O.C.G.A. § 11-9-315 (2019)
Secured party’s rights on disposition of collateral and in proceeds
(a) Disposition of collateral; continuation of security interest or agricultural lien; proceeds. Except as otherwise provided in this article and in subsection (2) of Code Section 11-2-403: (1) A security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange, or other disposition thereof unless the secured party authorized the disposition free of the security interest or agricultural lien; and
(2) A security interest attaches to any identifiable proceeds of collateral. (b) When commingled proceeds identifiable. Proceeds that are commingled with other property are identifiable proceeds: (1) If the proceeds are goods, to the extent provided by Code Section 11-9-336; and (2) If the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing, including application of equitable principles, that is permitted under law other than this article with respect to commingled property of the type involved. (c) Perfection of security interest in proceeds. A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected. (d) Continuation of perfection. A perfected security interest in proceeds becomes unperfected on the twenty-first day after the security interest attaches to the proceeds unless: (1) The following conditions are satisfied: (A) A filed financing statement covers the original collateral; (B) The proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and (C) The proceeds are not acquired with cash proceeds; (2) The proceeds are identifiable cash proceeds; or (3) The security interest in the proceeds is perfected other than under subsection (c) of this Code section when the security interest attaches to the proceeds or within 20 days thereafter. (e) When perfected security interest in proceeds becomes unperfected. If a filed financing statement covers the original collateral, a security interest in proceeds which remains perfected under paragraph (1) of subsection (d) of this Code section becomes unperfected at the later of: (1) When the effectiveness of the filed financing statement lapses under Code Section 11-9-515 or is terminated under Code Section 11-9-513; or (2) The twenty-first day after the security interest attaches to the proceeds.
History
Code 1981, § 11-9-315, enacted by Ga. L. 2001, p. 362, § 1.
Annotations
Law reviews. For article discussing the classification of a continuing security interest in changing collateral as an unenforceable preference under Section 60a of the Bankruptcy Act, see 1 Ga. L. Rev. 257 (1967). For note discussing creditor’s remedy of direct collection of accounts and instruments owed to the defaulting debtor, see 3 Ga. L. Rev. 198 (1968). For comment on Sherrock v. Commer-
cial Credit Corp., 290 A.2d 648 (Del. S. Ct. 1972), see 10 Ga. St. B.J. 110 (1973). For article, “The Revisions to Article IX of the Uniform Commercial Code,” see 15 Ga. St. B.J. 120 (1977). For article, “The Good Faith Purchase Idea and the Uniform Commercial Code,” see 15 Ga. L. Rev. 605 (1981). For article, “Preparing the Georgia Farmer (or Other Smaller Entrepreneur) for Bankruptcy,” see 22 Ga. State Bar J. 186 (1986). For annual survey article on commercial law, see 50 Mercer L. Rev. 193 (1998).
JUDICIAL DECISIONS Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article. Construction. - This statute is in derogation of common law and must be strictly construed and followed. Citizens & S. Nat’l Bank v. Weyerhaeuser Co., 152 Ga. App. 176, 262 S.E.2d 485, 1979 Ga. App. LEXIS 2857 (1979) (decided under former Code 1933, § 109A-9-306). Security interest in money. - Security interest in money (either originally given or received as proceeds from negotiation of instrument) is perfected by possession. In re Atlanta Times, Inc., 259 F. Supp. 820, 1966 U.S. Dist. LEXIS 10458 (N.D. Ga. 1966), aff’d, 383 F.2d 606, 1967 U.S. App. LEXIS 4987 (5th Cir. 1967) (decided under former Code 1933, § 109A9-306). Continuation of security interest. - Any time a debtor sells collateral and the sale is not authorized by a secured party, the lien continues in the property in hands of third-party purchaser. Moister v. National Bank (In re Guaranteed Muffler Supply Co.), 1 B.R. 324, 1979 Bankr. LEXIS 733 (Bankr. N.D. Ga. 1979) (decided under former Code 1933, § 109A-9306). Security interest remains perfected in property transferred without secured creditor’s knowledge or consent. Abney v. Nikko Audio (In re Environmental Elec.
Sys.), 2 B.R. 583, 1980 Bankr. LEXIS 5618 (Bankr. N.D. Ga. 1980) (decided under former Code 1933, § 109A-9-306). Security interest continues in collateral notwithstanding sale, exchange, or other disposition, unless authorized by secured party. Commercial Credit Equip. Corp. v. Bates, 159 Ga. App. 910, 285 S.E.2d 560, 1981 Ga. App. LEXIS 2928 (1981) (decided under former Code 1933, § 109A-9-306). Where contract for the use of equipment was correctly held to be a sales contract which created a security interest, such security interest continued in collateral notwithstanding sale to a third party where the disposition was not authorized by the secured party as would have been evident from the filing of a financing statement. Mann Inv. Co. v. Columbia Nitrogen Corp., 173 Ga. App. 77, 325 S.E.2d 612, 1984 Ga. App. LEXIS 2730 (1984) (decided under former Code Section 11-9-306). Georgia bank’s perfected security interest was not terminated when it consented to the sale of the equipment to the debtor subject to its security interest. Loeb v. Franchise Distribs., Inc. (In re Franchise Sys.), 46 B.R. 158, 1985 Bankr. LEXIS 6747 (Bankr. N.D. Ga. 1985) (decided under former Code Section 11-9-306). Bankruptcy debtor’s unearned postpetition income. - Bankruptcy debtor’s unearned postpetition income under a contract for employment did not constitute “proceeds” of creditor’s prepetition interest in accounts receivable. In re Rumker, 184 B.R. 621, 1995 Bankr.
LEXIS 1035 (Bankr. S.D. Ga. 1995) (decided under former Code Section 11-9306). Unauthorized disposition of collateral. - When debtor makes unauthorized disposition of collateral, secured party may maintain action for conversion against subsequent purchaser. United States v. McCleskey Mills, Inc., 409 F.2d 1216, 1969 U.S. App. LEXIS 13007 (5th Cir. 1969) (decided under former Code 1933, § 109A-9-306). Commingled funds. - In event of insolvency proceedings by or against debtor, secured party’s perfected security interest extends to all cash and bank accounts of debtor, if cash proceeds have been commingled or deposited with other funds in such accounts, subject, however, to any right of setoff. Citizens & S. Nat’l Bank v. Weyerhaeuser Co., 152 Ga. App. 176, 262 S.E.2d 485, 1979 Ga. App. LEXIS 2857 (1979) (decided under former Code 1933, § 109A-9-306). Under former subsection (4)(d)(ii), when a debtor has commingled proceeds of collateral with other cash or in a deposit account, the ceiling on the secured creditor’s recovery from the account is the amount of cash proceeds received by the debtor within the ten days prior to the filing of the petition, regardless of whether such proceeds were actually deposited in the account. Small v. Collegedale Distribs. (In re Unity Foods, Inc.), 75 B.R. 222, 1987 Bankr. LEXIS 1039 (Bankr. N.D. Ga. 1987) (decided under former Code Section 11-9-306). Insurance benefits considered “proceeds” and subject to lender’s security interest. - Insurance benefits payable from a third-party tortfeasor’s insurer upon the destruction of a vehicle became “proceeds,” subject to a lender’s security interest, before payment to the victims. JCS Enter., Inc. v. Vanliner Ins., 227 Ga. App. 371, 489 S.E.2d 95, 1997 Ga. App. LEXIS 891 (1997) (decided under former Code Section 11-9-306). Bankruptcy court found that under the security deed the credit company held a valid security interest in the destroyed property and the security deed provided sufficient language to grant the credit company a security interest in the pro-
ceeds of the collateral, including any insurance proceeds. Altegra Credit Co. v. Ford Motor Credit Co., 286 B.R. 918, 2002 Bankr. LEXIS 1633 (Bankr. S.D. Ga. 2002). Proceeds of collateral. - Under former Georgia law, proceeds included insurance payable by reason of loss or damage to collateral but returned or unearned insurance premiums are in no sense a substitute for specified collateral and cannot be held to constitute its proceeds. Blalock v. Aetna Fin. Co., 511 F. Supp. 33, 1980 U.S. Dist. LEXIS 16492 (N.D. Ga. 1980) (decided under former Code 1933, § 109A-9-306). Creditor that had purchased the debtor’s accounts receivable did not hold the first priority lien against the assets, and could not assert equitable subrogation, because the creditor exercised inexcusable neglect in failing to perfect the creditor’s own lien. Debtor’s estate retained an interest in receivables under O.C.G.A. § 119-315(a)(1). Kerr v. Commer. Credit Group, Inc. (In re Siskey Hauling Co.), 456 B.R. 597, 2011 Bankr. LEXIS 3681 (Bankr. N.D. Ga. 2011). Lien attached to proceeds. - The Farmers Home Administration, which had a prepetition security agreement extending to the livestock, farm products, increases, replacements, substitutions and additions of the bankruptcy debtors, had a lien which attached to the proceeds of the sales of milk produced and sold after the bankruptcy filing. United States v. Hollie, 42 B.R. 111, 1984 Bankr. LEXIS 5348 (Bankr. M.D. Ga. 1984) (decided under former Code Section 11-9-306). As a cotton gin bought a farmer’s cotton crop with actual knowledge, as defined by O.C.G.A. § 11-1-201(25), (27), of a bank’s security interest therein, but still withheld some of the proceeds of the sale under O.C.G.A. § 11-9-315(a)(1), the gin was liable to the bank for conversion and was not entitled to summary judgment. Bank of Dawson v. Worth Gin Co., 295 Ga. App. 256, 671 S.E.2d 279, 2008 Ga. App. LEXIS 1350 (2008). Debtor not a fiduciary. - Where a farmer did not require that the proceeds of the debtor’s sales of the farmer’s seeds be kept in a separate account, and the debtor
paid the debtor’s company’s operating expenses with the proceeds of the sale of the farmer’s seeds, the debtor was not a fiduciary under 11 U.S.C. § 523(a)(4) and the debt was discharged in the debtor’s bankruptcy; neither O.C.G.A. § 11-9-315(a)(1) nor O.C.G.A. § 11-7-204(1) imposed any fiduciary duties on the debtor. Bennett v. Wright, 282 B.R. 510, 2002 Bankr. LEXIS 1128 (Bankr. M.D. Ga. 2002). Releases. - Creditor’s execution of a partial release, giving up its interest in debtor’s “accounts receivable and proceeds of inventory sold in the normal course of business,” eliminated any secured interest in the accounts receivable or proceeds it otherwise would have had. Ray’s Mobile Home Repair Serv., Inc. v. Presidential Fin. Corp., 192 Ga. App. 682, 386 S.E.2d 48, 1989 Ga. App. LEXIS 1130
(1989) (decided under former Code Section 11-9-306). Release of an “Assignment of Proceeds from the Sale of Dairy Products” constituted a waiver of the lienholder’s security interest in milk products. Thomas v. Ralston Purina Co., 43 B.R. 201, 1984 Bankr. LEXIS 5011 (Bankr. M.D. Ga. 1984) (decided under former Code Section 11-9306). Change of location. - Where the transfer of debtor’s radio tower, consented to by creditor, merely constituted a change of location, it was not a “sale, exchange, or other disposition” within the meaning of former subsection (2) of this section. Tidwell v. Slocumb (In re Ga. Steel, Inc.), 71 B.R. 903, 1987 Bankr. LEXIS 428 (Bankr. M.D. Ga. 1987) (decided under former Code Section 11-9-306).
RESEARCH REFERENCES Am. Jur. 2d. 68A Am. Jur. 2d, Secured Transactions, §§ 85-100, 121, 291-293, 482-486, 527, 550-554, 962-982. C.J.S. 72 C.J.S., Pledges, §§ 28, 36. U.L.A. Uniform Commercial Code (U.L.A.) § 9315. ALR. Rights and duties of parties to conditional sales contract as to resale of repossessed property, 49 A.L.R.2d 15. Uniform Commercial Code: Burden of proof as to commercially reasonable disposition of collateral, 59 A.L.R.3d 369. Effectiveness of original financing statement under UCC Article 9 after change in debtor’s name, identity, or business structure, 99 A.L.R.3d 1194. Effect of UCC Article 9 upon conflict, as
to funds in debtor’s bank account, between secured creditor and bank claiming right of setoff, 3 A.L.R.4th 998. What is “commercially reasonable” disposition of collateral required by UCC § 9-504(3), 7 A.L.R.4th 308. What constitutes secured party’s authorization to transfer collateral free of lien under UCC § 9-306(2), 37 A.L.R.4th 787. Secured transactions: government agricultural program payments as “proceeds” of agricultural products under UCC § 9306, 79 A.L.R.4th 903. Causes of action governed by limitations period in UCC § 2-725, 49 A.L.R.5th 1. Creation and perfection of security interests in insurance proceeds under Article 9 of Uniform Commercial Code, 47 A.L.R.6th 347.