participation of the secured party;

(5) each copy of the authoritative copy and any copy of a copy

is readily identifiable as a copy that is not the authoritative

copy; and

(6) any revision of the authoritative copy is readily

identifiable as an authorized or unauthorized revision.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.106. CONTROL OF INVESTMENT PROPERTY. (a) A person has

control of a certificated security, uncertificated security, or

security entitlement as provided in Section 8.106.

(b) A secured party has control of a commodity contract if:

(1) the secured party is the commodity intermediary with which

the commodity contract is carried; or

(2) the commodity customer, secured party, and commodity

intermediary have agreed that the commodity intermediary will

apply any value distributed on account of the commodity contract

as directed by the secured party without further consent by the

commodity customer.

or commodity contracts carried in a securities account or

commodity account has control over the securities account or

commodity account.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.107. CONTROL OF LETTER-OF-CREDIT RIGHT. 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) or otherwise applicable law or practice.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.108. SUFFICIENCY OF DESCRIPTION. (a) Except as

otherwise provided in Subsections (c), (d), and (e), a

description of personal or real property is sufficient, whether

or not it is specific, if it reasonably identifies what is

described.

(b) Except as otherwise provided in Subsection (d), a

description of collateral reasonably identifies the collateral if

it identifies the collateral by:

(1) specific listing;

(2) category;

(3) except as otherwise provided in Subsection (e), a type of

collateral defined in this title;

(4) quantity;

(5) computational or allocational formula or procedure; or

(6) except as otherwise provided in Subsection (c), any other

method, if the identity of the collateral is objectively

determinable.

"all the debtor's personal property" or using words of similar

import does not reasonably identify the collateral.

(d) Except as otherwise provided in Subsection (e), a

description of a security entitlement, securities account, or

commodity account is sufficient if it describes:

(1) the collateral by those terms or as investment property; or

(2) the underlying financial asset or commodity contract.

(e) A description only by type of collateral defined in this

title is an insufficient description of:

(1) a commercial tort claim; or

(2) in a consumer transaction, consumer goods, a security

entitlement, a securities account, or a commodity account.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.109. SCOPE. (a) Except as otherwise provided in

Subsections (c), (d), and (e), this chapter applies to:

(1) a transaction, regardless of its form, that creates a

security interest in personal property or fixtures by contract;

(2) an agricultural lien;

(3) a sale of accounts, chattel paper, payment intangibles, or

promissory notes;

(4) a consignment;

(5) a security interest arising under Section 2.401, 2.505,

2.711(c), or 2A.508(e), as provided in Section 9.110; and

(6) a security interest arising under Section 4.210 or 5.118.

(b) 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.

(1) a statute, regulation, or treaty of the United States

preempts this chapter;

(2) another statute of this state expressly governs the

creation, perfection, priority, or enforcement of a security

interest created by this state or a governmental unit of this

state;

(3) a statute of another state, a foreign country, or a

governmental unit of another state or a foreign country, other

than a statute generally applicable to security interests,

expressly governs creation, perfection, priority, or enforcement

of a security interest created by the state, country, or

governmental unit; or

(4) the rights of a transferee beneficiary or nominated person

under a letter of credit are independent and superior under

Section 5.114.

(d) This chapter does not apply to:

(1) a landlord's lien, other than an agricultural lien;

(2) a lien, other than an agricultural lien, given by statute or

other rule of law for services or materials, but Section 9.333

applies with respect to priority of the lien;

(3) an assignment of a claim for wages, salary, or other

compensation of an employee;

(4) a sale of accounts, chattel paper, payment intangibles, or

promissory notes as part of a sale of the business out of which

they arose;

(5) an assignment of accounts, chattel paper, payment

intangibles, or promissory notes that is for the purpose of

collection only;

(6) an assignment of a right to payment under a contract to an

assignee that is also obligated to perform under the contract;

(7) an assignment of a single account, payment intangible, or

promissory note to an assignee in full or partial satisfaction of

a preexisting indebtedness;

(8) a transfer of an interest in or an assignment of a claim

under a policy of insurance, other than an assignment by or to a

health care provider of a health-care-insurance receivable and

any subsequent assignment of the right to payment, but Sections

9.315 and 9.322 apply with respect to proceeds and priorities in

proceeds;

(9) an assignment of a right represented by a judgment, other

than a judgment taken on a right to payment that was collateral;

(10) a right of recoupment or set-off, but:

(A) Section 9.340 applies with respect to the effectiveness of

rights of recoupment or set-off against deposit accounts; and

(B) Section 9.404 applies with respect to defenses or claims of

an account debtor;

(11) the creation or transfer of an interest in or lien on real

property, including a lease or rents thereunder, the interest of

a vendor or vendee in a contract for deed to purchase an interest

in real property, or the interest of an optionor or optionee in

an option to purchase an interest in real property, except to the

extent that provision is made for:

(A) liens on real property in Sections 9.203 and 9.308;

(B) fixtures in Section 9.334;

9.519; and

(D) security agreements covering personal and real property in

Section 9.604;

(12) an assignment of a claim arising in tort, other than a

commercial tort claim, but Sections 9.315 and 9.322 apply with

respect to proceeds and priorities in proceeds; or

(13) an assignment of a deposit account, other than a

nonnegotiable certificate of deposit, in a consumer transaction,

but Sections 9.315 and 9.322 apply with respect to proceeds and

priorities in proceeds.

(e) 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. For all purposes, in the absence of fraud or

intentional misrepresentation, the parties' characterization of a

transaction as a sale of such assets shall be conclusive that the

transaction is a sale and is not a secured transaction and that

title, legal and equitable, has passed to the party characterized

as the purchaser of those assets 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.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.110. SECURITY INTERESTS ARISING UNDER CHAPTER 2 OR 2A. A

security interest arising under Section 2.401, 2.505, 2.711(c),

or 2A.508(e) is subject to this chapter. However, until the

debtor obtains possession of the goods:

(1) the security interest is enforceable, even if Section

9.203(b)(3) has not been satisfied;

(2) filing is not required to perfect the security interest;

(3) the rights of the secured party after default by the debtor

are governed by Chapter 2 or 2A; and

(4) the security interest has priority over a conflicting

security interest created by the debtor.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

SUBCHAPTER B. EFFECTIVENESS OF SECURITY AGREEMENT; ATTACHMENT OF

SECURITY INTEREST; RIGHTS OF PARTIES TO SECURITY AGREEMENT

Sec. 9.201. GENERAL EFFECTIVENESS OF SECURITY AGREEMENT. (a)

Except as otherwise provided by this title, a security agreement

is effective according to its terms between the parties, against

purchasers of the collateral, and against creditors.

(b) A transaction subject to this chapter is subject to any

applicable rule of law that establishes a different rule for

consumers and to:

(1) Title 4, Finance Code; and

(2) Subchapter E, Chapter 17.

statute, or regulation described in Subsection (b), the rule of

law, statute, or regulation controls. Failure to comply with a

statute or regulation described in Subsection (b) has only the

effect the statute or regulation specifies.

(d) This chapter does not:

(1) validate any rate, charge, agreement, or practice that

violates a rule of law, statute, or regulation described in

Subsection (b); or

(2) extend the application of the rule of law, statute, or

regulation to a transaction not otherwise subject to it.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.202. TITLE TO COLLATERAL IMMATERIAL. Except as otherwise

provided with respect to consignments or sales of accounts,

chattel paper, payment intangibles, or promissory notes, the

provisions of this chapter with regard to rights and obligations

apply whether title to collateral is in the secured party or the

debtor.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.203. ATTACHMENT AND ENFORCEABILITY OF SECURITY INTEREST;

PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES. (a) A

security interest attaches to collateral when it becomes

enforceable against the debtor with respect to the collateral,

unless an agreement expressly postpones the time of attachment.

(b) Except as otherwise provided in Subsections (c)-(j), a

security interest is enforceable against the debtor and third

parties with respect to the collateral only if:

(1) value has been given;

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

transfer rights in the collateral to a secured party; and

(3) one of the following conditions is met:

(A) the debtor has authenticated a security agreement that

provides a description of the collateral and, if the security

interest covers timber to be cut, a description of the land

concerned;

(B) the collateral is not a certificated security and is in the

possession of the secured party under Section 9.313 pursuant to

the debtor's security agreement;

and the security certificate has been delivered to the secured

party under Section 8.301 pursuant to the debtor's security

agreement; or

(D) the collateral is deposit accounts, electronic chattel

paper, investment property, letter-of-credit rights, or

electronic documents, and the secured party has control under

Section 7.106, 9.104, 9.105, 9.106, or 9.107 pursuant to the

debtor's security agreement.

interest of a collecting bank, Section 5.118 on the security

interest of a letter-of-credit issuer or nominated person,

Section 9.110 on a security interest arising under Chapter 2 or

2A, and Section 9.206 on security interests in investment

property.

(d) A person becomes bound as debtor by a security agreement

entered into by another person if, by operation of law other than

this chapter or by contract:

(1) the security agreement becomes effective to create a

security interest in the person's property; or

(2) the person becomes generally obligated for the obligations

of the other person, including the obligation secured under the

security agreement, and acquires or succeeds to all or

substantially all of the assets of the other person.

(e) If a new debtor becomes bound as debtor by a security

agreement entered into by another person:

(1) the agreement satisfies Subsection (b)(3) with respect to

existing or after-acquired property of the new debtor to the

extent the property is described in the agreement; and

(2) another agreement is not necessary to make a security

interest in the property enforceable.

(f) The attachment of

a security interest in collateral gives the secured party the

rights to proceeds provided by Section 9.315 and is also

attachment of a security interest in a supporting obligation for

the collateral.

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

or performance secured by a security interest or other lien on

personal or real property is also attachment of a security

interest in the security interest, mortgage, or other lien.

(h) The attachment of a security interest in a securities

account is also attachment of a security interest in the security

entitlements carried in the securities account.

(i) The attachment of a security interest in a commodity account

is also attachment of a security interest in the commodity

contracts carried in the commodity account.

(j) If a secured party holds a security interest that applies

under this chapter to minerals, including oil and gas, 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. 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, including oil and gas, regardless of when

the minerals were extracted.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Amended by:

Acts 2005, 79th Leg., Ch.

122, Sec. 20, eff. September 1, 2005.

Sec. 9.204. AFTER-ACQUIRED PROPERTY; FUTURE ADVANCES. (a)

Except as provided in Subsection (b), a security agreement may

create or provide for a security interest in after-acquired

collateral.

(b) A security interest does not attach under a term

constituting an after-acquired property clause to:

(1) consumer goods, other than an accession when given as

additional security, unless the debtor acquires rights in them

within 10 days after the secured party gives value; or

(2) a commercial tort claim.

that accounts, chattel paper, payment intangibles, or promissory

notes are sold in connection with, future advances or other

value, whether or not the advances or value are given pursuant to

commitment.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.205. USE OR DISPOSITION OF COLLATERAL PERMISSIBLE. (a)

A security interest is not invalid or fraudulent against

creditors solely because:

(1) the debtor has the right or ability to:

(A) use, commingle, or dispose of all or part of the collateral,

including returned or repossessed goods;

(B) collect, compromise, enforce, or otherwise deal with

collateral;

(D) use, commingle, or dispose of proceeds; or

(2) the secured party fails to require the debtor to account for

proceeds or replace collateral.

(b) This section does not relax the requirements of possession

if attachment, perfection, or enforcement of a security interest

depends upon possession of the collateral by the secured party.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.206. SECURITY INTEREST ARISING IN PURCHASE OR DELIVERY OF

FINANCIAL ASSET. (a) A security interest in favor of a

securities intermediary attaches to a person's security

entitlement if:

(1) the person buys a financial asset through the securities

intermediary in a transaction in which the person is obligated to

pay the purchase price to the securities intermediary at the time

of the purchase; and

(2) the securities intermediary credits the financial asset to

the buyer's securities account before the buyer pays the

securities intermediary.

(b) The security interest described in Subsection (a) secures

the person's obligation to pay for the financial asset.

certificated security or other financial asset represented by a

writing attaches to the security or other financial asset if:

(1) the security or other financial asset:

(A) in the ordinary course of business is transferred by

delivery with any necessary indorsement or assignment; and

(B) is delivered under an agreement between persons in the

business of dealing with such securities or financial assets; and

(2) the agreement calls for delivery against payment.

(d) The security interest described in Subsection (c) secures

the obligation to make payment for the delivery.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.207. RIGHTS AND DUTIES OF SECURED PARTY HAVING POSSESSION

OR CONTROL OF COLLATERAL. (a) Except as otherwise provided in

Subsection (d), a secured party shall use reasonable care in the

custody and preservation of collateral in the secured party's

possession. In the case of chattel paper or an instrument,

reasonable care includes taking necessary steps to preserve

rights against prior parties unless otherwise agreed.

(b) Except as otherwise provided in Subsection (d), if a secured

party has possession of collateral:

(1) reasonable expenses, including the cost of insurance and

payment of taxes or other charges, incurred in the custody,

preservation, use, or operation of the collateral are chargeable

to the debtor and are secured by the collateral;

(2) the risk of accidental loss or damage is on the debtor to

the extent of any deficiency in any effective insurance coverage;

(3) the secured party shall keep the collateral identifiable,

but fungible collateral may be commingled; and

(4) the secured party may use or operate the collateral:

(A) for the purpose of preserving the collateral or its value;

(B) as permitted by an order of a court having competent

jurisdiction; or

the extent agreed by the debtor.

party having possession of collateral or control of collateral

under Section 7.106, 9.104, 9.105, 9.106, or 9.107:

(1) may hold as additional security any proceeds, except money

or funds, received from the collateral;

(2) shall apply money or funds received from the collateral to

reduce the secured obligation, unless remitted to the debtor; and

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

(d) If the secured party is a buyer of accounts, chattel paper,

payment intangibles, or promissory notes or a consignor:

(1) Subsection (a) does not apply unless the secured party is

entitled under an agreement:

(A) to charge back uncollected collateral; or

(B) otherwise to full or limited recourse against the debtor or

a secondary obligor based on the nonpayment or other default of

an account debtor or other obligor on the collateral; and

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

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Amended by:

Acts 2005, 79th Leg., Ch.

122, Sec. 21, eff. September 1, 2005.

Sec. 9.208. ADDITIONAL DUTIES OF SECURED PARTY HAVING CONTROL OF

COLLATERAL. (a) This section applies to cases in which there is

no outstanding secured obligation and the secured party is not

committed to make advances, incur obligations, or otherwise give

value.

(b) Within 10 days after receiving an authenticated demand by

the debtor:

(1) a secured party having control of a deposit account under

Section 9.104(a)(2) shall send to the bank with which the deposit

account is maintained an authenticated statement that releases

the bank from any further obligation to comply with instructions

originated by the secured party;

(2) a secured party having control of a deposit account under

Section 9.104(a)(3) shall:

(A) pay the debtor the balance on deposit in the deposit

account; or

(B) transfer the balance on deposit into a deposit account in

the debtor's name;

(3) a secured party, other than a buyer, having control of

electronic chattel paper under Section 9.105 shall:

(A) communicate the authoritative copy of the electronic chattel

paper to the debtor or its designated custodian;

(B) if the debtor designates a custodian that is the designated

custodian with which the authoritative copy of the electronic

chattel paper is maintained for the secured party, communicate to

the custodian an authenticated record releasing the designated

custodian from any further obligation to comply with instructions

originated by the secured party and instructing the custodian to

comply with instructions originated by the debtor; and

designated custodian to make copies of or revisions to the

authoritative copy that add or change an identified assignee of

the authoritative copy without the consent of the secured party;

(4) a secured party having control of investment property under

Section 8.106(d)(2) or 9.106(b) shall send to the securities

intermediary or commodity intermediary with which the security

entitlement or commodity contract is maintained an authenticated

record that releases the securities intermediary or commodity

intermediary from any further obligation to comply with

entitlement orders or directions originated by the secured party;

(5) a secured party having control of a letter-of-credit right

under Section 9.107 shall send to each person having an

unfulfilled obligation to pay or deliver proceeds of the letter

of credit to the secured party an authenticated release from any

further obligation to pay or deliver proceeds of the letter of

credit to the secured party; and

(6) a secured party having control of an electronic document

shall:

(A) give control of the electronic document to the debtor or its

designated custodian;

(B) if the debtor designates a custodian that is the designated

custodian with which the authoritative copy of the electronic

document is maintained for the secured party, communicate to the

custodian an authenticated record releasing the designated

custodian from any further obligation to comply with instructions

originated by the secured party and instructing the custodian to

comply with instructions originated by the debtor; and

designated custodian to make copies of or revisions to the

authoritative copy which add or change an identified assignee of

the authoritative copy without the consent of the secured party.

Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Amended by:

Acts 2005, 79th Leg., Ch.

122, Sec. 22, eff. September 1, 2005.

Sec. 9.209. DUTIES OF SECURED PARTY IF ACCOUNT DEBTOR HAS BEEN

NOTIFIED OF ASSIGNMENT. (a) Except as otherwise provided in

Subsection (c), this section applies if:

(1) there is no outstanding secured obligation; and

(2) the secured party is not committed to make advances, incur

obligations, or otherwise give value.

(b) Within 10 days after receiving an authenticated demand by

the debtor, a secured party shall send to an account debtor that

has received notification of an assignment to the secured party

as assignee under Section 9.406(a) an authenticated record that

releases the account debtor from any further obligation to the

secured party.

the sale of an account, chattel paper, or payment intangible.

Added by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1,

2001.

Sec. 9.210. REQUEST FOR ACCOUNTING; REQUEST REGARDING LIST OF

COLLATERAL OR STATEMENT OF ACCOUNT. (a) In this section:

(1) "Request" means a record of a type described in Subdivision

(2), (3), or (4).

(2) "Request for an accounting" means a record authenticated by

a debtor requesting that the recipient provide an accounting of

the unpaid obligations secured by collateral and reasonably

identifying the transaction or relationship that is the subject

of the request.

(3) "Request regarding a list of collateral" means a record

authenticated by a debtor requesting that the recipient approve

or correct a list of what the debtor believes to be the

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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