47-9608

47-9608. Application of proceeds of collection
or enforcement; liability for deficiency and right to
surplus

A. If a security interest or agricultural lien secures payment or performance of an
obligation, the following rules apply:

1. A secured party shall apply or pay over for application the cash proceeds of
collection or enforcement under section 47-9607 in the following order to:

(a) The reasonable expenses of collection and enforcement and, to the extent
provided for by agreement and not prohibited by law, reasonable attorney fees and legal
expenses incurred by the secured party;

(b) The satisfaction of obligations secured by the security interest or
agricultural lien under which the collection or enforcement is made; and

(c) The satisfaction of obligations secured by any subordinate security interest in
or other lien on the collateral subject to the security interest or agricultural lien
under which the collection or enforcement is made if the secured party receives an
authenticated demand for proceeds before distribution of the proceeds is completed.

2. If requested by a secured party, a holder of a subordinate security interest or
other lien shall furnish reasonable proof of the interest or lien within a reasonable
time. Unless the holder complies, the secured party need not comply with the holder's
demand under paragraph 1, subdivision (c).

3. A secured party need not apply or pay over for application noncash proceeds of
collection and enforcement under section 47-9607 unless the failure to do so would be
commercially unreasonable. A secured party that applies or pays over for application
noncash proceeds shall do so in a commercially reasonable manner.

4. A secured party shall account to and pay a debtor for any surplus, and the
obligor is liable for any deficiency.

B. 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.