Subpart 2. 
Rights and Duties



 



§490:9-207  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 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), a secured party having possession of collateral or control of collateral
under section 490:7-106, 490:9-104, 490:9-105, 490:9-106, or 490:9-107:



(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. [L 2000, c
241, pt of §1; am L 2004, c 163, §23]