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[Introduced][Amended][Status][Bill Documents][Fiscal Note][Bills Directory]
S.B. 168 Enrolled
UNIFORM COMMERCIAL CODE - ARTICLE 9
- SECURED TRANSACTIONS
2000 GENERAL SESSION
STATE OF UTAH
Sponsor: Lyle W. Hillyard
AN ACT RELATING TO THE UNIFORM COMMERCIAL CODE; REPEALING THE
FORMER CHAPTER 9; ADOPTING THE NEW UNIFORM ARTICLE 9 WITH CHANGES;
INCLUDING GENERAL PROVISIONS; ADDRESSING EFFECTIVENESS OF SECURITY
AGREEMENTS; ADDRESSING ATTACHMENT OF SECURITY INTERESTS;
ADDRESSING RIGHTS OF PARTIES TO SECURITY AGREEMENTS; ADDRESSING
PERFECTION AND PRIORITY; ADDRESSING RIGHTS OF THIRD PARTIES;
ADDRESSING FILING; ADDRESSING DEFAULT; ADDRESSING THE TRANSITION
FROM THE OLD TO THE NEW LAW; MAKING TECHNICAL CHANGES; AND
PROVIDING AN EFFECTIVE DATE.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
15-4-6.5, as enacted by Chapter 257, Laws of Utah 1991
25-6-9, as enacted by Chapter 59, Laws of Utah 1988
31A-22-419, as last amended by Chapter 204, Laws of Utah 1986
38-7-2.5, as enacted by Chapter 167, Laws of Utah 1996
38-8-2, as last amended by Chapter 66, Laws of Utah 1984
38-12-102, as enacted by Chapter 323, Laws of Utah 1995
38-12-103, as enacted by Chapter 323, Laws of Utah 1995
41-1a-223, as renumbered and amended by Chapter 1, Laws of Utah 1992
41-1a-601, as renumbered and amended by Chapter 1, Laws of Utah 1992
41-1a-606, as renumbered and amended by Chapter 1, Laws of Utah 1992
57-3-102, as renumbered and amended by Chapter 61 and last amended by Chapter 85,
Laws of Utah 1998
57-16-9, as enacted by Chapter 178, Laws of Utah 1981
58-37-13, as last amended by Chapters 198 and 294, Laws of Utah 1996
70A-1-105, as last amended by Chapter 241, Laws of Utah 1997
70A-1-201, as last amended by Chapter 13, Laws of Utah 1998
70A-1-206, as last amended by Chapter 204, Laws of Utah 1996
70A-2-103, as last amended by Chapter 10, Laws of Utah 1997
70A-2-210, as enacted by Chapter 154, Laws of Utah 1965
70A-2-326, as enacted by Chapter 154, Laws of Utah 1965
70A-2-502, as enacted by Chapter 154, Laws of Utah 1965
70A-2-716, as enacted by Chapter 154, Laws of Utah 1965
70A-2a-103, as last amended by Chapter 237, Laws of Utah 1993
70A-2a-303, as last amended by Chapter 237, Laws of Utah 1993
70A-2a-307, as last amended by Chapter 237, Laws of Utah 1993
70A-2a-309, as last amended by Chapter 237, Laws of Utah 1993
70A-3-605, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-4-210, as repealed and reenacted by Chapter 237, Laws of Utah 1993
70A-5-114, as repealed and reenacted by Chapter 241, Laws of Utah 1997
70A-7-503, as enacted by Chapter 154, Laws of Utah 1965
70A-8-102, as repealed and reenacted by Chapter 204, Laws of Utah 1996
70A-8-105, as repealed and reenacted by Chapter 204, Laws of Utah 1996
70A-8-109, as enacted by Chapter 204, Laws of Utah 1996
70A-8-301, as repealed and reenacted by Chapter 204, Laws of Utah 1996
70A-8-302, as repealed and reenacted by Chapter 204, Laws of Utah 1996
70A-8-510, as enacted by Chapter 204, Laws of Utah 1996
ENACTS:
57-3-108, Utah Code Annotated 1953
70A-5-120, Utah Code Annotated 1953
70A-9a-101, Utah Code Annotated 1953
70A-9a-102, Utah Code Annotated 1953
- 2 -
70A-9a-102.1, Utah Code Annotated 1953
70A-9a-103, Utah Code Annotated 1953
70A-9a-104, Utah Code Annotated 1953
70A-9a-105, Utah Code Annotated 1953
70A-9a-106, Utah Code Annotated 1953
70A-9a-107, Utah Code Annotated 1953
70A-9a-108, Utah Code Annotated 1953
70A-9a-109, Utah Code Annotated 1953
70A-9a-110, Utah Code Annotated 1953
70A-9a-201, Utah Code Annotated 1953
70A-9a-202, Utah Code Annotated 1953
70A-9a-203, Utah Code Annotated 1953
70A-9a-204, Utah Code Annotated 1953
70A-9a-205, Utah Code Annotated 1953
70A-9a-206, Utah Code Annotated 1953
70A-9a-207, Utah Code Annotated 1953
70A-9a-208, Utah Code Annotated 1953
70A-9a-209, Utah Code Annotated 1953
70A-9a-210, Utah Code Annotated 1953
70A-9a-301, Utah Code Annotated 1953
70A-9a-302, Utah Code Annotated 1953
70A-9a-303, Utah Code Annotated 1953
70A-9a-304, Utah Code Annotated 1953
70A-9a-305, Utah Code Annotated 1953
70A-9a-306, Utah Code Annotated 1953
70A-9a-307, Utah Code Annotated 1953
70A-9a-308, Utah Code Annotated 1953
70A-9a-309, Utah Code Annotated 1953
- 3 -
70A-9a-310, Utah Code Annotated 1953
70A-9a-311, Utah Code Annotated 1953
70A-9a-312, Utah Code Annotated 1953
70A-9a-313, Utah Code Annotated 1953
70A-9a-314, Utah Code Annotated 1953
70A-9a-315, Utah Code Annotated 1953
70A-9a-316, Utah Code Annotated 1953
70A-9a-317, Utah Code Annotated 1953
70A-9a-318, Utah Code Annotated 1953
70A-9a-319, Utah Code Annotated 1953
70A-9a-320, Utah Code Annotated 1953
70A-9a-321, Utah Code Annotated 1953
70A-9a-322, Utah Code Annotated 1953
70A-9a-323, Utah Code Annotated 1953
70A-9a-324, Utah Code Annotated 1953
70A-9a-325, Utah Code Annotated 1953
70A-9a-326, Utah Code Annotated 1953
70A-9a-327, Utah Code Annotated 1953
70A-9a-328, Utah Code Annotated 1953
70A-9a-329, Utah Code Annotated 1953
70A-9a-330, Utah Code Annotated 1953
70A-9a-331, Utah Code Annotated 1953
70A-9a-332, Utah Code Annotated 1953
70A-9a-333, Utah Code Annotated 1953
70A-9a-334, Utah Code Annotated 1953
70A-9a-335, Utah Code Annotated 1953
70A-9a-336, Utah Code Annotated 1953
70A-9a-337, Utah Code Annotated 1953
- 4 -
70A-9a-338, Utah Code Annotated 1953
70A-9a-339, Utah Code Annotated 1953
70A-9a-340, Utah Code Annotated 1953
70A-9a-341, Utah Code Annotated 1953
70A-9a-342, Utah Code Annotated 1953
70A-9a-401, Utah Code Annotated 1953
70A-9a-402, Utah Code Annotated 1953
70A-9a-403, Utah Code Annotated 1953
70A-9a-404, Utah Code Annotated 1953
70A-9a-405, Utah Code Annotated 1953
70A-9a-406, Utah Code Annotated 1953
70A-9a-407, Utah Code Annotated 1953
70A-9a-408, Utah Code Annotated 1953
70A-9a-409, Utah Code Annotated 1953
70A-9a-501, Utah Code Annotated 1953
70A-9a-502, Utah Code Annotated 1953
70A-9a-503, Utah Code Annotated 1953
70A-9a-504, Utah Code Annotated 1953
70A-9a-505, Utah Code Annotated 1953
70A-9a-506, Utah Code Annotated 1953
70A-9a-507, Utah Code Annotated 1953
70A-9a-508, Utah Code Annotated 1953
70A-9a-509, Utah Code Annotated 1953
70A-9a-510, Utah Code Annotated 1953
70A-9a-511, Utah Code Annotated 1953
70A-9a-512, Utah Code Annotated 1953
70A-9a-513, Utah Code Annotated 1953
70A-9a-514, Utah Code Annotated 1953
- 5 -
70A-9a-515, Utah Code Annotated 1953
70A-9a-516, Utah Code Annotated 1953
70A-9a-517, Utah Code Annotated 1953
70A-9a-518, Utah Code Annotated 1953
70A-9a-519, Utah Code Annotated 1953
70A-9a-520, Utah Code Annotated 1953
70A-9a-521, Utah Code Annotated 1953
70A-9a-522, Utah Code Annotated 1953
70A-9a-523, Utah Code Annotated 1953
70A-9a-524, Utah Code Annotated 1953
70A-9a-525, Utah Code Annotated 1953
70A-9a-526, Utah Code Annotated 1953
70A-9a-527, Utah Code Annotated 1953
70A-9a-601, Utah Code Annotated 1953
70A-9a-602, Utah Code Annotated 1953
70A-9a-603, Utah Code Annotated 1953
70A-9a-604, Utah Code Annotated 1953
70A-9a-605, Utah Code Annotated 1953
70A-9a-606, Utah Code Annotated 1953
70A-9a-607, Utah Code Annotated 1953
70A-9a-608, Utah Code Annotated 1953
70A-9a-609, Utah Code Annotated 1953
70A-9a-610, Utah Code Annotated 1953
70A-9a-611, Utah Code Annotated 1953
70A-9a-612, Utah Code Annotated 1953
70A-9a-613, Utah Code Annotated 1953
70A-9a-614, Utah Code Annotated 1953
70A-9a-615, Utah Code Annotated 1953
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70A-9a-616, Utah Code Annotated 1953
70A-9a-617, Utah Code Annotated 1953
70A-9a-618, Utah Code Annotated 1953
70A-9a-619, Utah Code Annotated 1953
70A-9a-620, Utah Code Annotated 1953
70A-9a-621, Utah Code Annotated 1953
70A-9a-622, Utah Code Annotated 1953
70A-9a-623, Utah Code Annotated 1953
70A-9a-624, Utah Code Annotated 1953
70A-9a-625, Utah Code Annotated 1953
70A-9a-626, Utah Code Annotated 1953
70A-9a-627, Utah Code Annotated 1953
70A-9a-628, Utah Code Annotated 1953
70A-9a-701, Utah Code Annotated 1953
70A-9a-702, Utah Code Annotated 1953
70A-9a-703, Utah Code Annotated 1953
70A-9a-704, Utah Code Annotated 1953
70A-9a-705, Utah Code Annotated 1953
70A-9a-706, Utah Code Annotated 1953
70A-9a-707, Utah Code Annotated 1953
70A-9a-708, Utah Code Annotated 1953
70A-9a-709, Utah Code Annotated 1953
REPEALS AND REENACTS:
70A-5-118, as enacted by Chapter 241, Laws of Utah 1997
70A-5-119, as enacted by Chapter 241, Laws of Utah 1997
REPEALS:
70A-9-101, as enacted by Chapter 154, Laws of Utah 1965
70A-9-102, as last amended by Chapter 172, Laws of Utah 1996
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70A-9-103, as last amended by Chapter 241, Laws of Utah 1997
70A-9-104, as last amended by Chapter 241, Laws of Utah 1997
70A-9-105, as last amended by Chapter 241, Laws of Utah 1997
70A-9-106, as last amended by Chapter 241, Laws of Utah 1997
70A-9-107, as enacted by Chapter 154, Laws of Utah 1965
70A-9-108, as enacted by Chapter 154, Laws of Utah 1965
70A-9-109, as enacted by Chapter 154, Laws of Utah 1965
70A-9-110, as enacted by Chapter 154, Laws of Utah 1965
70A-9-112, as enacted by Chapter 154, Laws of Utah 1965
70A-9-113, as last amended by Chapter 5, Laws of Utah 1991
70A-9-114, as enacted by Chapter 272, Laws of Utah 1977
70A-9-115, as enacted by Chapter 204, Laws of Utah 1996
70A-9-116, as enacted by Chapter 204, Laws of Utah 1996
70A-9-201, as enacted by Chapter 154, Laws of Utah 1965
70A-9-202, as enacted by Chapter 154, Laws of Utah 1965
70A-9-203, as last amended by Chapter 204, Laws of Utah 1996
70A-9-204, as enacted by Chapter 272, Laws of Utah 1977
70A-9-205, as last amended by Chapter 272, Laws of Utah 1977
70A-9-206, as enacted by Chapter 154, Laws of Utah 1965
70A-9-207, as enacted by Chapter 154, Laws of Utah 1965
70A-9-208, as enacted by Chapter 154, Laws of Utah 1965
70A-9-301, as last amended by Chapter 204, Laws of Utah 1996
70A-9-302, as last amended by Chapter 204, Laws of Utah 1996
70A-9-303, as last amended by Chapter 204, Laws of Utah 1996
70A-9-304, as last amended by Chapter 241, Laws of Utah 1997
70A-9-305, as last amended by Chapter 241, Laws of Utah 1997
70A-9-306, as last amended by Chapter 204, Laws of Utah 1996
70A-9-307, as last amended by Chapter 114, Laws of Utah 1986
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70A-9-308, as enacted by Chapter 272, Laws of Utah 1977
70A-9-309, as last amended by Chapter 204, Laws of Utah 1996
70A-9-310, as enacted by Chapter 154, Laws of Utah 1965
70A-9-311, as enacted by Chapter 154, Laws of Utah 1965
70A-9-312, as last amended by Chapter 204, Laws of Utah 1996
70A-9-313, as last amended by Chapter 5, Laws of Utah 1991
70A-9-314, as enacted by Chapter 154, Laws of Utah 1965
70A-9-315, as enacted by Chapter 154, Laws of Utah 1965
70A-9-316, as enacted by Chapter 154, Laws of Utah 1965
70A-9-317, as enacted by Chapter 154, Laws of Utah 1965
70A-9-318, as last amended by Chapter 197, Laws of Utah 1990
70A-9-400, as last amended by Chapter 92, Laws of Utah 1987
70A-9-401, as last amended by Chapter 66, Laws of Utah 1984
70A-9-402, as last amended by Chapter 232, Laws of Utah 1999
70A-9-403, as last amended by Chapter 172, Laws of Utah 1996
70A-9-404, as last amended by Chapter 147, Laws of Utah 1994
70A-9-405, as last amended by Chapter 313, Laws of Utah 1994
70A-9-406, as last amended by Chapter 313, Laws of Utah 1994
70A-9-407, as last amended by Chapter 313, Laws of Utah 1994
70A-9-408, as last amended by Chapter 272, Laws of Utah 1977
70A-9-409, as last amended by Chapter 178, Laws of Utah 1985
70A-9-501, as last amended by Chapter 272, Laws of Utah 1977
70A-9-502, as last amended by Chapter 272, Laws of Utah 1977
70A-9-503, as enacted by Chapter 154, Laws of Utah 1965
70A-9-504, as last amended by Chapter 272, Laws of Utah 1977
70A-9-505, as last amended by Chapter 272, Laws of Utah 1977
70A-9-506, as enacted by Chapter 154, Laws of Utah 1965
70A-9-507, as enacted by Chapter 154, Laws of Utah 1965
- 9 -
Be it enacted by the Legislature of the state of Utah:
Section 1.
Section
15-4-6.5
is amended to read:
15-4-6.5. Divorce or separate maintenance of co-obligors.
(1) On the entering of a decree of divorce or separate maintenance of joint debtors in
contract, the claim of a creditor remains unchanged unless otherwise provided by the contract or until
a new contract is entered into between the creditor and the debtors individually.
(2) In addition to [his] the creditor's duties as a secured party under [Section
70A-9-112
]
Title 70A, Chapter 9a, Uniform Commercial Code -- Secured Transactions, and [his] the creditor's
duties as a trustee or beneficiary of a trust deed under Title 57, Chapter 1, Conveyances, a creditor,
who has been notified by service of a copy of a court order under [Sections] Section
30-3-5
or
30-4-3
that the debtors are divorced or living separately under an order for separate maintenance, and who
has been expressly advised of the separate, current addresses of the debtors either by the court order
or by other written notice, shall provide to the debtors individually all statements, notices, and other
similar correspondence required by law or by the contract.
(3) (a) Except as provided in Subsection (3)(b), a creditor may continue to make negative
credit reports of joint debtors under Section
70C-7-107
and may report the repayment practices or
credit history of joint debtors under Title 7, Chapter 14, Credit Information Exchange.
(b) With respect to a debtor who is not ordered by the court under Sections
30-3-5
or
30-4-3
to make payments on a joint obligation, no negative credit report under Section
70C-7-107
, and no
report of the debtor's repayment practices or credit history under Title 7, Chapter 14, Credit
Information Exchange, may be made regarding the joint obligation after the creditor is served notice
of the court's order as required under Subsection (2), unless the creditor has made a demand on the
debtor for payment because of the failure to make payments by the other debtor, who is ordered by
the court to make the payments.
Section 2.
Section
25-6-9
is amended to read:
25-6-9. Good faith transfer.
(1) A transfer or obligation is not voidable under Subsection
25-6-5
(1)(a) against a person
who took in good faith and for a reasonably equivalent value or against any subsequent transferee or
- 10 -
obligee.
(2) Except as otherwise provided in this section, to the extent a transfer is voidable in an
action by a creditor under Subsection
25-6-8
(1)(a), the creditor may recover judgment for the value
of the asset transferred, as adjusted under Subsection (3), or the amount necessary to satisfy the
creditor's claim, whichever is less. The judgment may be entered against:
(a) the first transferee of the asset or the person for whose benefit the transfer was made; or
(b) any subsequent transferee other than a good faith transferee who took for value or from
any subsequent transferee.
(3) If the judgment under Subsection (2) is based upon the value of the asset transferred, the
judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to
an adjustment as equities may require.
(4) Notwithstanding voidability of a transfer or an obligation under this chapter, a good-faith
transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or
obligation, to:
(a) a lien on or a right to retain any interest in the asset transferred;
(b) enforcement of any obligation incurred; or
(c) a reduction in the amount of the liability on the judgment.
(5) A transfer is not voidable under Subsection
25-6-5
(1)(b) or Section
25-6-6
if the transfer
results from:
(a) termination of a lease upon default by the debtor when the termination is pursuant to the
lease and applicable law; or
(b) enforcement of a security interest in compliance with Title 70A, Chapter 9a, [the]
Uniform Commercial Code -- Secured Transactions.
(6) A transfer is not voidable under Subsection
25-6-6
(2):
(a) to the extent the insider gave new value to or for the benefit of the debtor after the
transfer was made unless the new value was secured by a valid lien;
(b) if made in the ordinary course of business or financial affairs of the debtor and the insider;
or
- 11 -
(c) if made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured
present value given for that purpose as well as an antecedent debt of the debtor.
Section 3.
Section
31A-22-419
is amended to read:
31A-22-419. Insurer's purchase of and loans on policies.
Any life insurer may purchase for its own benefit any policy of insurance or other obligation
of the company and any claim of its policyholders. The insurer may also lend to the holders of
policies of the company a sum which does not exceed the sum of the cash value of the policies and
the surplus or dividend additions to the policies. The policies and all additions to them shall be
security for payment of the loan. An insurer's security interest in a policy under this section need not
be filed under Title 70A, Chapter 9a, Uniform Commercial Code -- Secured Transactions, to be
perfected.
Section 4.
Section
38-7-2.5
is amended to read:
38-7-2.5. Failure to notify -- Effect -- Penalty.
(1) (a) A person who fails to meet the notice requirements of Subsections
38-7-2
(1) and (2)
is precluded from receiving an award of costs and attorneys' fees from the person against whom a
notice of lien has been filed in an action to enforce the lien if costs and attorneys' fees are authorized
by contract or statute.
(b) Subsection (1)(a) does not create a right to costs and attorneys' fees.
(2) In addition to the penalties provided in Subsection (1)(a), a lien claimant who, within 20
days from the date of receiving notice of noncompliance with the notice requirements of Subsection
38-7-2
(1) or (2), willfully refuses to release the notice of lien or record the lien in compliance with
Section
38-7-2
is liable to the person against whom the notice of lien was filed for $1,000 or for
treble damages, whichever is greater.
(3) Failure to meet the notice requirements of Subsections
38-7-2
(1) and (2) does not:
(a) invalidate any lien arising at common law or in equity or by any statute of this state; or
(b) affect the rules of priority provided in Title 70A, Chapter 9a, [Part 3] Uniform
Commercial Code -- Secured Transactions.
Section 5.
Section
38-8-2
is amended to read:
- 12 -
38-8-2. Lien against stored property -- Attachment and duration -- Search for
financing statement prerequisite to enforcement of lien.
(1) Where a rental agreement, as defined in Subsection
38-8-1
(6), is entered into between
the owner and the occupant, the owner of the self-service storage facility and [his] the owner's heirs,
executors, administrators, successors, and assigns have a lien upon all personal property located at
the self-service storage facility for rent, labor, or other charges, present or future, in relation to the
personal property and for expenses necessary for its preservation or expenses reasonably incurred in
its sale or other disposition under this chapter.
(2) The lien described in Subsection (1) attaches as of the date the personal property is
brought to the self-service storage facility and continues so long as the owner retains possession and
until any default is corrected, or a sale pursuant to a default is conducted, or the property is otherwise
disposed of to satisfy the lien.
(3) (a) Before taking enforcement action under Section
38-8-3
, the owner shall determine
if a financing statement filed in accordance with [Section
70A-9-401
, et seq.] Title 70A, Chapter 9a,
Part 5, Filing, has been filed with the Division of Corporations and Commercial Code concerning the
property to be sold or otherwise disposed of.
(b) A security interest evidenced by a financing statement filed in accordance with Title 70A,
Chapter 9a, Part 5, Filing, has priority over the lien provided by this section.
Section 6.
Section
38-12-102
is amended to read:
38-12-102. Notice requirements for lien filings -- Exceptions.
(1) No later than 30 days after the day on which a lien claimant or the lien claimant's
authorized agent files for recordation a notice of lien meeting the requirements of Subsection (2) with
a county recorder, county clerk, or clerk of the court, a lien claimant or the lien claimant's agent shall
send by certified mail a written copy of the notice of lien to the last-known address of the person
against whom the notice of lien is filed.
(2) The notice of lien shall contain the following information:
(a) the name and address of the person against whom the lien is filed;
(b) (i) a statement that certain property owned by the person against whom the lien is filed
- 13 -
is subject to a lien;
(ii) the amount of the judgment, settlement, or compromise if the lien is based on a charge
against or interest in a judgment, settlement, or compromise; or
(iii) the amount of state taxes owed;
(c) the article number contained on the certified mail receipt;
(d) the date the notice of lien was filed; and
(e) the name and address of the lien claimant.
(3) The notice requirements of Subsections (1) and (2) do not apply to a:
(a) mechanics' lien as provided in Title 38, Chapter 1, Mechanics' Liens;
(b) lessors' lien as provided in Title 38, Chapter 3, Lessors' Liens;
(c) federal tax lien as provided in Title 38, Chapter 6, Federal Tax Liens;
(d) hospital lien as provided in Title 38, Chapter 7, Hospital Lien Law;
(e) self-service storage facilities lien as provided in Title 38, Chapter 8, Self-Service Storage
Facilities;
(f) oil, gas, or mining lien as provided in Title 38, Chapter 10, Oil, Gas, and Mining Liens;
(g) claim against the Residence Lien Recovery Fund as provided in Title 38, Chapter 11,
Residence Lien Restriction and Lien Recovery Fund Act;
(h) trust deed;
(i) mortgage;
(j) interests subject to a security agreement as defined in [Subsection
70A-9-105
(l)] Section
70A-9a-102
; or
(k) other liens subject to the same or stricter notice requirements than those imposed by
Subsections (1) and (2).
Section 7.
Section
38-12-103
is amended to read:
38-12-103. Failure to notify -- Effect -- Penalty.
(1) (a) A person who fails to meet the notice requirements of Subsections
38-12-102
(1) and
(2) is precluded from receiving an award of costs and attorneys' fees from the person against whom
a notice of lien has been filed in an action to enforce the lien if costs and attorneys' fees are authorized
- 14 -
by contract or statute.
(b) Subsection (1)(a) does not create a right to costs and attorneys' fees.
(2) In addition to the penalties provided in Subsection (1)(a), a lien claimant who, within 20
days from the date of receiving notice of noncompliance with the notice requirements of Subsection
38-12-102
(1) or (2), willfully refuses to release the notice of lien or record the lien in compliance with
Section
38-12-102
is liable to the person against whom the notice of lien was filed for $1,000 or for
treble damages, whichever is greater.
(3) Failure to meet the notice requirements of Subsections
38-12-102
(1) and (2) does not:
(a) invalidate any lien arising at common law or in equity or by any statute of this state; or
(b) affect the rules of priority provided in Title 70A, Chapter 9a, [Part 3] Uniform
Commercial Code -- Secured Transactions.
Section 8.
Section
41-1a-223
is amended to read:
41-1a-223. Registration without Utah title.
(1) (a) If the owner of a vehicle operating interstate and registered in another state desires
to retain registration of the vehicle in the other state, the applicant need not surrender but shall submit
for inspection evidences of out-of-state registration.
(b) The division upon a proper showing shall register the vehicle in this state.
(2) (a) If a person is relocating from another jurisdiction and establishing residence in this
state, whether temporary or permanent, and that person has a vehicle registered and titled in another
jurisdiction and is not able to surrender title to the vehicle being registered in Utah because title is
physically held by a lienholder, the division may register the vehicle without issuing a Utah title.
(b) Notwithstanding [the provisions of] Section [
70A-9-103
]
70A-9a-316
, the registration
of a vehicle under this section does not alter or affect the rights or security interest of any lienholder
in another jurisdiction.
Section 9.
Section
41-1a-601
is amended to read:
41-1a-601. Lien validity -- Security interest.
(1) Except as provided under Subsection (2), a lien upon a vehicle, vessel, or outboard
motor, except a lien dependent upon possession, is not valid against the creditors of an owner
- 15 -
acquiring a lien by levy or attachment, or subsequent purchasers, or encumbrancers without notice
until Sections
41-1a-602
through
41-1a-606
have been complied with.
(2) Security interests in inventory consisting in part of vehicles subject to registration under
this chapter, that are held for sale by a person in the business of selling goods of that kind, shall be
perfected under Section [
70A-9-302
]
70A-9a-310
, except that buyers in the ordinary course of
business, as defined in Section
70A-1-201
, take free of the security interests as provided in Section
[
70A-9-307
]
70A-9a-320
.
Section 10.
Section
41-1a-606
is amended to read:
41-1a-606. Method of giving notice -- Exceptions.
The method provided in Sections
41-1a-602
through
41-1a-605
, for giving constructive notice
of a lien or encumbrance upon a registered vehicle is exclusive except for liens dependent upon
possession and any lien or encumbrance filed as provided under this chapter, which are exempt from
the provisions of Section [
70A-9-302
]
70A-9a-311
, and other provisions of law that otherwise
require or relate to the recording or filing of instruments creating or evidencing title retention or other
liens or encumbrances upon vehicles of a type subject to registration under this chapter.
Section 11.
Section
57-3-102
is amended to read:
57-3-102. Record imparts notice -- Change in interest rate -- Validity of document --
Notice of unnamed interests -- Conveyance by grantee.
(1) Each document executed, acknowledged, and certified, in the manner prescribed by this
title, each original document or certified copy of a document complying with Section
57-4a-3
,
whether or not acknowledged, each copy of a notice of location complying with Section
40-1-4
, and
each financing statement complying with Section [
70A-9-402
]
70A-9a-502
, whether or not
acknowledged shall, from the time of recording with the appropriate county recorder, impart notice
to all persons of their contents.
(2) If a recorded document was given as security, a change in the interest rate in accordance
with the terms of an agreement pertaining to the underlying secured obligation does not affect the
notice or alter the priority of the document provided under Subsection (1).
(3) This section does not affect the validity of a document with respect to the parties to the
- 16 -
document and all other persons who have notice of the document.
(4) The fact that a recorded document recites only a nominal consideration, names the
grantee as trustee, or otherwise purports to be in trust without naming beneficiaries or stating the
terms of the trust does not charge any third person with notice of any interest of the grantor or of the
interest of any other person not named in the document.
(5) The grantee in a recorded document may convey the interest granted to him free and clear
of all claims not disclosed in the document in which he appears as grantee or in any other document
recorded in accordance with this title that sets forth the names of the beneficiaries, specifies the
interest claimed, and describes the real property subject to the interest.
Section 12.
Section
57-3-108
is enacted to read:
57-3-108. Financing statements not subject to title.
This title does not apply to a financing statement filed or recorded in a filing office described
in Subsection
70A-9a-501
(1)(a) that:
(1) covers as-extracted collateral or timber to be cut; or
(2) (a) is filed as a fixture filing; and
(b) covers goods that are or are to become fixtures.
Section 13.
Section
57-16-9
is amended to read:
57-16-9. Lienholder's liability for rent and fees.
Notwithstanding [the provisions of] Section
38-3-2
and Section [
70A-9-317
]
70A-9a-402
,
the lienholder of record of a mobile home is primarily liable to the mobile home park owner or
operator for rent and service charges if a mobile home is not removed within [10] ten days after
receipt of written notice that a mobile home has been abandoned or that a writ of restitution has been
issued. The lienholder, however, is only liable for rent that accrues after receipt of such notice.
Section 14.
Section
58-37-13
is amended to read:
58-37-13. Property subject to forfeiture -- Seizure -- Procedure.
(1) As used in this section:
(a) "Complaint" means a verified civil in rem complaint seeking forfeiture or any criminal
information or indictment which contains or is amended to include a demand for forfeiture of a
- 17 -
defendant's in personam interest in any property which is subject to forfeiture.
(b) "Drug distributing paraphernalia" means any property used or designed to be used in the
illegal transportation, storage, shipping, or circulation of a controlled substance. Property is
considered "designed to be used" for one or more of the above-listed purposes if the property has
been altered or modified to include a feature or device which would actually promote or conceal a
violation of this chapter.
(c) "Drug manufacturing equipment or supplies" includes any illegally possessed controlled
substance precursor, or any chemical, laboratory equipment, or laboratory supplies possessed with
intent to engage in clandestine laboratory operation as defined in Section
58-37d-3
.
(d) "Interest holder" means a secured party as defined in [Section
70A-9-105
(1)(m)] Section
70A-9a-102
, a mortgagee, lien creditor, or the beneficiary of a security interest or encumbrance
pertaining to an interest in property, whose interest would be perfected against a good faith purchaser
for value. A person who holds property for the benefit of or as an agent or nominee for another, or
who is not in substantial compliance with any statute requiring an interest in property to be recorded
or reflected in public records in order to perfect the interest against a good faith purchaser for value,
is not an interest holder.
(e) "Proceeds" means property acquired directly or indirectly from, produced through,
realized through, or caused by an act or omission and includes any property of any kind without
reduction for expenses incurred in the acquisition, maintenance, or production of that property, or
any other purpose.
(f) "Resolution of criminal charges" occurs at the time a claimant who is also charged with
violations under Title 58, Chapters 37, 37a, 37b, 37c, or 37d enters a plea, upon return of a jury
verdict or court ruling in a criminal trial, or upon dismissal of the criminal charge.
(g) "Violation of this chapter" means any conduct prohibited by Title 58, Chapters 37, 37a,
37b, 37c, or 37d or any conduct occurring outside the state which would be a violation of the laws
of the place where the conduct occurred and which would be a violation of Title 58, Chapters 37,
37a, 37b, 37c, or 37d if the conduct had occurred in this state.
(2) The following are subject to forfeiture and no property right exists in them:
- 18 -
(a) all controlled substances which have been manufactured, distributed, dispensed, or
acquired in violation of this chapter;
(b) all raw materials, products, and equipment of any kind used, or intended for use, in
manufacturing, compounding, processing, delivering, importing, or exporting any controlled
substance in violation of this chapter;
(c) all property used or intended for use as a container for property described in Subsections
(2)(a) and (2)(b);
(d) all hypodermic needles, syringes, and other paraphernalia, not including capsules used
with health food supplements and herbs, used or intended for use to administer controlled substances
in violation of this chapter;
(e) all conveyances including aircraft, vehicles, or vessels used or intended for use, to
transport, or in any manner facilitate the transportation, sale, receipt, simple possession, or
concealment of property described in Subsections (2)(a) and (2)(b), except that:
(i) a conveyance used by any person as a common carrier in the transaction of business as a
common carrier may not be forfeited under this section unless the owner or other person in charge
of the conveyance was a consenting party or knew or had reason to know of the violation of this
chapter;
(ii) a conveyance may not be forfeited under this section by reason of any act or omission
committed or omitted without the owner's knowledge or consent; and
(iii) any forfeiture of a conveyance is subject to the claim of an interest holder who did not
know or have reason to know after the exercise of reasonable diligence that a violation would or did
take place in the use of the conveyance;
(f) all books, records, and research, including formulas, microfilm, tapes, and data used or
intended for use in violation of this chapter;
(g) everything of value furnished or intended to be furnished in exchange for a controlled
substance in violation of this chapter, and all moneys, negotiable instruments, and securities used or
intended to be used to facilitate any violation of this chapter. An interest in property may not be
forfeited under this subsection unless it is proven by a preponderance of the evidence that the interest
- 19 -
holder knew, had reason to know of, or consented to the conduct which made the property subject
to forfeiture. The burden of presenting this evidence shall be upon the state;
(h) all imitation controlled substances as defined in Section
58-37b-2
, Imitation Controlled
Substances Act;
(i) all warehousing, housing, and storage facilities, or interest in real property of any kind
used, or intended for use, in producing, cultivating, warehousing, storing, protecting, or
manufacturing any controlled substances in violation of this chapter, except that:
(i) any forfeiture of a housing, warehousing, or storage facility or interest in real property is
subject to the claim of an interest holder who did not know or have reason to know after the exercise
of reasonable diligence that a violation would take place on the property;
(ii) an interest in property may not be forfeited under this subsection if the interest holder did
not know or have reason to know of the conduct which made the property subject to forfeiture, or
did not willingly consent to the conduct; and
(iii) unless the premises are used in producing, cultivating, or manufacturing controlled
substances, a housing, warehousing, or storage facility or interest in real property may not be
forfeited
under this subsection unless cumulative sales of controlled substances on the property within a
two-month period total or exceed $1,000, or the street value of any controlled substances found on
the premises at any given time totals or exceeds $1,000. A narcotics officer experienced in controlled
substances law enforcement may testify to establish the street value of the controlled substances for
purposes of this subsection;
(j) any firearm, weapon, or ammunition carried or used during or in relation to a violation of
this chapter or any firearm, weapon, or ammunition kept or located within the proximity of controlled
substances or other property subject to forfeiture under this section; and
(k) all proceeds traceable to any violation of this chapter. There is a rebuttable presumption
that all money, coins, and currency found in proximity to forfeitable controlled substances, drug
manufacturing equipment or supplies, drug distributing paraphernalia, or forfeitable records of
importation, manufacture, or distribution of controlled substances are proceeds traceable to a
violation of this chapter. The burden of proof is upon the claimant of the property to rebut this
- 20 -
presumption.
(3) (a) Property subject to forfeiture under this chapter may be seized by any peace officer
of this state upon process issued by any court having jurisdiction over the property. However, seizure
without process may be made when:
(i) the seizure is incident to an arrest or search under a search warrant or an inspection under
an administrative inspection warrant;
(ii) the property subject to seizure has been the subject of a prior judgment in favor of the
state in a criminal injunction or forfeiture proceeding under this chapter;
(iii) the peace officer has probable cause to believe that the property is directly or indirectly
dangerous to health or safety; or
(iv) the peace officer has probable cause to believe that the property has been used or
intended to be used in violation of this chapter and has probable cause to believe the property will be
damaged, intentionally diminished in value, destroyed, concealed, or removed from the state.
(b) Upon the filing of a complaint, the court shall immediately issue to the seizing agency a
warrant for seizure of any property subject to forfeiture which had been seized without a warrant in
a manner described in this Subsection (3).
(4) In the event of seizure under Subsection (3), forfeiture proceedings under Subsection (9)
shall be instituted within 90 days of the seizure. The time period may by extended by the court having
jurisdiction over the property upon notice to all claimants and interest holders and for good cause
shown.
(5) Property taken or detained under this section is not repleviable but is in custody of the
law enforcement agency making the seizure, subject only to the orders and decrees of the court or
the official having jurisdiction. When property is seized under this chapter, the appropriate person
or agency may:
(a) place the property under seal;
(b) remove the property to a place designated by it or the warrant under which it was seized;
or
(c) take custody of the property and remove it to an appropriate location for disposition in
- 21 -
accordance with law.
(6) All substances listed in Schedule I that are possessed, transferred, distributed, or offered
for distribution in violation of this chapter are contraband and no property right shall exist in them.
All substances listed in Schedule I which are seized or come into the possession of the state may be
retained for any evidentiary or investigative purpose, including sampling or other preservation prior
to disposal or destruction by the state.
(7) All marijuana or any species of plants from which controlled substances in Schedules I
and II are derived which have been planted or cultivated in violation of this chapter, or of which the
owners or cultivators are unknown, or are wild growths, may be seized and retained for any
evidentiary or investigative purpose, including sampling or other preservation prior to disposal or
destruction by the state. Failure, upon demand by the department or its authorized agent, of any
person in occupancy or in control of land or premises upon which species of plants are growing or
being stored, to produce an appropriate license or proof that he is the holder of a license, is authority
for the seizure and forfeiture of the plants.
(8) When any property is forfeited under this chapter by a finding of the court that no person
is entitled to recover the property, it shall be deposited in the custody of the Division of Finance.
Disposition of all property is as follows:
(a) The state may include in its complaint seeking forfeiture, a request that the seizing agency
be awarded the property. Upon a finding that the seizing agency is able to use the forfeited property
in the enforcement of controlled substances laws, the court having jurisdiction over the case shall
award the property to the seizing agency. Each agency shall use the forfeited property for controlled
substance law enforcement purposes only. Forfeited property or proceeds from the sale of forfeited
property may not be used to pay any cash incentive, award, or bonus to any peace officer or
individual acting as an agent for the agency, nor may it be used to supplant any ordinary operating
expense of the agency. The seizing agency shall pay to the prosecuting agency the legal costs
incurred in filing and pursuing the forfeiture action. Property forfeited under this section may not be
applied by the court to costs or fines assessed against any defendant in the case.
(b) The seizing agency, or if it makes no application, any state agency, bureau, county, or
- 22 -
municipality, which demonstrates a need for specific property or classes of property subject to
forfeiture shall be given the property for use in enforcement of controlled substances laws upon the
payment of costs to the county attorney or, if within a prosecution district, the district attorney for
legal costs for filing and pursuing the forfeiture and upon application for the property to the director
of the Division of Finance. The application shall clearly set forth the need for the property and the
use to which the property will be put.
(c) The director of the Division of Finance shall review all applications for property submitted
under Subsection (8)(b) and, if the seizing agency makes no application, make a determination based
on necessity and advisability as to final disposition and shall notify the designated applicant or seizing
agency, where no application is made, who may obtain the property upon payment of all costs to the
appropriate department. The Division of Finance shall in turn reimburse the prosecuting agency or
agencies for costs of filing and pursuing the forfeiture action, not to exceed the amount of the net
proceeds received for the sale of the property. Any proceeds remaining after payment shall be
returned to the seizing agency or agencies.
(d) If no disposition is made upon an application under Subsection (8)(a) or (b), the director
of the Division of Finance shall dispose of the property by public bidding or as considered
appropriate, by destruction. Proof of destruction shall be upon oath of two officers or employees of
the department having charge of the property, and verified by the director of the department or his
designated agent.
(9) Forfeiture proceedings shall be commenced as follows:
(a) For actions brought under Subsections (2)(a) through (2)(j), a complaint shall be prepared
by the county attorney, or if within a prosecution district, the district attorney, or the attorney
general,
and filed in a court of record where the property was seized or is to be seized. In cases in which the
claimant of the property is also charged as a criminal defendant, the complaint shall be filed in the
county where the criminal charges arose, regardless of the location of the property. The complaint
shall include:
(i) a description of the property which is subject to forfeiture;
(ii) the date and place of seizure, if known; and
- 23 -
(iii) the allegations of conduct which gives rise to forfeiture.
(b) In cases where a claimant is also charged as a criminal defendant, the forfeiture shall
proceed as part of the criminal prosecution as an in personam action against the defendant's interest
in the property subject to forfeiture. A defendant need not file a written answer to the complaint, but
may acknowledge or deny interest in the property at the time of first appearance on the criminal
charges. If a criminal information or indictment is amended to include a demand for forfeiture, the
defendant may respond to the demand at the time of the amendment.
(i) Unless motion for disposition is made by the defendant, the determination of forfeiture
shall be stayed until resolution of the criminal charges. Hearing on the forfeiture shall be before the
court without a jury. The court may consider any evidence presented in the criminal case, and receive
any other evidence offered by the state or the defendant. The court shall determine by a
preponderance of the evidence the issues in the case and order forfeiture or release of the property
as it determines.
(ii) A defendant may move the court to transfer the forfeiture action, to stay all action,
including discovery, in the forfeiture, or for hearing on the forfeiture any time prior to trial of the
criminal charges. Either party may move the court to enter a finding of forfeiture as to defendant's
interest in part or all of the property, either by default or by stipulation. Upon entry of a finding, the
court shall stay the entry of judgment until resolution of the criminal charges. Any finding of
forfeiture entered by the court prior to resolution of the criminal charges may not constitute a
separate judgment, and any motion for disposition, stay, severance, or transfer of the forfeiture action
may not create a separate proceeding. Upon the granting of a motion by the defendant for
disposition, stay, severance, or transfer of the forfeiture action, the defendant shall be considered to
have waived any claim that the defendant has been twice put in jeopardy for the same offense.
(iii) Any other person claiming an interest in property subject to forfeiture under this
subsection may not intervene in a trial or appeal of a complaint filed under this subsection. Following
the entry of an in personam forfeiture order, or upon the filing of a petition for release under
Subsection (9)(e), the county attorney, district attorney, or attorney general may proceed with a
separate in rem action to resolve any other claims upon the property subject to forfeiture.
- 24 -
(c) A complaint seeking forfeiture under Subsection (2)(k) shall be prepared by the county
attorney, or if within a prosecution district, the district attorney, or by the attorney general, either in
personam as part of a criminal prosecution, or in a separate civil in rem action against the property
alleged to be proceeds, and filed in the county where the property is seized or encumbered, if the
proceeds are located outside the state. A finding that property is the proceeds of a violation of this
chapter does not require proof that the property is the proceeds of any particular exchange or
transaction. Proof that property is proceeds may be shown by evidence which establishes all of the
following by a preponderance of the evidence:
(i) that the person has engaged in conduct in violation of this chapter;
(ii) that the property was acquired by the person during that period when the conduct in
violation of this chapter occurred or within a reasonable time after that period; and
(iii) that there was no likely source for the property other than conduct in violation of the
chapter.
(d) Notice of the seizure and intended forfeiture shall be filed with the clerk of the court, and
served upon all persons known to the county attorney or district attorney to have a claim in the
property by:
(i) personal service upon a claimant who is charged in a criminal information or indictment;
and
(ii) certified mail to each claimant whose name and address is known or to each owner whose
right, title, or interest is of record in the Division of Motor Vehicles to the address given upon the
records of the division, which service is considered complete even though the mail is refused or
cannot be forwarded. The county attorney, district attorney, or attorney general shall make one
publication in a newspaper of general circulation in the county where the seizure was made for all
other claimants whose addresses are unknown, but who are believed to have an interest in the
property.
(e) Except under Subsection (9)(a) in personam actions, any claimant or interest holder shall
file with the court a verified answer to the complaint within 20 days after service. When property is
seized under this chapter, any interest holder or claimant of the property, prior to being served with
- 25 -
a complaint under this section, may file a petition in the court having jurisdiction for release of his
interest in the property. The petition shall specify the claimant's interest in the property and his right
to have it released. A copy shall be served upon the county attorney or, if within a prosecution
district, the district attorney in the county of the seizure, who shall answer the petition within 20 days.
A petitioner need not answer a complaint of forfeiture.
(f) For civil actions in rem, after 20 days following service of a complaint or petition for
release, the court shall examine the record and if no answer is on file, the court shall allow the
complainant or petitioner an opportunity to present evidence in support of his claim and order
forfeiture or release of the property as the court determines. If the county attorney or district
attorney has not filed an answer to a petition for release and the court determines from the evidence
that the petitioner is not entitled to recovery of the property, it shall enter an order directing the
county attorney or district attorney to answer the petition within ten days. If no answer is filed within
that period, the court shall order the release of the property to the petitioner entitled to receive it.
(g) When an answer to a complaint or petition appears of record at the end of 20 days, the
court shall set the matter for hearing. At this hearing all interested parties may present evidence of
their rights of release of the property following the state's evidence for forfeiture. The court shall
determine by a preponderance of the evidence the issues in the case and order forfeiture or release
of the property as it determines.
(h) When the court determines that claimants have no right in the property in whole or in
part, it shall declare the property to be forfeited.
(i) When the court determines that property, in whole or in part, is not subject to forfeiture,
it shall order release of the property to the proper claimant. If the court determines that the property
is subject to forfeiture and release in part, it shall order partial release and partial forfeiture. When
the property cannot be divided for partial forfeiture and release, the court shall order it sold and the
proceeds distributed:
(i) first, proportionally among the legitimate claimants;
(ii) second, to defray the costs of the action, including seizure, storage of the property, legal
costs of filing and pursuing the forfeiture, and costs of sale; and
- 26 -
(iii) third, to the Division of Finance for the General Fund.
(j) In a proceeding under this section where forfeiture is declared, in whole or in part, the
court shall assess all costs of the forfeiture proceeding, including seizure and storage of the property,
against the individual or individuals whose conduct was the basis of the forfeiture, and may assess
costs against any other claimant or claimants to the property as appropriate.
Section 15.
Section
70A-1-105
is amended to read:
70A-1-105. Territorial application of title -- Parties' power to choose applicable law.
(1) Except as provided in this section, when a transaction bears a reasonable relation to this
state and also to another state or nation, the parties may agree that the law either of this state or of
such other state or nation shall govern their rights and duties. Failing such agreement, this title
applies to transactions bearing an appropriate relation to this state.
(2) Where one of the following provisions of this title specifies the applicable law, that
provision governs and a contrary agreement is effective only to the extent permitted by the law,
including the conflict of laws rules, so specified:
(a) rights of creditors against sold goods under Section
70A-2-402
;
(b) applicability of the chapter on leases under Sections
70A-2a-105
and
70A-2a-106
;
(c) applicability of the chapter on [Bank Deposits and Collections] bank deposits and
collections under Section
70A-4-102
;
(d) applicability of the chapter on letters of credit under Section
70A-5-116
;
[(d)] (e) applicability of the chapter on [Investment Securities] investment securities under
Section
70A-8-109
; or
[(e) perfection provisions of the chapter on Secured Transactions under Section
70A-9-103
;
or]
(f) law governing perfection, the effect of perfection or nonperfection, and the priority of
security interests and agricultural liens under Sections
70A-9a-301
through
70A-9a-307
.
[(f) applicability of the chapter on Letters of Credit under Section
70A-5-116
.]
Section 16.
Section
70A-1-201
is amended to read:
70A-1-201. General definitions.
- 27 -
In addition to definitions contained in the subsequent chapters of this title and unless the
context otherwise requires, in this title:
(1) "Action" in the sense of a judicial proceeding includes recoupment, counterclaim, setoff,
suit in equity, and any other proceedings in which rights are determined.
(2) "Aggrieved party" means a party entitled to resort to a remedy.
(3) "Agreement" means the bargain of the parties in fact as found in their language or by
implication from other circumstances including course of dealing or usage of trade or course of
performance as provided in Sections
70A-1-205
and
70A-2-208
. Whether an agreement has legal
consequences is determined by the provisions of this title, if applicable; otherwise by the law of
contracts as provided in Section
70A-1-103
. Compare the definition of "contract" in Subsection (11).
(4) "Bank" means any person engaged in the business of banking.
(5) "Bearer" means the person in possession of an instrument, document of title, or
certificated security payable to bearer or indorsed in blank.
(6) "Bill of lading" means a document evidencing the receipt of goods for shipment issued
by a person engaged in the business of transporting or forwarding goods, and includes an airbill.
"Airbill" means a document serving for air transportation as a bill of lading does for marine or rail
transportation, and includes an air consignment note or air waybill.
(7) "Branch" includes a separately incorporated foreign branch of a bank.
(8) "Burden of establishing a fact" means the burden of persuading the triers of fact that the
existence of the fact is more probable than its nonexistence.
(9) "Buyer in ordinary course of business" means a person [who] that buys goods, in good
faith [and], without knowledge that the sale [to him is in violation of] violates the [ownership] rights
[or security interest] of [a third party] another person in the goods, [buys] and in the ordinary course
from a person, other than a pawnbroker, in the business of selling goods of that kind [but does not
include a pawnbroker. All persons who sell minerals or the like, including oil and gas, at wellhead
or minehead are considered to be persons]. A person buys goods in the ordinary course if the sale
to the person comports with the usual or customary practices in the kind of business in which the
seller is engaged or with the seller's own usual or customary practices. A person that sells oil, gas,
- 28 -
or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind.
["Buying"] A buyer in ordinary course of business may [be] buy for cash [or], by exchange of other
property, or on secured or unsecured credit, and [includes receiving] may acquire goods or
documents of title under a preexisting contract for sale [but does not include a transfer in bulk or as
security for or in total or partial satisfaction of a money debt]. Only a buyer that takes possession of
the goods or has a right to recover the goods from the seller under Chapter 2 may be a buyer in
ordinary course of business. A person that acquires goods in a transfer in bulk or as security for or
in total or partial satisfaction of a money debt is not a buyer in ordinary course of business.
(10) "Conspicuous" means a term or clause that is so written that a reasonable person against
whom it is to operate ought to have noticed it. A printed heading in capitals such as:
NONNEGOTIABLE BILL OF LADING is conspicuous. Language in the body of a form is
"conspicuous" if it is in larger or other contrasting type or color. In a telegram any stated term is
"conspicuous." Whether a term or clause is "conspicuous" or not is for decision by the court.
(11) "Contract" means the total legal obligation which results from the parties' agreement as
affected by this title and any other applicable rules of law. Compare the definition of "agreement" in
Subsection (3).
(12) "Creditor" includes a general creditor, a secured creditor, a lien creditor, and any
representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy,
a receiver in equity, and an executor or administrator of an insolvent debtor's or assignor's estate.
(13) "Defendant" includes a person in the position of defendant in a cross-action or
counterclaim.
(14) "Delivery" with respect to instruments, documents of title, chattel paper, or certificated
securities means voluntary transfer of possession.
(15) "Document of title" includes bill of lading, dock warrant, dock receipt, warehouse
receipt, or order for the delivery of goods, and also any other document which in the regular course
of business or financing is treated as adequately representing that the person in possession of it is
entitled to receive, hold and dispose of the document and the goods it covers. To be a document of
title, a document must purport to be issued by or addressed to a bailee and purport to cover goods
- 29 -
in the bailee's possession which are either identified or are fungible portions of an identified mass.
(16) "Fault" means wrongful act, omission, or breach.
(17) "Fungible" with respect to goods or securities means goods or securities of which any
unit is, by nature or usage of trade, the equivalent of any other like unit. Goods which are not
fungible are considered fungible for the purposes of this title to the extent that under a particular
agreement or document unlike units are treated as equivalents.
(18) "Genuine" means free of forgery or counterfeiting.
(19) "Good faith" means honesty in fact in the conduct or transaction concerned.
(20) "Holder" with respect to a negotiable instrument, certificated security, or document of
title means the person in possession if:
(a) in the case of a negotiable instrument payable to bearer or to an identified person, the
identified person is in possession;
(b) in the case of a security, the person in possession is the registered owner, or the security
has been indorsed to the person in possession by the registered owner, or the security is in bearer
form; or
(c) in the case of a document of title, the goods are deliverable to bearer or to the order of
the person in possession.
(21) To "honor" is to pay or to accept and pay, or where a credit so engages to purchase or
discount a draft complying with the terms of the credit.
(22) "Insolvency proceedings" includes any assignment for the benefit of creditors or other
proceedings intended to liquidate or rehabilitate the estate of the person involved.
(23) A person is "insolvent" who either has ceased to pay his debts in the ordinary course of
business or cannot pay his debts as they become due or if he is insolvent within the meaning of the
federal bankruptcy law.
(24) "Money" means a medium of exchange authorized or adopted by a domestic or foreign
government or intergovernmental organization and includes a monetary unit of account established
by an intergovernmental organization or by agreement between two or more nations.
(25) (a) A person has "notice" of a fact when:
- 30 -
(i) he has actual knowledge of it;
(ii) he has received a notice or notification of it; or
(iii) from all the facts and circumstances known to him at the time in question he has reason
to know that it exists.
(b) A person "knows" or has "knowledge" of a fact when he has actual knowledge of it.
(c) "Discover" or "learn" or a word or phrase of similar import refers to knowledge rather
than to reason to know.
(d) The time and circumstances under which a notice or notification may cease to be effective
are not determined by this title.
(26) (a) A person "notifies" or "gives" a notice or notification to another by taking such steps
as may be reasonably required to inform the other person in ordinary course whether or not the other
person actually comes to know of it.
(b) A person "receives" a notice or notification when:
(i) it comes to his attention; or
(ii) it is duly delivered at the place of business through which the contract was made or at any
other place held out by him as the place for receipt of such communications.
(27) Notice, knowledge of a notice, or notification received by an organization is effective
for a particular transaction from the time when it is brought to the attention of the individual
conducting that transaction, and in any event from the time when it would have been brought to his
attention if the organization had exercised due diligence. An organization exercises due diligence if
it maintains reasonable routines for communicating significant information to the person conducting
the transaction and there is reasonable compliance with the routines. Due diligence does not require
an individual acting for the organization to communicate information unless such communication is
part of his regular duties or unless he has reason to know of the transaction and that the transaction
would be materially affected by the information.
(28) "Organization" includes a corporation, government or governmental subdivision or
agency, business trust, estate, trust, partnership or association, two or more persons having a joint
or common interest, or any other legal or commercial entity.
- 31 -
(29) "Party," as distinct from "third party," means a person who has engaged in a transaction
or made an agreement within this title.
(30) "Person" includes an individual or an organization as provided in Section
70A-1-102
.
(31) "Presumption" or "presumed" means that the trier of fact must find the existence of the
fact presumed unless and until evidence is introduced which would support a finding of its
nonexistence.
(32) "Purchase" includes taking by sale, discount, negotiation, mortgage, pledge, lien,
security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in
property.
(33) "Purchaser" means a person who takes by purchase.
(34) "Remedy" means any remedial right to which an aggrieved party is entitled with or
without resort to a tribunal.
(35) "Representative" includes an agent, an officer of a corporation or association, and a
trustee, executor, or administrator of an estate, or any other person empowered to act for another.
(36) "Rights" includes remedies.
(37) (a) "Security interest" means an interest in personal property or fixtures which secures
payment or performance of an obligation. [The retention or reservation of title by a seller of goods,
notwithstanding shipment or delivery to the buyer as provided in Section
70A-2-401
, is limited in
effect to a reservation of a "security interest."] The term also includes any interest of a consignor and
a buyer of accounts [or], chattel paper [which], a payment intangible, or a promissory note in a
transaction that is subject to Title 70A, Chapter 9a, Uniform Commercial Code -- Secured
Transactions. The special property interest of a buyer of goods on identification of those goods to
a contract for sale under Section
70A-2-401
is not a "security interest," but a buyer may also acquire
a "security interest" by complying with Title 70A, Chapter 9a, Uniform Commercial Code -- Secured
Transactions. [Unless a consignment is intended as security, reservation of title under the
consignment is not a "security interest." A consignment in any event is subject to the provisions on
consignment sales provided in Section
70A-2-326
.] Except as otherwise provided in Section
70A-2-505
, the right of a seller or lessor of goods under Chapter 2 or 2A to retain or acquire
- 32 -
possession of the goods is not a "security interest," but a seller or lessor may also acquire a "security
interest" by complying with Chapter 9a, Uniform Commercial Code -- Secured Transactions. The
retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer
(Section
70A-2-401
) is limited in effect to a reservation of a "security interest." Notwithstanding
anything in Title 70A to the contrary, "security interest" does not include a rental purchase agreement
as defined in Section
15-8-3
.
(b) Whether a transaction creates a lease or security interest is determined by the facts of each
case; however, a transaction creates a security interest if the consideration the lessee is to pay the
lessor for the right to possession and use of the goods is an obligation for the term of the lease not
subject to termination by the lessee, and:
(i) the original term of the lease is equal to or greater than the remaining economic life of the
goods;
(ii) the lessee is bound to renew the lease for the remaining economic life of the goods or is
bound to become the owner of the goods;
(iii) the lessee has an option to renew the lease for the remaining economic life of the goods
for no additional consideration or nominal additional consideration upon compliance with the lease
agreement; or
(iv) the lessee has an option to become the owner of the goods for no additional
consideration or nominal additional consideration upon compliance with the lease agreement.
(c) A transaction does not create a security interest merely because it provides that:
(i) the present value of the consideration the lessee is obligated to pay the lessor for the right
to possession and use of the goods is substantially equal to or is greater than the fair market value of
the goods at the time the lease is entered into;
(ii) the lessee assumes risk of loss of the goods, or agrees to pay taxes, insurance, filing,
recording, or registration fees, or service or maintenance costs with respect to the goods;
(iii) the lessee has an option to renew the lease or to become the owner of the goods;
(iv) the lessee has an option to renew the lease for a fixed rent that is equal to or greater than
the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the
- 33 -
time the option is to be performed; or
(v) the lessee has an option to become the owner of the goods for a fixed price that is equal
to or greater than the reasonably predictable fair market value of the goods at the time the option is
to be performed.
(d) For purposes of this subsection:
(i) Additional consideration is not nominal if, when the option to renew the lease is granted
to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the
renewal determined at the time the option is to be performed, or when the option to become the
owner of the goods is granted to the lessee the price is stated to be the fair market value of the goods
determined at the time the option is to be performed.
(ii) Additional consideration is nominal if it is less than the lessee's reasonably predictable cost
of performing under the lease agreement if the option is not exercised.
(iii) "Reasonably predictable" and "remaining economic life of the goods" are to be
determined with reference to the facts and circumstances at the time the transaction is entered into.
(iv) "Present value" means the amount as of a date certain of one or more sums payable in
the future, discounted to the date certain. The discount is determined by the interest rate specified
by the parties if the rate is not manifestly unreasonable at the time the transaction is entered into;
otherwise, the discount is determined by a commercially reasonable rate that takes into account the
facts and circumstances of each case at the time the transaction was entered into.
(38) "Send" in connection with any writing or notice means to deposit in the mail or deliver
for transmission by any other usual means of communication with postage or the cost of the
transmission provided for and properly addressed, and, in the case of an instrument, to an address
specified thereon or otherwise agreed, or if there be none to any address reasonable under the
circumstances. The receipt of any writing or notice within the time at which it would have arrived
if properly sent has the effect of a proper sending.
(39) "Signed" includes any symbol executed or adopted by a party with present intention to
authenticate a writing.
(40) "Surety" includes guarantor.
- 34 -
(41) "Telegram" includes a message transmitted by radio, teletype, cable, any mechanical
method of transmission, or the like.
(42) "Term" means that portion of an agreement which relates to a particular matter.
(43) "Unauthorized signature" means one made without actual, implied, or apparent authority
and includes a forgery.
(44) "Value." Except as otherwise provided with respect to negotiable instruments and bank
collections as in Sections
70A-3-303
,
70A-4-210
, and
70A-4-211
, a person gives "value" for rights
if he acquires them:
(a) in return for a binding commitment to extend credit or for the extension of immediately
available credit whether or not drawn upon and whether or not a charge-back is provided for in the
event of difficulties in collection;
(b) as security for or in total or partial satisfaction of a preexisting claim;
(c) by accepting delivery pursuant to a preexisting contract for purchase; or
(d) generally, in return for any consideration sufficient to support a simple contract.
(45) "Warehouse receipt" means a receipt issued by a person engaged in the business of
storing goods for hire.
(46) "Written" or "writing" includes printing, typewriting, or any other intentional reduction
to tangible form.
Section 17.
Section
70A-1-206
is amended to read:
70A-1-206. Statute of frauds for kinds of personal property not otherwise covered.
(1) Except in the cases described in Subsection (2) of this section, a contract for the sale of
personal property is not enforceable by way of action or defense beyond $5,000 in amount or value
of remedy unless there is some writing which indicates that a contract for sale has been made between
the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the
party against whom enforcement is sought or by his authorized agent.
(2) Subsection (1) of this section does not apply to contracts for the sale of goods (Section
70A-2-201
) nor of securities (Section
70A-8-112
) nor to security agreements (Section [
70A-9-203
]
70A-9a-203
).
- 35 -
Section 18.
Section
70A-2-103
is amended to read:
70A-2-103. Definitions and index of definitions.
(1) In this chapter unless the context otherwise requires:
(a) "Buyer" means a person who buys or contracts to buy goods.
(b) "Good faith" in the case of a merchant means honesty in fact and the observance of
reasonable commercial standards of fair dealing in the trade.
(c) "Receipt" of goods means taking physical possession of them.
(d) "Seller" means a person who sells or contracts to sell goods.
(2) Other definitions applying to this chapter or to specified parts thereof, and the sections
in which they appear are:
(a) "Acceptance." Section
70A-2-606
.
(b) "Banker's credit." Section
70A-2-325
.
(c) "Between merchants." Section
70A-2-104
.
(d) "Cancellation." Subsection
70A-2-106
(4).
(e) "Commercial unit." Section
70A-2-105
.
(f) "Confirmed credit." Section
70A-2-325
.
(g) "Conforming to contract." Section
70A-2-106
.
(h) "Contract for sale." Section
70A-2-106
.
(i) "Cover." Section
70A-2-712
.
(j) "Entrusting." Section
70A-2-403
.
(k) "Financing agency." Section
70A-2-104
.
(l) "Future goods." Section
70A-2-105
.
(m) "Goods." Section
70A-2-105
.
(n) "Identification." Section
70A-2-501
.
(o) "Installment contract." Section
70A-2-612
.
(p) "Letter of Credit." Section
70A-2-325
.
(q) "Lot." Section
70A-2-105
.
(r) "Merchant." Section
70A-2-104
.
- 36 -
(s) "Overseas." Section
70A-2-323
.
(t) "Person in position of seller." Section
70A-2-707
.
(u) "Present sale." Section
70A-2-106
.
(v) "Sale." Section
70A-2-106
.
(w) "Sale on approval." Section
70A-2-326
.
(x) "Sale or return." Section
70A-2-326
.
(y) "Termination." Section
70A-2-106
.
(3) The following definitions in other chapters apply to this chapter:
(a) "Check." Section
70A-3-104
.
(b) "Consignee." Section
70A-7-102
.
(c) "Consignor." Section
70A-7-102
.
(d) "Consumer goods." Section [
70A-9-109
]
70A-9a-102
.
(e) "Dishonor." Section
70A-3-502
.
(f) "Draft." Section
70A-3-104
.
(4) In addition Chapter 1 contains general definitions and principles of construction and
interpretation applicable throughout this chapter.
Section 19.
Section
70A-2-210
is amended to read:
70A-2-210. Delegation of performance -- Assignment of rights.
(1) A party may perform his duty through a delegate unless otherwise agreed or unless the
other party has a substantial interest in having his original promisor perform or control the acts
required by the contract. No delegation of performance relieves the party delegating of any duty to
perform or any liability for breach.
(2) [Unless] Except as otherwise provided in Section
70A-9a-406
, unless otherwise agreed,
all rights of either seller or buyer can be assigned except where the assignment would materially
change the duty of the other party, or increase materially the burden or risk imposed on him by his
contract, or impair materially his chance of obtaining return performance. A right to damages for
breach of the whole contract or a right arising out of the assignor's due performance of his entire
obligation can be assigned despite agreement otherwise.
- 37 -
(3) The creation, attachment, perfection, or enforcement of a security interest in the seller's
interest under a contract is not a transfer that materially changes the duty of or increases materially
the burden or risk imposed on the buyer or impairs materially the buyer's chance of obtaining return
performance within the purview of Subsection (2) unless, and then only to the extent that,
enforcement actually results in a delegation of material performance of the seller. Even in that event,
the creation, attachment, perfection, and enforcement of the security interest remain effective, but:
(a) the seller is liable to the buyer for damages caused by the delegation to the extent that the
damages could not reasonably be prevented by the buyer; and
(b) a court having jurisdiction may grant other appropriate relief, including cancellation of
the contract for sale or an injunction against enforcement of the security interest or consummation
of the enforcement.
[(3)] (4) Unless the circumstances indicate the contrary a prohibition of assignment of "the
contract" is to be construed as barring only the delegation of (to) the assignee of the assignor's
performance.
[(4)] (5) An assignment of "the contract" or of "all my rights under the contract" or an
assignment in similar general terms is an assignment of rights and unless the language or the
circumstances (as in an assignment of (for) security) indicate the contrary, it is a delegation of
performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by
him to perform those duties. This promise is enforceable by either the assignor or the other party to
the original contract.
[(5)] (6) The other party may treat any assignment which delegates performance as creating
reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand
assurances from the assignee (Section
70A-2-609
).
Section 20.
Section
70A-2-326
is amended to read:
70A-2-326. Sale on approval and sale or return -- Rights of creditors.
(1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though
they conform to the contract, the transaction is:
(a) a "sale on approval" if the goods are delivered primarily for use[,]; and
- 38 -
(b) a "sale or return" if the goods are delivered primarily for resale.
(2) [Except as provided in Subsection (3), goods] Goods held on approval are not subject
to the claims of the buyer's creditors until acceptance; goods held on sale or return are subject to such
claims while in the buyer's possession.
[(3) Where goods are delivered to a person for sale and such person maintains a place of
business at which he deals in goods of the kind involved, under a name other than the name of the
person making delivery then with respect to claims of creditors of the person conducting the business
the goods are deemed to be on sale or return. The provisions of this subsection are applicable even
though an agreement purports to reserve title to the person making delivery until payment or resale
or uses such words as "on consignment" or "on memorandum." However, this subsection is not
applicable if the person making delivery]
[(a) complies with an applicable law providing for a consignor's interest or the like to be
evidenced by a sign, or]
[(b) establishes that the person conducting the business is generally known by his creditors
to be substantially engaged in selling the goods of others, or]
[(c) complies with the filing provisions of the chapter on Secured Transactions (Chapter 9).]
[(4)] (3) Any "or return" term of a contract for sale is to be treated as a separate contract for
sale within the statute of frauds section of this chapter (Section
70A-2-201
) and as contradicting the
sale aspect of the contract within the provisions of this chapter on parol or extrinsic evidence (Section
70A-2-202
).
Section 21.
Section
70A-2-502
is amended to read:
70A-2-502. Buyer's right to goods on seller's repudiation, failure to deliver, or
insolvency.
(1) Subject to [Subsection] Subsections (2) and (3) and even though the goods have not been
shipped a buyer who has paid a part or all of the price of goods in which he has a special property
under the provisions of the immediately preceding section may on making and keeping good a tender
of any unpaid portion of their price recover them from the seller if:
(a) in the case of goods bought for personal, family, or household purposes, the seller
- 39 -
repudiates or fails to deliver as required by the contract; or
(b) in all cases, the seller becomes insolvent within ten days after receipt of the first
installment on their price.
(2) The buyer's right to recover the goods under Subsection (1)(a) vests upon acquisition
of a special property, even if the seller had not then repudiated or failed to deliver.
[(2)] (3) If the identification creating his special property has been made by the buyer he
acquires the right to recover the goods only if they conform to the contract for sale.
Section 22.
Section
70A-2-716
is amended to read:
70A-2-716. Buyer's right to specific performance or replevin.
(1) Specific performance may be decreed where the goods are unique or in other proper
circumstances.
(2) The decree for specific performance may include such terms and conditions as to payment
of the price, damages, or other relief as the court may deem just.
(3) The buyer has a right of replevin for goods identified to the contract if after reasonable
effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such
effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the
security interest in them has been made or tendered. In the case of goods bought for personal, family,
or household purposes, the buyer's right of replevin vests upon acquisition of a special property, even
if the seller had not then repudiated or failed to deliver.
Section 23.
Section
70A-2a-103
is amended to read:
70A-2a-103. Definitions -- Index of definitions.
(1) In this chapter, unless the context otherwise requires:
(a) "Buyer in ordinary course of business" means a person, who in good faith and without
knowledge that the sale to him is in violation of the ownership rights or security interest or leasehold
interest of a third party in the goods, buys in ordinary course from a person in the business of selling
goods of that kind, but does not include a pawnbroker. "Buying" may be for cash or by exchange of
other property or on secured or unsecured credit and includes receiving goods or documents of title
under a preexisting contract for sale, but does not include a transfer in bulk, or as security for, or in
- 40 -
total or partial satisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an end to the lease contract for default by
the other party.
(c) "Commercial unit" means a unit of goods which by commercial usage is a single whole
for purposes of lease, and the division of which materially impairs its character or value on the market
or in use. A commercial unit may be a single article, such as a machine, or a set of articles, such as
a suite of furniture or a line of machinery, or a quantity, such as a gross or carload, or any other unit
treated in use or in the relevant market as a single whole.
(d) "Conforming goods or performance under a lease contract" means goods or performance
that are in accordance with the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor, regularly engaged in the business of leasing
or selling, makes to a lessee, who is an individual and who takes under the lease primarily for a
personal, family, or household purpose.
(f) "Fault" means wrongful act, omission, breach, or default.
(g) "Finance lease" means a lease in which:
(i) the lessor does not select, manufacture, or supply the goods;
(ii) the lessor acquires the goods or the right to possession and use of the goods in
connection
with the lease; and
(iii) one of the following occurs:
(A) the lessee receives a copy of the contract by which the lessor acquired the goods or the
right to possession and use of the goods before signing the lease contract;
(B) the lessee's approval of the contract by which the lessor acquired the goods or the right
to possession and use of the goods is a condition to effectiveness of the lease contract;
(C) the lessee, before signing the lease contract, receives an accurate and complete statement
designating the promises and warranties, and any disclaimers of warranties, limitations, or
modifications of remedies, or liquidated damages, including those of a third party, such as the
manufacturer of the goods, provided to the lessor by the person supplying the goods in connection
with or as part of the contract by which the lessor acquired the goods or the right to possession and
- 41 -
use of the goods; or
(D) if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract,
informs the lessee in writing:
(I) of the identity of the person supplying the goods to the lessor, unless the lessee has
selected that person and directed the lessor to acquire the goods or the right to possession and use
of the goods from that person;
(II) that the lessee is entitled under this chapter to the promises and warranties, including
those of any third party, provided to the lessor by the person supplying the goods in connection with
or as part of the contract by which the lessor acquired the goods or the right to possession and use
of the goods; and
(III) that the lessee may communicate with the person supplying the goods to the lessor and
receive an accurate and complete statement of those promises and warranties, including any
disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of identification to the lease
contract, or are fixtures. The term does not include money, documents, instruments, accounts,
chattel
paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term
also includes the unborn young of animals.
(i) "Installment lease contract" means a lease contract that authorizes or requires the delivery
of goods in separate lots to be separately accepted, even though the lease contract contains a clause
stating "each delivery is a separate lease" or its equivalent.
(j) "Lease" means a transfer of the right to possession and use of goods for a term, in return
for consideration. Unless the context clearly indicates otherwise, the term includes a sublease. But
a sale, including a sale on approval or a sale or return, or retention or creation of a security interest
is not a lease.
(k) "Lease agreement" with respect to the lease, means the bargain of the lessor and the
lessee in fact as found in their language or by implication from other circumstances including course
of dealing or usage of trade or course of performance as provided in this chapter. Unless the context
clearly indicates otherwise, the term includes a sublease agreement.
- 42 -
(l) "Lease contract" means the total legal obligation that results from the lease agreement as
affected by this chapter and any other applicable rules of law. Unless the context clearly indicates
otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to possession and use of goods under a
lease. Unless the context clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person who in good faith and without
knowledge that the lease to him is in violation of the ownership rights, security interest, or leasehold
interest of a third party in the goods, leases in ordinary course from a person in the business of selling
or leasing goods of that kind, but does not include a pawnbroker. "Leasing" may be for cash or by
exchange of other property, or on secured or unsecured credit, and includes receiving goods or
documents of title under a preexisting lease contract. "Leasing" does not include a transfer in bulk
or as security for or in total or partial satisfaction of a money debt.
(p) "Lessor" means a person who transfers the right to possession and use of goods under
a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's interest in the goods after expiration,
termination, or cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods to secure payment of a debt or
performance of an obligation, but the term does not include a security interest.
(s) "Lot" means a parcel or single article that is the subject matter of a separate lease or
delivery, whether or not it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant with respect to goods of the kind
subject to the lease.
(u) "Present value" means the amount as of a date certain of one or more sums payable in the
future, discounted to the date certain. The discount is determined by the interest rate specified by the
parties if the rate was not manifestly unreasonable at the time the transaction was entered into;
otherwise, the discount is determined by a commercially reasonable rate that takes into account the
facts and circumstances of each case at the time the transaction was entered into.
- 43 -
(v) "Purchase" includes taking by sale, lease, mortgage, security interest, pledge, gift, or any
other voluntary transaction creating an interest in goods.
(w) "Sublease" means a lease of goods, the right to possession and use of which was acquired
by the lessor as a lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys or leases goods to be leased under
a finance lease.
(y) "Supply contract" means a contract under which a lessor buys or leases goods to be
leased.
(z) "Termination" occurs when either party, pursuant to a power created by agreement or
law, puts an end to the lease contract otherwise than for default.
(2) Other definitions applying to this chapter and the sections in which they appear are:
(a) "Accessions," Section
70A-2a-310
;
(b) "Construction mortgage," Section
70A-2a-309
;
(c) "Encumbrance," Section
70A-2a-309
;
(d) "Fixtures," Section
70A-2a-309
;
(e) "Fixture filing," Section
70A-2a-309
; and
(f) "Purchase money lease," Section
70A-2a-309
.
(3) The following definitions in other chapters apply to this chapter:
(a) "Account," [Section
70A-9-106
] Subsection
70A-9a-102
(2);
(b) "Between merchants," Section
70A-2-104
;
(c) "Buyer," Section
70A-2-103
;
(d) "Chattel paper," [Section
70A-9-105
] Subsection
70A-9a-102
(11);
(e) "Consumer goods," [Section
70A-9-109
] Subsection
70A-9a-102
(23);
(f) "Document," [Section
70A-9-105
] Subsection
70A-9a-102
(30);
(g) "Entrusting," Section
70A-2-403
;
(h) "General [intangibles] intangible," [Section
70A-9-106
] Subsection
70A-9a-102
(42);
(i) "Good faith," Section
70A-2-103
;
(j) "Instrument," [Section
70A-9-105
] Subsection
70A-9a-102
(47);
- 44 -
(k) "Merchant," Section
70A-2-104
;
(l) "Mortgage," [Section
70A-9-105
] Subsection
70A-9a-102
(55);
(m) "Pursuant to commitment," [Section
70A-9-105
] Subsection
70A-9a-102
(68);
(n) "Receipt," Section
70A-2-103
;
(o) "Sale," Section
70A-2-106
;
(p) "Sale on approval," Section
70A-2-326
;
(q) "Sale or return," Section
70A-2-326
; and
(r) "Seller," Section
70A-2-103
.
(4) In addition, Title 70A, Chapter 1, Uniform Commercial Code -- General Provisions,
contains general definitions and principles of construction and interpretation applicable throughout
this chapter.
Section 24.
Section
70A-2a-303
is amended to read:
70A-2a-303. Transfer of party's interest under lease contract or of lessor's residual
interest in goods -- Transfer as event of default -- Creation or enforcement of security interest
-- Transfer of right to damages for default.
(1) As used in this section, "creation of a security interest" includes the sale of a lease
contract subject to Title 70A, Chapter 9a, Uniform Commercial Code -- Secured Transactions, by
reason of [Section
70A-9-102
] Subsection
70A-9a-109
(1)(c).
(2) Except as provided in [Subsections] Subsection (3) and [(4)] Section
70A-9a-407
, a
provision in a lease agreement that prohibits the voluntary or involuntary transfer (including a transfer
by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial
process) of an interest of a party under the lease contract or of the lessor's residual interest in the
goods, or that makes such a transfer an event of default, gives rise to the rights and remedies
provided in Subsection [(5)] (4), but a transfer that is prohibited or is an event of default under the
lease agreement is otherwise effective.
[(3) A provision in a lease agreement that either prohibits the creation or enforcement of a
security interest in an interest of a party under the lease contract or in the lessor's residual interest in
the goods, or makes such a transfer an event of default, is not enforceable unless, and then only to
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the extent that, there is an actual transfer by the lessee of the lessee's right of possession or use of the
goods in violation of the provision, or an actual delegation of a material performance of either party
to the lease contract in violation of the provision. Neither the granting nor the enforcement of a
security interest in either the lessor's interest under the lease contract or the lessor's residual interest
in the goods is a transfer that materially impairs the prospect of obtaining return performance by,
materially changes the duty of, or materially increases the burden or risk imposed on, the lessee within
the purview of Subsection (5) unless, and then only to the extent that, there is an actual delegation
of a material performance of the lessor.]
[(4)] (3) A provision in a lease agreement that prohibits a transfer of a right to damages for
default with respect to the whole lease contract or of a right to payment arising out of the transferor's
due performance of the transferor's entire obligation, or makes such a transfer an event of default, is
not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining
return performance by, materially changes the duty of, or materially increases the burden or risk
imposed on, the other party to the lease contract within the purview of Subsection [(5)] (4).
[(5)] (4) Subject to [Subsections] Subsection (3) and [(4)] Section
70A-9a-407
:
(a) if a transfer is made that is made an event of default under a lease agreement, the party
to the lease contract not making the transfer, unless that party waives the default or otherwise agrees,
has the rights and remedies described in Section
70A-2a-501
; and
(b) if Subsection [(5)] (4)(a) is not applicable and if a transfer is made that is prohibited under
a lease agreement, or materially impairs the prospect of obtaining return performance by, materially
changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease
contract, unless the party not making the transfer agrees at any time to the transfer in the lease
contract or otherwise, then, except as limited by contract, the transferor is liable to the party not
making the transfer for damages caused by the transfer to the extent that the damages could not
reasonably be prevented by the party not making the transfer, and a court having jurisdiction may
grant other appropriate relief, including cancellation of the lease contract or an injunction against the
transfer.
[(6)] (5) A transfer of "the lease" or of "all my rights under the lease" or a transfer in similar
- 46 -
general terms, is a transfer of rights, and unless the language or the circumstances, as in a transfer for
security, indicate the contrary, the transfer is a delegation of duties by the transferor to the transferee.
Acceptance by the transferee constitutes a promise by the transferee to perform those duties. The
promise is enforceable by either the transferor or the other party to the lease contract.
[(7)] (6) Unless otherwise agreed by the lessor and the lessee, a delegation of performance
does not relieve the transferor as against the other party of any duty to perform or any liability for
default.
[(8)] (7) In a consumer lease, to prohibit the transfer of an interest of a party under the lease
contract, or to make a transfer an event of default, the language must be specific, by writing, and
conspicuous.
Section 25.
Section
70A-2a-307
is amended to read:
70A-2a-307. Priority of liens arising by attachment or levy on, security interests in,
and other claims to goods.
(1) Except as otherwise provided in Section
70A-2a-306
, a creditor of a lessee takes subject
to the lease contract.
(2) Except as otherwise provided in [Subsections] Subsection (3) [and (4)] and in Sections
70A-2a-306
and
70A-2a-308
, a creditor of a lessor takes subject to the lease contract unless[: (a)]
the creditor holds a lien that attached to the goods before the lease contract became enforceable[;].
[(b) the creditor holds a security interest in the goods and the lessee did not give value and
receive delivery of the goods without knowledge of the security interest; or]
[(c) the creditor holds a security interest in the goods that was perfected before the lease
contract became enforceable.]
[(3) A lessee in the ordinary course of business takes the leasehold interest free of a security
interest in the goods created by the lessor even though the security interest is perfected and the lessee
knows of its existence.]
[(4) A lessee other than a lessee in the ordinary course of business takes the leasehold interest
free of a security interest to the extent that it secures future advances made after the secured party
acquires knowledge of the lease or more than 45 days after the lease contract becomes enforceable,
- 47 -
whichever first occurs, unless the future advances are made pursuant to a commitment entered into
without knowledge of the lease and before the expiration of the 45-day period.]
(3) Except as otherwise provided in Sections
70A-9a-317
,
70A-9a-321
, and
70A-9a-323
,
a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.
Section 26.
Section
70A-2a-309
is amended to read:
70A-2a-309. Lessor's and lessee's rights when goods become fixtures.
(1) In this section:
(a) goods are "fixtures" when they become so related to particular real estate that an interest
in them arises under real estate law;
(b) a "fixture filing" is the filing, in the office where a record of a mortgage on the real estate
would be filed, recorded, or registered, of a financing statement covering goods that are or are to
become fixtures and conforming to the requirements of [Subsection
70A-9-402
(5)] Subsections
70A-9a-502
(1) and (2);
(c) a lease is a "purchase money lease" unless the lessee has possession or use of the goods
or the right to possession or use of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent it secures an obligation incurred
for the construction of an improvement on land including the acquisition cost of the land, if the
recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other liens on real estate and all other
rights in real estate that are not ownership interests.
(2) Under this chapter, a lease may be of goods that are fixtures or may continue in goods
that become fixtures, but no lease exists under this chapter of ordinary building materials incorporated
into an improvement on land.
(3) This chapter does not prevent creation of a lease of fixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an
encumbrancer or owner of the real estate if:
(a) the lease is a purchase money lease, the conflicting interest of the encumbrancer or owner
arises before the goods become fixtures, a fixture filing covering the fixtures is filed or recorded
- 48 -
before the goods become fixtures or within ten days thereafter, and the lessee has an interest of
record
in the real estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture filing before the interest of the
encumbrancer or owner is of record, the lessor's interest has priority over any conflicting interest of
a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real
estate or is in possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected, has priority over the
conflicting interest of an encumbrancer or owner of the real estate if:
(a) the fixtures are readily removable factory or office machines, readily removable equipment
that is not primarily used or leased for use in the operation of the real estate, or readily removable
replacements of domestic appliances that are goods subject to a consumer lease, and before the goods
become fixtures the lease contract is enforceable;
(b) the conflicting interest is a lien on the real estate obtained by legal or equitable
proceedings after the lease contract is enforceable;
(c) the encumbrancer or owner has consented in writing to the lease or has disclaimed an
interest in the goods as fixtures; or
(d) the lessee has a right to remove the goods as against the encumbrancer or owner. If the
lessee's right to remove terminates, the priority of the interest of the lessor continues for a reasonable
time.
(6) Notwithstanding Subsection (4)(a), but otherwise subject to Subsections (4) and (5), the
interest of a lessor of fixtures is subordinate to the conflicting interest of an encumbrancer of the real
estate under a construction mortgage recorded before the goods become fixtures if the goods become
fixtures before the completion of the construction. To the extent given to refinance a construction
mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this
priority to the same extent as the encumbrancer of the real estate under the construction mortgage.
(7) In cases not within the preceding subsections, priority between the interest of a lessor of
fixtures, including the lessor's residual interest, and the conflicting interest of an encumbrancer or
owner of the real estate who is not the lessee is determined by the priority rules governing conflicting
- 49 -
interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor's residual interest, has priority
over all conflicting interests of all owners and encumbrances of the real estate, the lessor or the lessee
may:
(a) on default, expiration, termination, or cancellation of the lease agreement but subject to
the lease agreement and this chapter; or
(b) if necessary to enforce other rights and remedies of the lessor or lessee under this chapter,
remove the goods from the real estate, free and clear of all conflicting interests of all owners and
encumbrances of the real estate, but the lessor or lessee must reimburse any encumbrancer or owner
of the real estate who is not the lessee and who has not otherwise agreed for the cost of repair of any
physical injury, but not for any diminution in value of the real estate caused by the absence of the
goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse
permission to remove the goods until the party seeking removal gives adequate security for the
performance of this obligation.
(9) Even though the lease agreement does not create a security interest, the interest of a
lessor of fixtures, including the lessor's residual interest, is perfected by filing a financing statement
as a fixture filing for leased goods that are or are to become fixtures in accordance with the relevant
provisions of Title 70A, Chapter 9a, Uniform Commercial Code -- Secured Transactions.
Section 27.
Section
70A-3-605
is amended to read:
70A-3-605. Discharge of indorsers and accommodation parties.
(1) In this section, the term "indorser" includes a drawer having the obligation described in
Subsection
70A-3-414
(4).
(2) Discharge, under Section
70A-3-604
, of the obligation of a party to pay an instrument
does not discharge the obligation of an indorser or accommodation party having a right of recourse
against the discharged party.
(3) If a person entitled to enforce an instrument agrees, with or without consideration, to an
extension of the due date of the obligation of a party to pay the instrument, the extension discharges
an indorser or accommodation party having a right of recourse against the party whose obligation is
- 50 -
extended to the extent the indorser or accommodation party proves that the extension caused loss
to the indorser or accommodation party with respect to the right of recourse.
(4) If a person entitled to enforce an instrument agrees, with or without consideration, to a
material modification of the obligation of a party other than an extension of the due date, the
modification discharges the obligation of an indorser or accommodation party having a right of
recourse against the person whose obligation is modified to the extent the modification causes loss
to the indorser or accommodation party with respect to the right of recourse. The loss suffered by
the indorser or accommodation party as a result of the modification is equal to the amount of the right
of recourse unless the person enforcing the instrument proves that no loss was caused by the
modification or that the loss caused by the modification was an amount less than the amount of the
right of recourse.
(5) If the obligation of a party to pay an instrument is secured by an interest in collateral and
a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation
of an indorser or accommodation party having a right of recourse against the obligor is discharged
to the extent of the impairment. The value of an interest in collateral is impaired to the extent the
value of the interest is reduced to an amount less than the amount of the right of recourse of the party
asserting discharge, or the reduction in value of the interest causes an increase in the amount by which
the amount of the right of recourse exceeds the value of the interest. The burden of proving
impairment is on the party asserting discharge.
(6) If the obligation of a party is secured by an interest in collateral not provided by an
accommodation party and a person entitled to enforce the instrument impairs the value of the interest
in collateral, the obligation of any party who is jointly and severally liable with respect to the secured
obligation is discharged to the extent the impairment causes the party asserting discharge to pay more
than that party would have been obliged to pay, taking into account rights of contribution, if
impairment had not occurred. If the party asserting discharge is an accommodation party not entitled
to discharge under Subsection (5), the party is deemed to have a right to contribution based on joint
and several liability rather than a right to reimbursement. The burden of proving impairment is on the
party asserting discharge.
- 51 -
(7) Under Subsection (5) or (6), impairing value of an interest in collateral includes failure
to obtain or maintain perfection or recordation of the interest in collateral, release of collateral
without substitution of collateral of equal value, failure to perform a duty to preserve the value of
collateral owed, under Title 70A, Chapter 9a, Uniform Commercial Code -- Secured Transactions,
or other law, to a debtor or surety or other person secondarily liable, or failure to comply with
applicable law in disposing of collateral.
(8) An accommodation party is not discharged under Subsection (3), (4), or (5) unless the
person entitled to enforce the instrument knows of the accommodation or has notice under
Subsection
70A-3-419
(3) that the instrument was signed for accommodation.
(9) A party is not discharged under this section if the party asserting discharge consents to
the event or conduct that is the basis of the discharge, or the instrument or a separate agreement of
the party provides for waiver of discharge under this section either specifically or by general language
indicating that parties waive defenses based on suretyship or impairment of collateral.
Section 28.
Section
70A-4-210
is amended to read:
70A-4-210. Security interest of collecting bank in items, accompanying documents,
and
proceeds.
(1) A collecting bank has a security interest in an item and any accompanying documents or
the proceeds of either:
(a) in case of an item deposited in an account, to the extent to which credit given for the item
has been withdrawn or applied;
(b) in case of an item for which it has given credit available for withdrawal as of right, to the
extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back;
or
(c) if it makes an advance on or against the item.
(2) If credit given for several items received at one time or pursuant to a single agreement
is withdrawn or applied in part, the security interest remains upon all the items, any accompanying
documents or the proceeds of either. For the purpose of this section, credits first given are first
withdrawn.
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(3) Receipt by a collecting bank of a final settlement for an item is a realization on its security
interest in the item, accompanying documents, and proceeds. So long as the bank does not receive
final settlement for the item or give up possession of the item or accompanying documents for
purposes other than collection, the security interest continues to that extent and is subject to Title
70A, Chapter 9a, Uniform Commercial Code -- Secured Transactions, but:
(a) no security agreement is necessary to make the security interest enforceable, Subsection
[
70A-9-203
(1)(a)]
70A-9a-203
(2)(c)(i);
(b) no filing is required to perfect the security interest; and
(c) the security interest has priority over conflicting perfected security interests in the item,
accompanying documents, or proceeds.
Section 29.
Section
70A-5-114
is amended to read:
70A-5-114. Assignment of proceeds.
(1) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or
other item of value paid or delivered upon honor or giving of value by the issuer or any nominated
person under the letter of credit. The term does not include a beneficiary's drawing rights or
documents presented by the beneficiary.
(2) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The
beneficiary may do so before presentation as a present assignment of its right to receive proceeds
contingent upon its compliance with the terms and conditions of the letter of credit.
(3) An issuer or nominated person need not recognize an assignment of proceeds of a letter
of credit until it consents to the assignment.
(4) An issuer or nominated person has no obligation to give or withhold its consent to an
assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the
assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a
condition to honor.
(5) Rights of a transferee beneficiary or nominated person are independent of the beneficiary's
assignment of the proceeds of a letter of credit and are superior to the assignee's right to the
proceeds.
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(6) Neither the rights recognized by this section between an assignee and an issuer, transferee
beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an
assignee or a third person affect the rights between the assignee and any person other than the issuer,
transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest
in or granting an assignment of a beneficiary's rights to proceeds is governed by Title 70A, Chapte