47-9207. Rights and duties of secured party
having possession or control of collateral


A. Except as otherwise provided in subsection D of this section, 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 of this section, 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 a
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


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


C. Except as otherwise provided in subsection D of this section, a secured party
having possession of collateral or control of collateral under section 47-7106, 47-9104,
47-9105, 47-9106 or 47-9107:


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 of this section 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 of this section do not apply.