AN ACT to update the uniform commercial code to govern transactions involving certain emerging technologies, as recommended by the General Statutes Commission.

The General Assembly of North Carolina enacts:

PART I. CONTROLLABLE ELECTRONIC RECORDS

SECTION 1.  Chapter 25 of the General Statutes is amended by adding a new Article to read:

Article 12.

Controllable Electronic Records.

§ 25‑12‑101.  Title.

This Article may be cited as Uniform Commercial Code – Controllable Electronic Records.

§ 25‑12‑102.  Definitions.

(a)        Article 12 Definitions. – In this Article, the following definitions apply:

(1)        Account debtor. – Defined in G.S. 25‑9‑102.

(2)        Chattel paper. – Defined in G.S. 25‑9‑102.

(3)        Controllable account. – Defined in G.S. 25‑9‑102.

(4)        Controllable electronic record. – A record stored in an electronic medium that can be subjected to control under G.S. 25‑12‑105. The term does not include a controllable account, a controllable payment intangible, a deposit account, an electronic copy of a record evidencing chattel paper, an electronic document of title, electronic money, investment property, or a transferable record.

(5)        Controllable payment intangible. – Defined in G.S. 25‑9‑102.

(6)        Deposit account. – Defined in G.S. 25‑9‑102.

(7)        Electronic money. – Defined in G.S. 25‑9‑102.

(8)        Investment property. – Defined in G.S. 25‑9‑102.

(9)        Qualifying purchaser. – A purchaser of a controllable electronic record or an interest in a controllable electronic record that obtains control of the controllable electronic record for value, in good faith, and without notice of a claim of a property right in the controllable electronic record.

(10)      Transferable record. – Has the meaning provided for that term in either of the following:

a.         Section 201(a)(1) of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7021(a)(1).

b.         G.S. 66‑326(a).

(11)      Value. – Has the meaning provided in G.S. 25‑3‑303(a), as if references in that subsection to an instrument were references to a controllable account, controllable electronic record, or controllable payment intangible.

(b)        Article 1 Definitions and Principles. – Article 1 of this Chapter contains general definitions and principles of construction and interpretation applicable throughout this Article.

§ 25‑12‑103.  Relation to Article 9 and consumer laws.

(a)        Article 9 Governs in Case of Conflict. – If there is conflict between this Article and Article 9 of this Chapter, Article 9 of this Chapter governs.

(b)        Applicable Consumer Law and Other Laws. – A transaction subject to this Article is subject to any applicable rule of law that establishes a different rule for consumers, to any other statute or rule of this State that regulates the rates, charges, agreements, and practices for loans, credit sales, or other extensions of credit, and to any consumer‑protection statute or rule of this State, including Chapter 24 of the General Statutes, the Retail Installment Sales Act (Chapter 25A of the General Statutes), the North Carolina Consumer Finance Act (Article 15 of Chapter 53 of the General Statutes), and the Pawnbrokers and Currency Converters Modernization Act (Part 1 of Article 45 of Chapter 66 of the General Statutes).

§ 25‑12‑104.  Rights in controllable account, controllable electronic record, and controllable payment intangible.

(a)        Applicability of Section to Controllable Account and Controllable Payment Intangible. – This section applies to the acquisition and purchase of rights in a controllable account or controllable payment intangible, including the rights and benefits under subsections (c), (d), (e), (g), and (h) of this section of a purchaser and qualifying purchaser, in the same manner this section applies to a controllable electronic record.

(b)        Control of Controllable Account and Controllable Payment Intangible. – To determine whether a purchaser of a controllable account or a controllable payment intangible is a qualifying purchaser, the purchaser obtains control of the account or payment intangible if it obtains control of the controllable electronic record that evidences the account or payment intangible.

(c)        Applicability of Other Law to Acquisition of Rights. – Except as provided in this section, law other than this Article determines whether a person acquires a right in a controllable electronic record and the right the person acquires.

(d)       Shelter Principle and Purchase of Limited Interest. – A purchaser of a controllable electronic record acquires all rights in the controllable electronic record that the transferor had or had power to transfer, except that a purchaser of a limited interest in a controllable electronic record acquires rights only to the extent of the interest purchased.

(e)        Rights of Qualifying Purchaser. – A qualifying purchaser acquires its rights in the controllable electronic record free of a claim of a property right in the controllable electronic record.

(f)        Limitation of Rights of Qualifying Purchaser in Other Property. – Except as provided in subsections (a) and (e) of this section for a controllable account and a controllable payment intangible or law other than this Article, a qualifying purchaser takes a right to payment, right to performance, or other interest in property evidenced by the controllable electronic record subject to a claim of a property right in the right to payment, right to performance, or other interest in property.

(g)        No‑Action Protection for Qualifying Purchaser. – An action shall not be asserted against a qualifying purchaser based on both a purchase by the qualifying purchaser of a controllable electronic record and a claim of a property right in another controllable electronic record, whether the action is framed in conversion, replevin, constructive trust, equitable lien, or other theory.

(h)        Filing Not Notice. – Filing of a financing statement under Article 9 of this Chapter is not notice of a claim of a property right in a controllable electronic record.

§ 25‑12‑105.  Control of controllable electronic record.

(a)        General Rule for Control of Controllable Electronic Record. – A person has control of a controllable electronic record if the electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded does both of the following:

(1)        Gives the person both of the following:

a.         Power to avail itself of substantially all the benefit from the electronic record.

b.         Exclusive power, subject to subsection (b) of this section, to do both of the following:

1.         Prevent others from availing themselves of substantially all the benefit from the electronic record.

2.         Transfer control of the electronic record to another person or cause another person to obtain control of another controllable electronic record as a result of the transfer of the electronic record.

(2)        Enables the person readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as having the powers specified in subdivision (1) of this subsection.

(b)        Meaning of Exclusive. – Subject to subsection (c) of this section, a power is exclusive under sub‑subdivision (a)(1)b. of this section even if either of the following applies:

(1)        The controllable electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded limits the use of the electronic record or has a protocol programmed to cause a change, including a transfer or loss of control or a modification of benefits afforded by the electronic record.

(2)        The power is shared with another person.

(c)        When Power Not Shared with Another Person. – A power of a person is not shared with another person under subdivision (b)(2) of this section and the person's power is not exclusive if both of the following apply:

(1)        The person can exercise the power only if the power also is exercised by the other person.

(2)        Either of the following applies:

a.         The other person can exercise the power without exercise of the power by the person.

b.         The other person is the transferor to the person of an interest in the controllable electronic record or a controllable account or controllable payment intangible evidenced by the controllable electronic record.

(d)       Presumption of Exclusivity of Certain Powers. – If a person has the powers specified in sub‑subdivision (a)(1)b. of this section, the powers are presumed to be exclusive.

(e)        Control Through Another Person. – A person has control of a controllable electronic record if either of the following applies to another person, other than the transferor to the person of an interest in the controllable electronic record or a controllable account or controllable payment intangible evidenced by the controllable electronic record:

(1)        The other person has control of the electronic record and acknowledges that it has control on behalf of the person.

(2)        The other person obtains control of the electronic record after having acknowledged that it will obtain control of the electronic record on behalf of the person.

(f)        No Requirement to Acknowledge. – A person that has control under this section is not required to acknowledge that it has control on behalf of another person.

(g)        No Duties or Confirmation. – If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this Article or Article 9 of this Chapter otherwise provides, the person does not owe any duty to the other person and is not required to confirm the acknowledgment to any other person.

§ 25‑12‑106.  Discharge of account debtor on controllable account or controllable payment intangible.

(a)        Discharge of Account Debtor. – An account debtor on a controllable account or controllable payment intangible may discharge its obligation by paying either of the following persons:

(1)        The person having control of the controllable electronic record that evidences the controllable account or controllable payment intangible.

(2)        Except as provided in subsection (b) of this section, a person that formerly had control of the controllable electronic record.

(b)        Content and Effect of Notification. – Subject to subsection (d) of this section, the account debtor shall not discharge its obligation by paying a person that formerly had control of the controllable electronic record if the account debtor receives a notification that satisfies all of the following requirements:

(1)        The notification is signed by a person that formerly had control or the person to which control was transferred.

(2)        The notification reasonably identifies the controllable account or controllable payment intangible.

(3)        The notification notifies the account debtor that control of the controllable electronic record that evidences the controllable account or controllable payment intangible was transferred.

(4)        The notification identifies the transferee, in any reasonable way, including by name, identifying number, cryptographic key, office, or account number.

(5)        The notification provides a commercially reasonable method by which the account debtor is to pay the transferee.

(c)        Discharge Following Effective Notification. – After receipt of a notification that complies with subsection (b) of this section, the account debtor may discharge its obligation by paying in accordance with the notification and shall not discharge the obligation by paying a person that formerly had control.

(d)       When Notification Ineffective. – Subject to subsection (h) of this section, all of the following apply to a notification under subsection (b) of this section:

(1)        The notification is ineffective unless, before the notification is sent, the account debtor and the person that, at that time, had control of the controllable electronic record that evidences the controllable account or controllable payment intangible agree in a signed record to a commercially reasonable method by which a person may furnish reasonable proof that control has been transferred.

(2)        The notification is ineffective to the extent an agreement between the account debtor and seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this Article.

(3)        The notification is ineffective at the option of the account debtor, if the notification notifies the account debtor to do any of the following:

a.         Divide a payment.

b.         Make less than the full amount of an installment or other periodic payment.

c.         Pay any part of a payment by more than one method or to more than one person.

(e)        Proof of Transfer of Control. – Subject to subsection (h) of this section, if requested by the account debtor, the person giving the notification under subsection (b) of this section seasonably shall furnish reasonable proof, using the method in the agreement referred to in subdivision (d)(1) of this section, that control of the controllable electronic record has been transferred. Unless the person complies with the request, the account debtor may discharge its obligation by paying a person that formerly had control, even if the account debtor has received a notification under subsection (b) of this section.

(f)        What Constitutes Reasonable Proof. – A person furnishes reasonable proof under subsection (e) of this section that control has been transferred if the person demonstrates, using the method in the agreement referred to in subdivision (d)(1) of this section, that the transferee has the power to do all of the following:

(1)        Avail itself of substantially all the benefit from the controllable electronic record.

(2)        Prevent others from availing themselves of substantially all the benefit from the controllable electronic record.

(3)        Transfer the powers specified in subdivisions (1) and (2) of this subsection to another person.

(g)        Rights Not Waivable. – Subject to subsection (h) of this section, an account debtor shall not waive or vary its rights under subdivision (d)(1) and subsection (e) of this section or its option under subdivision (d)(3) of this section.

(h)        Rule for Individual Under Other Law. – This section is subject to law other than this Article that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

§ 25‑12‑107.  Governing law.

(a)        General Rule for Governing Law. – Except as provided in subsection (b) of this section, the local law of a controllable electronic record's jurisdiction governs a matter covered by this Article.

(b)        Governing Law for G.S. 25‑12‑106. – For a controllable electronic record that evidences a controllable account or controllable payment intangible, the local law of the controllable electronic record's jurisdiction governs a matter covered by G.S. 25‑12‑106 unless an effective agreement determines that the local law of another jurisdiction governs.

(c)        Controllable Electronic Record's Jurisdiction. – The following rules determine a controllable electronic record's jurisdiction under this section:

(1)        If the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily available for review, expressly provides that a particular jurisdiction is the controllable electronic record's jurisdiction for purposes of this Article or Chapter, that jurisdiction is the controllable electronic record's jurisdiction.

(2)        If subdivision (1) of this subsection does not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that a particular jurisdiction is the controllable electronic record's jurisdiction for purposes of this Article or Chapter, that jurisdiction is the controllable electronic record's jurisdiction.

(3)        If subdivisions (1) and (2) of this subsection do not apply and the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily available for review, expressly provides that the controllable electronic record is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record's jurisdiction.

(4)        If subdivisions (1), (2), and (3) of this subsection do not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that the controllable electronic record or the system is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record's jurisdiction.

(5)        If subdivisions (1) through (4) of this subsection do not apply, the controllable electronic record's jurisdiction is the District of Columbia.

(d)       Applicability of Article 12. – If subdivision (c)(5) of this section applies and Article 12 is not in effect in the District of Columbia without material modification, the governing law for a matter covered by this Article is the law of the District of Columbia as though Article 12 were in effect in the District of Columbia without material modification. In this subsection, Article 12 means Article 12 of Uniform Commercial Code Amendments (2022).

(e)        Relation of Matter or Transaction to Controllable Electronic Record's Jurisdiction Not Necessary. – To the extent subsections (a) and (b) of this section provide that the local law of the controllable electronic record's jurisdiction governs a matter covered by this Article, that law governs even if the matter or a transaction to which the matter relates does not bear any relation to the controllable electronic record's jurisdiction.

(f)        Rights of Purchasers Determined at Time of Purchase. – The rights acquired under G.S. 25‑12‑104 by a purchaser or qualifying purchaser are governed by the law applicable under this section at the time of purchase.

PART II. CONFORMING CHANGES AND OTHER AMENDMENTS TO ARTICLE 9 (SECURED TRANSACTIONS) OF THE UCC

SECTION 2.  G.S. 25‑9‑102 reads as rewritten:

§ 25‑9‑102.  Definitions and index of definitions.

(a)        Article 9 definitions. – Definitions. – In this Article:Article, the following definitions apply:

(1)        Accession means goods Accession. – Goods that are physically united with other goods in such a manner that in which the identity of the original goods is not lost.

(2)        Account, except as used in account for, means a Account. – Except as used in account for, account statement, account to, commodity account, customer's account, deposit account, on account of, and statement of account, means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state. The term includes controllable accounts and health‑care‑insurance receivables. The term does not include (i) rights to payment evidenced by chattel paper or an instrument, chattel paper, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter‑of‑credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.card, or (vii) rights to payment evidenced by an instrument.

(3)        Account debtor means a Account debtor. – A person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the negotiable instrument constitutes part of evidences chattel paper.

(4)        Accounting, except as used in accounting for, means a record: Accounting. – Except as used in accounting for, means a record that meets all of the following requirements:

a.         Authenticated Signed by a secured party;party.

b.         Indicating the aggregate unpaid secured obligations as of a date not more than 35 days earlier or 35 days later than the date of the record; andrecord.

c.         Identifying the components of the obligations in reasonable detail.

(5)        Agricultural lien means an Agricultural lien. – An interest, other than a security interest, in farm products:products that satisfies all of the following requirements:

a.         Which The interest secures payment or performance of an obligation for:for either of the following:

1.         Goods or services furnished in connection with a debtor's farming operation; oroperation.

2.         Rent on real property leased by a debtor in connection with its the debtor's farming operation;operation.

b.         Which The interest is created by statute in favor of a person that:that did either of the following:

1.         In the ordinary course of its business business, furnished goods or services to a debtor in connection with a the debtor's farming operation; oroperation.

2.         Leased real property to a debtor in connection with the debtor's farming operation; andoperation.

c.         Whose The interest's effectiveness does not depend on the person's interest holder's possession of the personal property.

(5a)      Applicant. – Defined in G.S. 25‑5‑102.

(6)        As‑extracted collateral means:As‑extracted collateral. – Either of the following:

a.         Oil, gas, or other minerals that are subject to a security interest that:that satisfies both of the following:

1.         Is The security interest is created by a debtor having an interest in the minerals before extraction; andextraction.

2.         Attaches The security interest attaches to the minerals as extracted; orextracted.

b.         Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.

(6a)      Assignee. – Except as used in assignee for benefit of creditors, means a person (i) in whose favor a security interest that secures an obligation is created or provided for under a security agreement, whether or not the obligation is outstanding or (ii) to which an account, chattel paper, payment intangible, or promissory note has been sold. The term includes a person to which a security interest has been transferred by a secured party.

(6b)      Assignor. – A person that (i) under a security agreement creates or provides for a security interest that secures an obligation or (ii) sells an account, chattel paper, payment intangible, or promissory note. The term includes a secured party that has transferred a security interest to another person.

(7)        Authenticate means:

a.         To sign; or

b.         With present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.

(8)        Bank means an Bank. – An organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions, and trust companies.

(8a)      Beneficiary. – Defined in G.S. 25‑5‑102.

(8b)      Broker. – Defined in G.S. 25‑8‑102.

(9)        Cash proceeds means proceeds Cash proceeds. – Proceeds that are money, checks, deposit accounts, or the like.

(10)      Certificate of title means a Certificate of title. – A certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral.

(10a)    Certificated security. – Defined in G.S. 25‑8‑102.

(11)      Chattel paper means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this subdivision, monetary obligation means a monetary obligation secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.Chattel paper. – Either of the following:

a.         A right to payment of a monetary obligation secured by specific goods, if the right to payment and security agreement are evidenced by a record.

b.         A right to payment of a monetary obligation owed by a lessee under a lease agreement with respect to specific goods and a monetary obligation owed by the lessee in connection with the transaction giving rise to the lease, if both of the following apply:

1.         The right to payment and lease agreement are evidenced by a record.

2.         The predominant purpose of the transaction giving rise to the lease was to give the lessee the right to possession and use of the goods.

The term does not include a right to payment arising out of a charter or other contract involving the use or hire of a vessel or a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.

(11a)    Check. – Defined in G.S. 25‑3‑104.

(11b)    Clearing corporation. – Defined in G.S. 25‑8‑102.

(12)      Collateral means the Collateral. – The property subject to a security interest or agricultural lien. The term includes:includes all of the following:

a.         Proceeds to which a security interest attaches;attaches.

b.         Accounts, chattel paper, payment intangibles, and promissory notes that have been sold; andsold.

c.         Goods that are the subject of a consignment.

(13)      Commercial tort claim means a Commercial tort claim. – A claim arising in tort with respect to which:if either of the following applies:

a.         The claimant is an organization; ororganization.

b.         The claimant is an individual and the claim:both of the following apply:

1.         Arose The claim arose in the course of the claimant's business or profession; andprofession.

2.         Does The claim does not include damages arising out of personal injury to or the death of an individual.

(14)      Commodity account means an Commodity account. – An account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.

(15)      Commodity contract means a Commodity contract. – A commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is:either of the following applies:

a.         Traded The contract or option is traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract the contract or option pursuant to federal commodities laws; orlaw.

b.         Traded The contract or option is traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.

(16)      Commodity customer means a Commodity customer. – A person for which a commodity intermediary carries a commodity contract on its books.

(17)      Commodity intermediary means a Commodity intermediary. – A person that:that satisfies either of the following:

a.         Is registered as a futures commission merchant under federal commodities law; orlaw.

b.         In the ordinary course of its business business, provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.

(18)      Communicate means:Communicate. – Any of the following:

a.         To send a written or other tangible record;record.

b.         To transmit a record by any means agreed upon by the persons sending and receiving the record; orrecord.

c.         In the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing‑office rule.

(19)      Consignee means a Consignee. – A merchant to which goods are delivered in a consignment.

(20)      Consignment means a Consignment. – A transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:and all of the following apply:

a.         The merchant:All of the following apply to the merchant:

1.         Deals The merchant deals in goods of that kind under a name other than the name of the person making delivery;delivery.

2.         Is The merchant is not an auctioneer; andauctioneer.

3.         Is The merchant is not generally known by its creditors to be substantially engaged in selling the goods of others;others.

b.         With respect to each delivery, the aggregate value of the goods is one thousand dollars ($1,000) or more at the time of delivery;delivery.

c.         The goods are not consumer goods immediately before delivery;and delivery.

d.         The transaction does not create a security interest that secures an obligation.

(21)      Consignor means a Consignor. – A person that delivers goods to a consignee in a consignment.

(22)      Consumer debtor means a Consumer debtor. – A debtor in a consumer transaction.

(23)      Consumer goods means goods Consumer goods. – Goods that are used or bought for use primarily for personal, family, or household purposes.

(24)      Consumer‑goods transaction means a Consumer‑goods transaction. – A consumer transaction in which:which both of the following apply:

a.         An individual incurs an obligation primarily for personal, family, or household purposes; andpurposes.

b.         A security interest in consumer goods secures the obligation.

(25)      Consumer obligor means an Consumer obligor. – An obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes.

(26)      Consumer transaction means a Consumer transaction. – A transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer‑goods transactions.

(27)      Continuation statement means an Continuation statement. – An amendment of a financing statement which:that does both of the following:

a.         Identifies, by its file number, the initial financing statement to which it relates; andrelates.

b.         Indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.

(27a)    Contract for sale. – Defined in G.S. 25‑2‑106.

(27b)    Control. – Defined in G.S. 25‑7‑106.

(27c)    Controllable account. – An account evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under G.S. 25‑12‑105 of the controllable electronic record.

(27d)   Controllable electronic record. – Defined in G.S. 25‑12‑102.

(27e)    Controllable payment intangible. – A payment intangible evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under G.S. 25‑12‑105 of the controllable electronic record.

(27f)    Customer. – Defined in G.S. 25‑4‑104.

(28)      Debtor means:Debtor. – Any of the following:

a.         A person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;obligor.

b.         A seller of accounts, chattel paper, payment intangibles, or promissory notes; ornotes.

c.         A consignee.

(29)      Deposit account means a Deposit account. – A demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.

(30)      Document means a Document. – A document of title or a receipt of the type described in G.S. 25‑7‑201(b).

(31)      Electronic chattel paper means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.

(31a)    Electronic money. – Money in an electronic form.

(32)      Encumbrance means a Encumbrance. – A right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.

(32a)    Entitlement holder. – Defined in G.S. 25‑8‑102.

(33)      Equipment means goods Equipment. – Goods other than inventory, farm products, or consumer goods.

(34)      Farm products means goods, Farm products. – Any of the following goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:operation:

a.         Crops grown, growing, or to be grown, including:including both of the following:

1.         Crops produced on trees, vines, and bushes; andbushes.

2.         Aquatic goods produced in aquacultural operations;operations.

b.         Livestock, born or unborn, including aquatic goods produced in aquacultural operations;operations.

c.         Supplies used or produced in a farming operation; oroperation.

d.         Products of crops or livestock in their unmanufactured states.

(35)      Farming operation means raising, Farming operation. – Raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.

(36)      File number means the File number. – The number assigned to an initial financing statement pursuant to G.S. 25‑9‑519(a).

(37)      Filing office means an Filing office. – An office designated in G.S. 25‑9‑501 as the place to file a financing statement.

(38)      Filing‑office rule means a Filing‑office rule. – A rule adopted pursuant to G.S. 25‑9‑526.

(38a)    Financial asset. – Defined in G.S. 25‑8‑102.

(39)      Financing statement means a Financing statement. – A record or records composed of an initial financing statement and any filed record relating to the initial financing statement.

(40)      Fixture filing means the Fixture filing. – The filing of a financing statement covering goods that are or are to become fixtures and satisfying G.S. 25‑9‑502(a) and (b). The term includes the filing of a financing statement covering goods of a transmitting utility which that are or are to become fixtures.

(41)      Fixtures means goods Fixtures. – Goods that have become so related to particular real property that an interest in them arises under real property law.

(42)      General intangible means any General intangible. – Any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter‑of‑credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes controllable electronic records, payment intangibles intangibles, and software.

(43)      Repealed by Session Laws 2006‑112, s. 21, effective October 1, 2006.

(44)      Goods means all Goods. – All things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter‑of‑credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.

(45)      Governmental unit means a Governmental unit. – A subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization (i) is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States, States or (ii) was created to facilitate the issuance of notes, bonds, other evidences of indebtedness indebtedness, or payment obligations for borrowed money by, or in conjunction with, installment or lease purchase financings for, for this State or any county, municipality, or other agency or political subdivision thereof as evidenced by the documents creating the organization.

(46)      Health‑care‑insurance receivable means an Health‑care‑insurance receivable. – An interest in or claim under a policy of insurance which that is a right to payment of a monetary obligation for health‑care goods or services provided.

(46a)    Holder in due course. – Defined in G.S. 25‑3‑302.

(47)      Instrument means a Instrument. – A negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include (i) investment property, (ii) letters of credit, or (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. card, or (iv) writings that evidence chattel paper.

(48)      Inventory means goods, Inventory. – Goods, other than farm products, which:that satisfy any of the following descriptions:

a.         Are leased by a person as lessor;lessor.

b.         Are held by a person for sale or lease or to be furnished under a contract of service;service.

c.         Are furnished by a person under a contract of service; orservice.

d.         Consist of raw materials, work in process, or materials used or consumed in a business.

(49)      Investment property means a Investment property. – A security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.

(49a)    Issuer. – Defined as follows:

a.         With respect to a letter of credit or letter‑of‑credit right, defined in G.S. 25‑5‑102.

b.         With respect to a security, defined in G.S. 25‑8‑201.

c.         With respect to documents of title, defined in G.S. 25‑7‑102.

(50)      Jurisdiction of organization, with respect to a registered organization, means the Jurisdiction of organization. – With respect to a registered organization, the jurisdiction under whose law the organization is formed or organized.

(50a)    Lease. – Defined in G.S. 25‑2A‑103.

(50b)    Lease agreement. – Defined in G.S. 25‑2A‑103.

(50c)    Lease contract. – Defined in G.S. 25‑2A‑103.

(50d)   Leasehold interest. – Defined in G.S. 25‑2A‑103.

(50e)    Lessee. – Defined in G.S. 25‑2A‑103.

(50f)    Lessee in ordinary course of business. – Defined in G.S. 25‑2A‑103.

(50g)    Lessor. – Defined in G.S. 25‑2A‑103.

(50h)    Lessor's residual interest. – Defined in G.S. 25‑2A‑103.

(50i)     Letter of credit. – Defined in G.S. 25‑5‑102.

(51)      Letter‑of‑credit right means a Letter‑of‑credit right. – A right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.

(52)      Lien creditor means:Lien creditor. – Any of the following:

a.         A creditor that has acquired a lien on the property involved by attachment, levy, or the like;like.

b.         An assignee for benefit of creditors from the time of assignment;assignment.

c.         A trustee in bankruptcy from the date of the filing of the petition; orpetition.

d.         A receiver in equity from the time of appointment.

(53)      Manufactured home means a Manufactured home. – A structure, transportable in one or more sections, which, sections that satisfies all of the following requirements:

a.         in In the traveling mode, is eight body feet or more in width or 40 body feet or more in length, or, when erected on site, is 320 or more square feet, and whichfeet.

b.         is Is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, andutilities.

c.         includes the Includes plumbing, heating, air‑conditioning, and electrical systems contained therein.systems.

The term includes any structure that meets all of the requirements of this subdivision except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States Secretary of Housing and Urban Development and complies with the standards established under Title 42 of the United States Code.

(54)      Manufactured‑home transaction means a secured transaction: Manufactured‑home transaction. – A secured transaction if either of the following applies:

a.         That The transaction creates a purchase‑money security interest in a manufactured home, other than a manufactured home held as inventory; orinventory.

b.         In which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.

(54a)    Merchant. – Defined in G.S. 25‑2‑104.

(54b)    Money. – Defined in G.S. 25‑1‑201(b) but does not include (i) a deposit account or (ii) money in an electronic form that cannot be subjected to control under G.S. 25‑9‑105.1.

(55)      Mortgage means a Mortgage. – A consensual interest in real property, including fixtures, which that secures payment or performance of an obligation.

(55a)    Negotiable instrument. – Defined in G.S. 25‑3‑104.

(56)      New debtor means a New debtor. – A person that becomes bound as debtor under G.S. 25‑9‑203(d) by a security agreement previously entered into by another person.

(57)      New value meansNew value. – Any of the following:

a.         (i) money, Money.

b.         (ii) money's Money's worth in property, services, or new credit, orcredit.

c.         (iii) release Release by a transferee of an interest in property previously transferred to the transferee.

The term does not include an obligation substituted for another obligation.

(57a)    Nominated person. – Defined in G.S. 25‑5‑102.

(58)      Noncash proceeds means proceeds Noncash proceeds. – Proceeds other than cash proceeds.

(58a)    Note. – Defined in G.S. 25‑3‑104.

(59)      Obligor means a Obligor. – A person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.

(60)      Original debtor, except as used in G.S. 25‑9‑310(c), means a Original debtor, except as used in G.S. 25‑9‑310(c). – A person that, as debtor, entered into a security agreement to which a new debtor has become bound under G.S. 25‑9‑203(d).

(61)      Payment intangible means a Payment intangible. – A general intangible under which the account debtor's principal obligation is a monetary obligation. The term includes a controllable payment intangible.

(62)      Person related to, with respect to an individual, means:Person related to. – Defined as follows:

a.         With respect to an individual, any of the following:

a.1.      The spouse of the individual;individual.

b.2.      A brother, brother‑in‑law, sister, or sister‑in‑law of the individual;individual.

c.3.      An ancestor or lineal descendant of the individual or the individual's spouse; orspouse.

d.4.      Any other relative, by blood or marriage, of the individual or the individual's spouse who shares the same home with the individual.

(63)      Person related to, with respect to an organization, means:

b.         With respect to an organization, any of the following:

a.1.      A person directly or indirectly controlling, controlled by, or under common control with the organization;organization.

b.2.      An officer or director of, or a person performing similar functions with respect to, the organization;organization.

c.3.      An officer or director of, or a person performing similar functions with respect to, a person described in sub‑subdivision a. of this subdivision;sub‑sub‑subdivision 1. of this sub‑subdivision.

d.4.      The spouse of an individual described in sub‑subdivision a., b., or c. of this subdivision; orsub‑sub‑subdivision 1., 2., or 3., of this sub‑subdivision.

e.5.      An individual who is related by blood or marriage to an individual described in sub‑subdivision a., b., c., or d. of this subdivision sub‑sub‑subdivision 1., 2., 3., or 4. of this sub‑subdivision and shares the same home with the individual.

(64)      Proceeds, except as used in G.S. 25‑9‑609(b), means the Proceeds. – Except as used in G.S. 25‑9‑609(b), means any of the following property:

a.         Whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;collateral.

b.         Whatever is collected on, or distributed on account of, collateral;collateral.

c.         Rights arising out of collateral;collateral.

d.         To the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, thecollateral; orcollateral.

e.         To the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.

(64a)    Proceeds of a letter of credit. – Defined in G.S. 25‑5‑114.

(65)      Production‑money crops means crops Production‑money crops. – Crops that secure a production‑money obligation incurred with respect to the production of those crops.

(66)      Production‑money obligation means an Production‑money obligation. – An obligation of an obligor incurred for new value given to enable the debtor to produce crops if the value is in fact used for the production of the crops.

(67)      Production of crops includes Production of crops. – Includes tilling and otherwise preparing land for growing, planting, cultivating, fertilizing, irrigating, harvesting, gathering, and curing crops, crops and protecting them from damage or disease.

(68)      Promissory note means an Promissory note. – An instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.

(69)      Proposal means a Proposal. – A record authenticated signed by a secured party which that includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to G.S. 25‑9‑620, 25‑9‑621, and 25‑9‑622.

(69a)    Protected purchaser. – Defined in G.S. 25‑8‑303.

(69b)    Prove. – Defined in G.S. 25‑3‑103.

(70)      Public‑finance transaction means a Public‑finance transaction. – A secured transaction in connection with which:to which all of the following apply:

a.         Debt securities are issued;issued.

b.         All or a portion of the securities issued have an initial stated maturity of at least 20 years; andyears.

c.         The debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.

(70a)    Public organic record means a Public organic record. – A record that is available to the public for inspection and is:is any of the following:

a.         A record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which that amends or restates the initial record;record.

b.         An organic record of a business trust consisting of the record initially filed with a state and any record filed with the state which that amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state; orstate.

c.         A record consisting of legislation enacted by the legislature of a state or the Congress of the United States which that forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or the United States which that amends or restates the name of the organization.

(71)      Pursuant to commitment, with Pursuant to commitment. – With respect to an advance made or other value given by a secured party, means pursuant to the secured party's obligation, whether or not a subsequent event of default or other event not within the secured party's control has relieved or may relieve the secured party from its obligation.

(71a)    Qualifying purchaser. – Defined in G.S. 25‑12‑102.

(72)      Record, except as used in for record, of record, record or legal title, and record owner, Record. – Except as used in for record, of record, record or legal title, and record owner, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(73)      Registered organization means an Registered organization. – An organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust's organic record be filed with the state.

(73a)    Sale. – Defined in G.S. 25‑2‑106.

(74)      Secondary obligor means an Secondary obligor. – An obligor to the extent that:that either of the following applies:

a.         The obligor's obligation is secondary; orsecondary.

b.         The obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.

(75)      Secured party means:Secured party. – Any of the following:

a.         A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;outstanding.

b.         A person that holds an agricultural lien;lien.

c.         A consignor;consignor.

d.         A person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;sold.

e.         A trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; orfor.

f.          A person that holds a security interest arising under G.S. 25‑2‑401, 25‑2‑505, 25‑2‑711(3), 25‑2A‑508(5), 25‑4‑208, or 25‑5‑118.

(75a)    Securities account. – Defined in G.S. 25‑8‑501.

(75b)    Securities intermediary. – Defined in G.S. 25‑8‑102.

(75c)    Security. – Defined in G.S. 25‑8‑102.

(76)      Security agreement means an Security agreement. – An agreement that creates or provides for a security interest.

(76a)    Security certificate. – Defined in G.S. 25‑8‑102.

(76b)    Security entitlement. – Defined in G.S. 25‑8‑102.

(77)      Send, in connection with a record or notification, means:

a.         To deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or

b.         To cause the record or notification to be received within the time that it would have been received if properly sent under sub‑subdivision a. of this subdivision.

(78)      Software means a Software. – A computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.

(79)      State means a State. – A state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(80)      Supporting obligation means a Supporting obligation. – A letter‑of‑credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property.

(81)      Tangible chattel paper means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.

(81a)    Tangible money. – Money in a tangible form.

(82)      Termination statement means an Termination statement. – An amendment of a financing statement which:that does both of the following:

a.         Identifies, by its file number, the initial financing statement to which it relates; andrelates.

b.         Indicates either that it is a termination statement or that the identified financing statement is no longer effective.

(83)      Transmitting utility means a Transmitting utility. – A person primarily engaged in the business of:of any of the following:

a.         Operating a railroad, subway, street railway, or trolley bus;bus.

b.         Transmitting communications electrically, electromagnetically, or by light;light.

c.         Transmitting goods by pipeline or sewer; orsewer.

d.         Transmitting or producing and transmitting electricity, steam, gas, or water.

(84)      Uncertificated security. – Defined in G.S. 25‑8‑102.

(b)        Definitions in other articles. – Control as provided in G.S. 25‑7‑106 and the following definitions in other Articles of this Chapter apply to this Article:

Applicant                                                                                   G.S. 25‑5‑102.

Beneficiary                                                                                 G.S. 25‑5‑102.

Broker                                                                                        G.S. 25‑8‑102.

Certificated security                                                                   G.S. 25‑8‑102.

Check                                                                                         G.S. 25‑3‑104.

Clearing corporation                                                                  G.S. 25‑8‑102.

Contract for sale                                                                         G.S. 25‑2‑106.

Customer                                                                                    G.S. 25‑4‑104.

Entitlement holder                                                                     G.S. 25‑8‑102.

Financial asset                                                                           G.S. 25‑8‑102.

Holder in due course                                                                  G.S. 25‑3‑302.

Issuer (with respect to a letter of credit or letter‑of‑credit right)                                                               G.S. 25‑5‑102.

Issuer (with respect to a security)                                              G.S. 25‑8‑201.

Issuer (with respect to documents of title)                                G.S. 25‑7‑102.

Lease                                                                                          G.S. 25‑2A‑103.

Lease agreement                                                                        G.S. 25‑2A‑103.

Lease contract                                                                            G.S. 25‑2A‑103.

Leasehold interest                                                                      G.S. 25‑2A‑103.

Lessee                                                                                        G.S. 25‑2A‑103.

Lessee in ordinary course of business                                       G.S. 25‑2A‑103.

Lessor                                                                                         G.S. 25‑2A‑103.

Lessor's residual interest                                                            G.S. 25‑2A‑103.

Letter of credit                                                                           G.S. 25‑5‑102.

Merchant                                                                                    G.S. 25‑2‑104.

Negotiable instrument                                                               G.S. 25‑3‑104.

Nominated person                                                                      G.S. 25‑5‑102.

Note                                                                                           G.S. 25‑3‑104.

Proceeds of a letter of credit                                                      G.S. 25‑5‑114.

Prove                                                                                          G.S. 25‑3‑103.

Sale                                                                                            G.S. 25‑2‑106.

Securities account                                                                      G.S. 25‑8‑501.

Securities intermediary                                                              G.S. 25‑8‑102.

Security                                                                                      G.S. 25‑8‑102.

Security certificate                                                                     G.S. 25‑8‑102.

Security entitlement                                                                   G.S. 25‑8‑102.

Uncertificated security                                                               G.S. 25‑8‑102.

(c)        Article 1 definitions and principles. – Definitions and Principles. – Article 1 of this Chapter contains general definitions and principles of construction and interpretation applicable throughout this Article.

SECTION 3.  G.S. 25‑9‑104 reads as rewritten:

§ 25‑9‑104.  Control of deposit account.

(a)        Requirements for control. – Control. – A secured party has control of a deposit account if:if any of the following applies:

(1)        The secured party is the bank with which the deposit account is maintained;maintained.

(2)        The debtor, secured party, and bank have agreed in an authenticated a signed record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; ordebtor.

(3)        The secured party becomes the bank's customer with respect to the deposit account.

(4)        Another person, other than the debtor, does either of the following:

a.         Has control of the deposit account and acknowledges that it has control on behalf of the secured party.

b.         Obtains control of the deposit account after having acknowledged that it will obtain control of the deposit account on behalf of the secured party.

(b)        Debtor's right to direct disposition. – Right to Direct Disposition. – A secured party that has satisfied subsection (a) of this section has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.

SECTION 4.  G.S. 25‑9‑105 reads as rewritten:

§ 25‑9‑105.  Control of electronic chattel paper.copy of record evidencing chattel paper.

(a)        General Rule: Control of Electronic Chattel Paper. – A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.

(b)        Specific Facts Giving Control. – A system satisfies subsection (a) of this section if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:

(1)        A single authoritative copy of the record or records exists which is unique, identifiable, and, except as otherwise provided in subdivisions (4), (5), and (6) of this section, unalterable;

(2)        The authoritative copy identifies the secured party as the assignee of the record or records;

(3)        The authoritative copy is communicated to and maintained by the secured party or its designated custodian;

(4)        Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party;

(5)        Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and

(6)        Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

(a)        General Rule for Control of Electronic Copy of Record Evidencing Chattel Paper. – A purchaser has control of an authoritative electronic copy of a record evidencing chattel paper if a system employed for evidencing the assignment of interests in the chattel paper reliably establishes the purchaser as the person to which the authoritative electronic copy was assigned.

(b)        Single Authoritative Copy. – A system satisfies subsection (a) of this section if the record or records evidencing the chattel paper are created, stored, and assigned in a manner that satisfies all of the following requirements:

(1)        A single authoritative copy of the record or records exists that is unique, identifiable, and, except as otherwise provided in subdivisions (4), (5), and (6) of this subsection, unalterable.

(2)        The authoritative copy identifies the purchaser as the assignee of the record or records.

(3)        The authoritative copy is communicated to and maintained by the purchaser or its designated custodian.

(4)        Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the purchaser.

(5)        Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy.

(6)        Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

(c)        One or More Authoritative Copies. – A system satisfies subsection (a) of this section, and a purchaser has control of an authoritative electronic copy of a record evidencing chattel paper, if the electronic copy, a record attached to or logically associated with the electronic copy, or a system in which the electronic copy is recorded does all of the following:

(1)        Enables the purchaser readily to identify each electronic copy as either an authoritative copy or a nonauthoritative copy.

(2)        Enables the purchaser readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as the assignee of the authoritative electronic copy.

(3)        Gives the purchaser exclusive power, subject to subsection (d) of this section, to do both of the following:

a.         Prevent others from adding or changing an identified assignee of the authoritative electronic copy.

b.         Transfer control of the authoritative electronic copy.

(d)       Meaning of Exclusive. – Subject to subsection (e) of this section, a power is exclusive under subdivision (c)(3) of this section even if either of the following applies:

(1)        The authoritative electronic copy, a record attached to or logically associated with the authoritative electronic copy, or a system in which the authoritative electronic copy is recorded limits the use of the authoritative electronic copy or has a protocol programmed to cause a change, including a transfer or loss of control.

(2)        The power is shared with another person.

(e)        When Power Not Shared with Another Person. – A power of a purchaser is not shared with another person under subdivision (d)(2) of this section and the purchaser's power is not exclusive if both of the following apply:

(1)        The purchaser can exercise the power only if the power also is exercised by the other person.

(2)        Either of the following applies:

a.         The other person can exercise the power without exercise of the power by the purchaser.

b.         The other person is the transferor to the purchaser of an interest in the chattel paper.

(f)        Presumption of Exclusivity of Certain Powers. – If a purchaser has the powers specified in subdivision (c)(3) of this section, the powers are presumed to be exclusive.

(g)        Obtaining Control Through Another Person. – A purchaser has control of an authoritative electronic copy of a record evidencing chattel paper if either of the following applies to another person, other than the transferor to the purchaser of an interest in the chattel paper:

(1)        The other person has control of the authoritative electronic copy and acknowledges that it has control on behalf of the purchaser.

(2)        The other person obtains control of the authoritative electronic copy after having acknowledged that it will obtain control of the electronic copy on behalf of the purchaser.

SECTION 5.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑105.1.  Control of electronic money.

(a)        General Rule for Control of Electronic Money. – A person has control of electronic money if both of the following apply:

(1)        The electronic money, a record attached to or logically associated with the electronic money, or a system in which the electronic money is recorded gives the person both of the following:

a.         Power to avail itself of substantially all the benefit from the electronic money.

b.         Exclusive power, subject to subsection (b) of this section, to do both of the following:

1.         Prevent others from availing themselves of substantially all the benefit from the electronic money.

2.         Transfer control of the electronic money to another person or cause another person to obtain control of other electronic money as a result of the transfer of the electronic money.

(2)        The electronic money, a record attached to or logically associated with the electronic money, or a system in which the electronic money is recorded enables the person readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as having the powers under subdivision (1) of this subsection.

(b)        Meaning of Exclusive. – Subject to subsection (c) of this section, a power is exclusive under sub‑subdivision (a)(1)b. of this section even if either of the following applies:

(1)        The electronic money, a record attached to or logically associated with the electronic money, or a system in which the electronic money is recorded limits the use of the electronic money or has a protocol programmed to cause a change, including a transfer or loss of control.

(2)        The power is shared with another person.

(c)        When Power Not Shared with Another Person. – A power of a person is not shared with another person under subdivision (b)(2) of this section and the person's power is not exclusive if both of the following apply:

(1)        The person can exercise the power only if the power also is exercised by the other person.

(2)        Either of the following applies:

a.         The other person can exercise the power without exercise of the power by the person.

b.         The other person is the transferor to the person of an interest in the electronic money.

(d)       Presumption of Exclusivity of Certain Powers. – If a person has the powers specified in sub‑subdivision (a)(1)b. of this section, the powers are presumed to be exclusive.

(e)        Control Through Another Person. – A person has control of electronic money if either of the following applies to another person, other than the transferor to the person of an interest in the electronic money:

(1)        The other person has control of the electronic money and acknowledges that it has control on behalf of the person.

(2)        The other person obtains control of the electronic money after having acknowledged that it will obtain control of the electronic money on behalf of the person.

SECTION 6.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑107.1.  Control of controllable electronic record, controllable account, or controllable payment intangible.

(a)        Control Under G.S. 25‑12‑105. – A secured party has control of a controllable electronic record as provided in G.S. 25‑12‑105.

(b)        Control of Controllable Account and Controllable Payment Intangible. – A secured party has control of a controllable account or controllable payment intangible if the secured party has control of the controllable electronic record that evidences the controllable account or controllable payment intangible.

SECTION 7.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑107.2.  No requirement to acknowledge or confirm; no duties.

(a)        No Requirement to Acknowledge. – A person that has control under G.S. 25‑9‑104, 25‑9‑105, or 25‑9‑105.1 is not required to acknowledge that it has control on behalf of another person.

(b)        No Duties or Confirmation. – If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this Article otherwise provides, the person does not owe any duty to the other person and is not required to confirm the acknowledgment to any other person.

SECTION 8.  G.S. 25‑9‑203 reads as rewritten:

§ 25‑9‑203.  Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites.

(a)        Attachment. – A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.

(b)        Enforceability. – Except as otherwise provided in subsections (c) through (i) of this section, a security interest is enforceable against the debtor and third parties with respect to the collateral only if:if all of the following apply:

(1)        Value has been given;given.

(2)        The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; andparty.

(3)        One of the following conditions is met:

a.         The debtor has authenticated signed a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;concerned.

b.         The collateral is not a certificated security and is in the possession of the secured party under G.S. 25‑9‑313 pursuant to the debtor's security agreement;agreement.

c.         The collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under G.S. 25‑8‑301 pursuant to the debtor's security agreement; oragreement.

d.         The collateral is controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic chattel paper, electronic documents, electronic money, investment property, or letter‑of‑credit rights, or electronic documents, and the secured party has control under G.S. 25‑7‑106, 25‑9‑104, 25‑9‑105, 25‑9‑105.1, 25‑9‑106, or 25‑9‑107 25‑9‑107, or 25‑9‑107.1 pursuant to the debtor's security agreement.

e.         The collateral is chattel paper, and the secured party has possession and control under G.S. 25‑9‑314.1 pursuant to the debtor's security agreement.

(c)        Other UCC provisions. – Provisions. – Subsection (b) of this section is subject to G.S. 25‑4‑208 on the security interest of a collecting bank, G.S. 25‑5‑118 on the security interest of a letter‑of‑credit issuer or nominated person, G.S. 25‑9‑110 on a security interest arising under Article 2 or 2A of this Chapter, and G.S. 25‑9‑206 on security interests in investment property.

(d)       When person becomes bound by another person's security agreement. – Person Becomes Bound by Another Person's Security Agreement. – A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this Article or by contract:contract, either of the following applies:

(1)        The security agreement becomes effective to create a security interest in the person's property; orproperty.

(2)        The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

(e)        Effect of new debtor becoming bound. – New Debtor Becoming Bound. – If a new debtor becomes bound as debtor by a security agreement entered into by another person:person, both of the following apply:

(1)        The agreement satisfies subdivision (b)(3) of this section with respect to existing or after‑acquired property of the new debtor to the extent the property is described in the agreement; andagreement.

(2)        Another agreement is not necessary to make a security interest in the property enforceable.

(f)        Proceeds and supporting obligations. – Supporting Obligations. – The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by G.S. 25‑9‑315 and is also an attachment of a security interest in a supporting obligation for the collateral.

(g)        Lien securing right to payment. – Securing Right to Payment. – The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also an attachment of a security interest in the security interest, mortgage, or other lien.

(h)        Security entitlement carried in securities account. – Entitlement Carried in Securities Account. – The attachment of a security interest in a securities account is also an attachment of a security interest in the security entitlements carried in the securities account.

(i)         Commodity contracts carried in commodity account. – Contracts Carried in Commodity Account. – The attachment of a security interest in a commodity account is also an attachment of a security interest in the commodity contracts carried in the commodity account.

SECTION 9.  G.S. 25‑9‑204 reads as rewritten:

§ 25‑9‑204.  After‑acquired property; future advances.

(a)        After‑acquired collateral. – After‑Acquired Collateral. – Except as otherwise provided in subsection (b) of this section, a security agreement may create or provide for a security interest in after‑acquired collateral.

(b)        When after‑acquired property clause not effective. – A After‑Acquired Property Clause Not Effective. – Subject to subsection (b1) of this section, a security interest does not attach under a term constituting an after‑acquired property clause to:to either of the following:

(1)        Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value; orvalue.

(2)        A commercial tort claim.

(b1)      Limitation on Subsection (b). – Subsection (b) of this section does not prevent a security interest from attaching to any of the following:

(1)        To consumer goods as proceeds under G.S. 25‑9‑315(a) or commingled goods under G.S. 25‑9‑336(c).

(2)        To a commercial tort claim as proceeds under G.S. 25‑9‑315(a).

(3)        Under an after‑acquired property clause, to property that is proceeds of consumer goods or a commercial tort claim.

(c)        Future advances and other value. – Advances and Other Value. – A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with future advances or other value, whether or not the advances or value are given pursuant to commitment.

SECTION 10.  G.S. 25‑9‑207 reads as rewritten:

§ 25‑9‑207.  Rights and duties of secured party having possession or control of collateral.

(a)        Duty of care when secured party in possession. – Care When Secured Party in Possession. – Except as otherwise provided in subsection (d) of this section, a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

(b)        Expenses, risks, duties, and rights when secured party in possession. – Risks, Duties, and Rights When Secured Party in Possession. – Except as otherwise provided in subsection (d) of this section, if a secured party has possession of collateral:collateral, all of the following apply:

(1)        Reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral;collateral.

(2)        The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;coverage.

(3)        The secured party shall keep the collateral identifiable, but fungible collateral may be commingled; andcommingled.

(4)        The secured party may use or operate the collateral:collateral as follows:

a.         For the purpose of preserving the collateral or its value;value.

b.         As permitted by an order of a court having competent jurisdiction; orjurisdiction.

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

(c)        Rights and duties when secured party in possession or control. – Duties When Secured Party in Possession or Control. – Except as otherwise provided in subsection (d) of this section, all of the following apply to a secured party having possession of collateral or control of collateral under G.S. 25‑7‑106, 25‑9‑104, 25‑9‑105, 25‑9‑105.1, 25‑9‑106, or 25‑9‑107:25‑9‑107, or 25‑9‑107.1:

(1)        May The secured party may hold as additional security any proceeds, except money or funds, received from the collateral;collateral.

(2)        Shall The secured party shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; anddebtor.

(3)        May The secured party may create a security interest in the collateral.

(d)       Buyer of certain rights to payment. – Certain Rights to Payment. – If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:consignor, both of the following apply:

(1)        Subsection (a) of this section does not apply unless the secured party is entitled under an agreement:agreement to either of the following:

a.         To charge back uncollected collateral; orcollateral.

b.         Otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; andcollateral.

(2)        Subsections (b) and (c) of this section do not apply.

SECTION 11.  G.S. 25‑9‑208 reads as rewritten:

§ 25‑9‑208.  Additional duties of secured party having control of collateral.

(a)        Applicability of section. – Section. – This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.

(b)        Duties of secured party after receiving demand from debtor. – Secured Party After Receiving Demand from Debtor. – Within 10 days after receiving an authenticated a signed demand by the debtor:debtor, all of the following apply:

(1)        A secured party having control of a deposit account under G.S. 25‑9‑104(a)(2) shall send to the bank with which the deposit account is maintained an authenticated statement a signed record that releases the bank from any further obligation to comply with instructions originated by the secured party;party.

(2)        A secured party having control of a deposit account under G.S. 25‑9‑104(a)(3) shall:shall do either of the following:

a.         Pay the debtor the balance on deposit in the deposit account; oraccount.

b.         Transfer the balance on deposit into a deposit account in the debtor's name;name.

(3)        A secured party, other than a buyer, having control of electronic chattel paper under G.S. 25‑9‑105 shall:

a.         Communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;

b.         If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and

c.         Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;

A secured party, other than a buyer, having control under G.S. 25‑9‑105 of an authoritative electronic copy of a record evidencing chattel paper shall transfer control of the electronic copy to the debtor or a person designated by the debtor.

(4)        A secured party having control of investment property under G.S. 25‑8‑106(d)(2) or G.S. 25‑9‑106(b) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated a signed record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party;party.

(5)        A secured party having control of a letter‑of‑credit right under G.S. 25‑9‑107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated a signed release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party; andparty.

(6)        A secured party having control of an electronic document shall:

a.         Give control of the electronic document to the debtor or its designated custodian;

b.         If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and

c.         Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party.

A secured party having control under G.S. 25‑7‑106 of an authoritative electronic copy of an electronic document shall transfer control of the electronic copy to the debtor or a person designated by the debtor.

(7)        A secured party having control under G.S. 25‑9‑105.1 of electronic money shall transfer control of the electronic money to the debtor or a person designated by the debtor.

(8)        A secured party having control under G.S. 25‑12‑105 of a controllable electronic record, other than a buyer of a controllable account or controllable payment intangible evidenced by the controllable electronic record, shall transfer control of the controllable electronic record to the debtor or a person designated by the debtor.

SECTION 12.  G.S. 25‑9‑209 reads as rewritten:

§ 25‑9‑209.  Duties of secured party if account debtor has been notified of assignment.

(a)        Applicability of section. – Section. – Except as otherwise provided in subsection (c) of this section, this section applies if:if there

(1)        There is no outstanding secured obligation; obligation and the

(2)        The secured party is not committed to make advances, incur obligations, or otherwise give value.

(b)        Duties of secured party after receiving demand from debtor. – Secured Party After Receiving Demand from Debtor. – Within 10 days after receiving an authenticated a signed demand by the debtor, a secured party shall send to an account debtor that has received notification under G.S. 25‑9‑406(a) or G.S. 25‑12‑106(b) of an assignment to the secured party as assignee under G.S. 25‑9‑406(a) an authenticated a signed record that releases the account debtor from any further obligation to the secured party.

(c)        Inapplicability to sales. – Sales. – This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.

SECTION 13.  G.S. 25‑9‑210 reads as rewritten:

§ 25‑9‑210.  Request for accounting; request regarding list of collateral or statement of account.

(a)        Definitions. – In this section:section, the following definitions apply:

(1)        Request means a Request. – A record of a type described in subdivision (2), (3), or (4) of this subsection.

(2)        Request for an accounting means a Request for an accounting. – A record authenticated signed by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request.

(3)        Request regarding a list of collateral means a Request regarding a list of collateral. – A record authenticated signed by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request.

(4)        Request regarding a statement of account means a Request regarding a statement of account. – A record authenticated signed by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.

(b)        Duty to respond to requests. – Respond to Requests. – Subject to subsections (c), (d), (e), and (f) of this section, a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, shall comply with a request within 14 days after receipt:receipt as follows:

(1)        In the case of a request for an accounting, by authenticating signing and sending to the debtor an accounting; andaccounting.

(2)        In the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating signing and sending to the debtor an approval or correction.

(c)        Request regarding list of collateral; statement concerning type of collateral. – Regarding List of Collateral; Statement Concerning Type of Collateral. – A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor an authenticated a signed record including a statement to that effect within 14 days after receipt.

(d)       Request regarding list of collateral; no interest claimed. – Regarding List of Collateral; No Interest Claimed. – A person that receives a request regarding a list of collateral, claims no interest in the collateral when it receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record:a signed record that does both of the following:

(1)        Disclaiming Disclaims any interest in the collateral; andcollateral.

(2)        If known to the recipient, providing provides the name and mailing address of any assignee of or successor to the recipient's interest in the collateral.

(e)        Request for accounting or regarding statement of account; no interest in obligation claimed. – Accounting or Regarding Statement of Account; No Interest in Obligation Claimed. – A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier time shall comply with the request within 14 days after receipt by sending to the debtor an authenticated record:a signed record that does both of the following:

(1)        Disclaiming Disclaims any interest in the obligations; andobligations.

(2)        If known to the recipient, providing provides the name and mailing address of any assignee of or successor to the recipient's interest in the obligations.

(f)        Charges for responses. – Responses. – A debtor is entitled without charge to one response to a request under this section during any six‑month period. The secured party may require payment of a charge not exceeding twenty‑five dollars ($25.00) for each additional response.

SECTION 14.  G.S. 25‑9‑301 reads as rewritten:

§ 25‑9‑301.  Law governing perfection and priority of security interests.

Except as otherwise provided in G.S. 25‑9‑303 through G.S. 25‑9‑306, G.S. 25‑9‑306.2, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:

(1)        Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.

(2)        While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.

(3)        Except as otherwise provided in paragraph subdivision (4) of this section, while tangible negotiable tangible documents, goods, instruments, money, or tangible chattel paper or tangible money is located in a jurisdiction, the local law of that jurisdiction governs:governs all of the following:

a.         Perfection of a security interest in the goods by filing a fixture filing;filing.

b.         Perfection of a security interest in timber to be cut; andcut.

c.         The effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.

(4)        The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as‑extracted collateral.

SECTION 15.  G.S. 25‑9‑304 reads as rewritten:

§ 25‑9‑304.  Law governing perfection and priority of security interests in deposit accounts.

(a)        Law of bank's jurisdiction governs. – Bank's Jurisdiction Governs. – The local law of a bank's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.bank even if the transaction does not bear any relation to the bank's jurisdiction.

(b)        Bank's jurisdiction. – Jurisdiction. – The following rules determine a bank's jurisdiction for purposes of this Part:

….

SECTION 16.  G.S. 25‑9‑305 reads as rewritten:

§ 25‑9‑305.  Law governing perfection and priority of security interests in investment property.

(a)        Governing law: general rules. – General Rules for Governing Law. – Except as otherwise provided in subsection (c) of this section, the following rules apply:

(1)        While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.

(2)        The local law of the issuer's jurisdiction as specified in G.S. 25‑8‑110(d) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.

(3)        The local law of the securities intermediary's jurisdiction as specified in G.S. 25‑8‑110(e) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account.

(4)        The local law of the commodity intermediary's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.

(5)        Subdivisions (2), (3), and (4) of this subsection apply even if the transaction does not bear any relation to the jurisdiction.

(b)        Commodity intermediary's jurisdiction. – Intermediary's Jurisdiction. – The following rules determine a commodity intermediary's jurisdiction for purposes of this Part:

…

(c)        When perfection governed by law of jurisdiction where debtor located. – Perfection Governed by Law of Jurisdiction Where Debtor Located. – The local law of the jurisdiction in which the debtor is located governs:governs all of the following:

(1)        Perfection of a security interest in investment property by filing;filing.

(2)        Automatic perfection of a security interest in investment property created by a broker or securities intermediary; andintermediary.

(3)        Automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.

SECTION 17.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑306.1.  Law governing perfection and priority of security interests in chattel paper.

(a)        Chattel Paper Evidenced by Authoritative Electronic Copy. – Except as provided in subsection (d) of this section, if chattel paper is evidenced only by an authoritative electronic copy of the chattel paper or is evidenced by an authoritative electronic copy and an authoritative tangible copy, the local law of the chattel paper's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the chattel paper, even if the transaction does not bear any relation to the chattel paper's jurisdiction.

(b)        Chattel Paper's Jurisdiction. – The following rules determine the chattel paper's jurisdiction under this section:

(1)        If the authoritative electronic copy of the record evidencing chattel paper, or a record attached to or logically associated with the electronic copy and readily available for review, expressly provides that a particular jurisdiction is the chattel paper's jurisdiction for purposes of this Part, this Article, or this Chapter, that jurisdiction is the chattel paper's jurisdiction.

(2)        If subdivision (1) of this subsection does not apply and the rules of the system in which the authoritative electronic copy is recorded are readily available for review and expressly provide that a particular jurisdiction is the chattel paper's jurisdiction for purposes of this Part, this Article, or this Chapter, that jurisdiction is the chattel paper's jurisdiction.

(3)        If subdivisions (1) and (2) of this subsection do not apply and the authoritative electronic copy, or a record attached to or logically associated with the electronic copy and readily available for review, expressly provides that the chattel paper is governed by the law of a particular jurisdiction, that jurisdiction is the chattel paper's jurisdiction.

(4)        If subdivisions (1), (2), and (3) of this subsection do not apply and the rules of the system in which the authoritative electronic copy is recorded are readily available for review and expressly provide that the chattel paper or the system is governed by the law of a particular jurisdiction, that jurisdiction is the chattel paper's jurisdiction.

(5)        If subdivisions (1) through (4) of this subsection do not apply, the chattel paper's jurisdiction is the jurisdiction in which the debtor is located.

(c)        Chattel Paper Evidenced by Authoritative Tangible Copy. – If an authoritative tangible copy of a record evidences chattel paper and the chattel paper is not evidenced by an authoritative electronic copy, while the authoritative tangible copy of the record evidencing chattel paper is located in a jurisdiction, the local law of that jurisdiction governs both of the following:

(1)        Perfection of a security interest in the chattel paper by possession under G.S. 25‑9‑314.1.

(2)        The effect of perfection or nonperfection and the priority of a security interest in the chattel paper.

(d)       When Perfection Governed by Law of Jurisdiction Where Debtor Located. – The local law of the jurisdiction in which the debtor is located governs perfection of a security interest in chattel paper by filing.

SECTION 18.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑306.2.  Law governing perfection and priority of security interests in controllable accounts, controllable electronic records, and controllable payment intangibles.

(a)        General Rules for Governing Law. – Except as provided in subsection (b) of this section, the local law of the controllable electronic record's jurisdiction specified in G.S. 25‑12‑107(c) and (d) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a controllable electronic record and a security interest in a controllable account or controllable payment intangible evidenced by the controllable electronic record.

(b)        When Perfection Governed by Law of Jurisdiction Where Debtor Located. – The local law of the jurisdiction in which the debtor is located governs both of the following:

(1)        Perfection of a security interest in a controllable account, controllable electronic record, or controllable payment intangible by filing.

(2)        Automatic perfection of a security interest in a controllable payment intangible created by a sale of the controllable payment intangible.

SECTION 19.  G.S. 25‑9‑310 reads as rewritten:

§ 25‑9‑310.  When filing required to perfect security interest or agricultural lien; security interests and agricultural liens to which filing provisions do not apply.

(a)        General rule: perfection by filing. – Rule for Perfection by Filing. – Except as otherwise provided in subsection (b) of this section and G.S. 25‑9‑312(b), a financing statement must be filed to perfect all security interests and agricultural liens.

(b)        Exceptions: filing not necessary. – Exceptions When Filing Not Necessary. – The filing of a financing statement is not necessary to perfect a security interest:any of the following security interests:

(1)        That A security interest that is perfected under G.S. 25‑9‑308(d), (e), (f), or (g);G.S. 25‑9‑308(d), (e), (f), or (g).

(2)        That A security interest that is perfected under G.S. 25‑9‑309 when it attaches;attaches.

(3)        In A security interest in property subject to a statute, regulation, or treaty described in G.S. 25‑9‑311(a);G.S. 25‑9‑311(a).

(4)        In A security interest in goods in possession of a bailee which that is perfected under G.S. 25‑9‑312(d)(1) or (2);G.S. 25‑9‑312(d)(1) or (2).

(5)        In A security interest in certificated securities, documents, goods, or instruments which that is perfected without filing, control, or possession under G.S. 25‑9‑312(e), (f), or (g);G.S. 25‑9‑312(e), (f), or (g).

(6)        In A security interest in collateral in the secured party's possession under G.S. 25‑9‑313;G.S. 25‑9‑313.

(7)        In A security interest in a certificated security which that is perfected by delivery of the security certificate to the secured party under G.S. 25‑9‑313;G.S. 25‑9‑313.

(8)        In A security interest in controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic chattel paper, electronic documents, investment property, or letter‑of‑credit rights which that is perfected by control under G.S. 25‑9‑314;G.S. 25‑9‑314.

(8a)      A security interest in chattel paper that is perfected by possession and control under G.S. 25‑9‑314.1.

(9)        In A security interest in proceeds which that is perfected under G.S. 25‑9‑315; orG.S. 25‑9‑315.

(10)      That A security interest that is perfected under G.S. 25‑9‑316.

(c)        Assignment of perfected security interest. – Perfected Security Interest. – If a secured party assigns a perfected security interest or agricultural lien, a filing under this Article is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.

SECTION 20.  G.S. 25‑9‑312 reads as rewritten:

§ 25‑9‑312.  Perfection of security interests in chattel paper, controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, negotiable documents, goods covered by documents, instruments, investment property, letter‑of‑credit rights, and money; perfection by permissive filing; temporary perfection without filing or transfer of possession.

(a)        Perfection by filing permitted. – Filing Permitted. – A security interest in chattel paper, negotiable documents, controllable accounts, controllable electronic records, controllable payment intangibles, instruments, or investment property investment property, or negotiable documents may be perfected by filing.

(b)        Control or possession of certain collateral. – Possession of Certain Collateral. – Except as otherwise provided in G.S. 25‑9‑315(c) and (d) for proceeds:proceeds, all of the following apply:

(1)        A security interest in a deposit account may be perfected only by control under G.S. 25‑9‑314;G.S. 25‑9‑314.

(2)        And except Except as otherwise provided in G.S. 25‑9‑308(d), a security interest in a letter‑of‑credit right may be perfected only by control under G.S. 25‑9‑314; andG.S. 25‑9‑314.

(3)        A security interest in tangible money may be perfected only by the secured party's taking possession under G.S. 25‑9‑313.

(4)        A security interest in electronic money may be perfected only by control under G.S. 25‑9‑314.

(c)        Goods covered by negotiable document. – Covered by Negotiable Document. – While goods are in the possession of a bailee that has issued a negotiable document covering the goods:goods, both of the following apply:

(1)        A security interest in the goods may be perfected by perfecting a security interest in the document; anddocument.

(2)        A security interest perfected in the document has priority over any security interest that becomes perfected in the goods by another method during that time.

(d)       Goods covered by nonnegotiable document. – Covered by Nonnegotiable Document. – While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by:by any of the following:

(1)        Issuance of a document in the name of the secured party;party.

(2)        The bailee's receipt of notification of the secured party's interest; orinterest.

(3)        Filing as to the goods.

(e)        Temporary perfection: new value. – Perfection for New Value. – A security interest in certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of 20 days from the time it attaches to the extent that it arises for new value given under an authenticated a signed security agreement.

(f)        Temporary perfection: goods or documents made available to debtor. – Perfection for Goods or Documents Made Available to Debtor. – A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for 20 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of:of either of the following:

(1)        Ultimate sale or exchange; orexchange.

(2)        Loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange.

(g)        Temporary perfection: delivery of security certificate or instrument to debtor. – Perfection for Delivery of Security Certificate or Instrument to Debtor. – A perfected security interest in a certificated security or instrument remains perfected for 20 days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of:of either of the following:

(1)        Ultimate sale or exchange; orexchange.

(2)        Presentation, collection, enforcement, renewal, or registration of transfer.

(h)        Expiration of temporary perfection. – Temporary Perfection. – After the 20‑day period specified in subsection (e), (f), or (g) of this section expires, perfection depends upon compliance with this Article.

SECTION 21.  G.S. 25‑9‑313 reads as rewritten:

§ 25‑9‑313.  When possession by or delivery to secured party perfects security interest without filing.

(a)        Perfection by possession or delivery. – Possession or Delivery. – Except as otherwise provided in subsection (b) of this section, a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper negotiable tangible documents, or tangible money by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under G.S. 25‑8‑301.

(b)        Goods covered by certificate of title. – Covered by Certificate of Title. – With respect to goods covered by a certificate of title issued by this State, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in G.S. 25‑9‑316(d).

(c)        Collateral in possession of person other than debtor. – Possession of Person Other Than Debtor. – With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business, when:when either of the following applies:

(1)        The person in possession authenticates signs a record acknowledging that it holds possession of the collateral for the secured party's benefit; orbenefit.

(2)        The person takes possession of the collateral after having authenticated signed a record acknowledging that it will hold possession of the collateral for the secured party's benefit.

(d)       Time of perfection by possession; continuation of perfection. – Perfection by Possession; Continuation of Perfection. – If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no not earlier than the time the secured party takes possession and continues only while the secured party retains possession.

(e)        Time of perfection by delivery; continuation of perfection. – Perfection by Delivery; Continuation of Perfection. – A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under G.S. 25‑8‑301 and remains perfected by delivery until the debtor obtains possession of the security certificate.

(f)        Acknowledgment not required. – Not Required. – A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.

(g)        Effectiveness of acknowledgment; no duties or confirmation. – Acknowledgment; No Duties or Confirmation. – If a person acknowledges that it holds possession for the secured party's benefit:benefit, both of the following apply:

(1)        The acknowledgment is effective under subsection (c) of this section or G.S. 25‑8‑301(a), even if the acknowledgment violates the rights of a debtor; anddebtor.

(2)        Unless the person otherwise agrees or law other than this Article otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.

(h)        Secured party's delivery to person other than debtor. – Party's Delivery to Person Other Than Debtor. – A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:delivery to do either of the following:

(1)        To hold possession of the collateral for the secured party's benefit; orbenefit.

(2)        To redeliver the collateral to the secured party.

(i)         Effect of delivery under subsection (h); no duties or confirmation. – Delivery Under Subsection (h); No Duties or Confirmation. – A secured party does not relinquish possession, even if a delivery under subsection (h) of this section violates the rights of a debtor. A person to which collateral is delivered under subsection (h) of this section does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this Article otherwise provides.

SECTION 22.  G.S. 25‑9‑314 reads as rewritten:

§ 25‑9‑314.  Perfection by control.

(a)        Perfection by control. – Control. – A security interest in investment property, deposit accounts, letter‑of‑credit rights, electronic chattel paper, or electronic documents controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, investment property, or letter‑of‑credit rights may be perfected by control of the collateral under G.S. 25‑7‑106, 25‑9‑104, 25‑9‑105, 25‑9‑105.1, 25‑9‑106, or 25‑9‑107.25‑9‑107, or 25‑9‑107.1.

(b)        Specified collateral: time of perfection by control; continuation of perfection. – Collateral; Time of Perfection by Control; Continuation of Perfection. – A security interest in deposit accounts, electronic chattel paper, letter‑of‑credit rights, or electronic documents controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, electronic money, or letter‑of‑credit rights is perfected by control under G.S. 25‑7‑106, 25‑9‑104, 25‑9‑105, or 25‑9‑107 when 25‑9‑105.1, 25‑9‑107, or 25‑9‑107.1 not earlier than the time the secured party obtains control and remains perfected by control only while the secured party retains control.

(c)        Investment property: time of perfection by control; continuation of perfection. – Property; Time of Perfection by Control; Continuation of Perfection. – A security interest in investment property is perfected by control under G.S. 25‑9‑106 from not earlier than the time the secured party obtains control and remains perfected by control until:until both of the following occur:

(1)        The secured party does not have control; andcontrol.

(2)        One of the following occurs:

a.         If the collateral is a certificated security, the debtor has or acquires possession of the security certificate;certificate.

b.         If the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; orowner.

c.         If the collateral is a security entitlement, the debtor is or becomes the entitlement holder.

SECTION 23.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑314.1.  Perfection by possession and control of chattel paper.

(a)        Perfection by Possession and Control. – A secured party may perfect a security interest in chattel paper by taking possession of each authoritative tangible copy of the record evidencing the chattel paper and obtaining control of each authoritative electronic copy of the electronic record evidencing the chattel paper.

(b)        Time of Perfection; Continuation of Perfection. – A security interest is perfected under subsection (a) of this section not earlier than the time the secured party takes possession and obtains control and remains perfected under subsection (a) of this section only while the secured party retains possession and control.

(c)        Application of G.S. 25‑9‑313 to Perfection by Possession of Chattel Paper. – G.S. 25‑9‑313(c) and (f) through (i) apply to perfection by possession of an authoritative tangible copy of a record evidencing chattel paper.

SECTION 24.  G.S. 25‑9‑316 reads as rewritten:

§ 25‑9‑316.  Effect of change in governing law.

(a)        General rule: effect on perfection of change in governing law. – Rule for Effect on Perfection of Change in Governing Law. – A security interest perfected pursuant to the law of the jurisdiction designated in G.S. 25‑9‑301(1) or G.S. 25‑9‑305(c) G.S. 25‑9‑301(1), 25‑9‑305(c), 25‑9‑306.1(d), or 25‑9‑306.2(b) remains perfected until the earliest of:of the following:

(1)        The time perfection would have ceased under the law of that jurisdiction;jurisdiction.

(2)        The expiration of four months after a change of the debtor's location to another jurisdiction; orjurisdiction.

(3)        The expiration of one year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.

(b)        Security interest perfected or unperfected under law of new jurisdiction. – Interest Perfected or Unperfected Under Law of New Jurisdiction. – If a security interest described in subsection (a) of this section becomes perfected under the law of the other jurisdiction before the earliest time or event described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(c)        Possessory security interest in collateral moved to new jurisdiction. – Security Interest in Collateral Moved to New Jurisdiction. – A possessory security interest in collateral, other than goods covered by a certificate of title and as‑extracted collateral consisting of goods, remains continuously perfected if:if all of the following apply:

(1)        The collateral is located in one jurisdiction and subject to a security interest perfected under the law of that jurisdiction;jurisdiction.

(2)        Thereafter the collateral is brought into another jurisdiction; andjurisdiction.

(3)        Upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.

(d)       Goods covered by certificate of title from this State. – Covered by Certificate of Title from this State. – Except as otherwise provided in subsection (e) of this section, a security interest in goods covered by a certificate of title which that is perfected by any method under the law of another jurisdiction when the goods become covered by a certificate of title from this State remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.

(e)        When subsection (d) security interest becomes unperfected against purchasers. – Subsection (d) Security Interest Becomes Unperfected Against Purchasers. – A security interest described in subsection (d) of this section becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under G.S. 25‑9‑311(b) or G.S. 25‑9‑313 are not satisfied before the earlier of:of the following:

(1)        The time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this State; orState.

(2)        The expiration of four months after the goods had become so covered.

(f)        Change in jurisdiction of bank, issuer, nominated person, securities intermediary, or commodity intermediary. – Jurisdiction of Chattel Paper, Controllable Electronic Record, Bank, Issuer, Nominated Person, Securities Intermediary, or Commodity Intermediary. – A security interest in chattel paper, controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, letter‑of‑credit rights, or investment property which that is perfected under the law of the chattel paper's jurisdiction, the controllable electronic record's jurisdiction, the bank's jurisdiction, the issuer's jurisdiction, a nominated person's jurisdiction, the securities intermediary's jurisdiction, or the commodity intermediary's jurisdiction, as applicable, remains perfected until the earlier of:of the following:

(1)        The time the security interest would have become unperfected under the law of that jurisdiction; orjurisdiction.

(2)        The expiration of four months after a change of the applicable jurisdiction to another jurisdiction.

(g)        Subsection (f) security interest perfected or unperfected under law of new jurisdiction. – Security Interest Perfected or Unperfected Under Law of New Jurisdiction. – If a security interest described in subsection (f) of this section becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

…

(i)         Effect of Change in Governing Law on Financing Statement Filed Against Original Debtor. – If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in G.S. 25‑9‑301(1) or G.S. 25‑9‑305(c) and the new debtor is located in another jurisdiction, the following rules apply:

…

(2)        A security interest perfected by the financing statement and which that becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in G.S. 25‑9‑301(1) or G.S. 25‑9‑305(c) or the expiration of the four‑month period remains perfected thereafter. A security interest that is perfected by the financing statement but which that does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

SECTION 25.  G.S. 25‑9‑317 reads as rewritten:

§ 25‑9‑317.  Interests that take priority over or take free of security interest or agricultural lien.

(a)        Conflicting security interests and rights of lien creditors. – Security Interests and Rights of Lien Creditors. – A security interest or agricultural lien is subordinate to the rights of:of both of the following:

(1)        A person entitled to priority under G.S. 25‑9‑322; andG.S. 25‑9‑322.

(2)        Except as otherwise provided in subsection (e) of this section, a person that becomes a lien creditor before the earlier of the time:following:

a.         The security interest or agricultural lien is perfected; orperfected.

b.         One of the conditions specified in G.S. 25‑9‑203(b)(3) is met and a financing statement covering the collateral is filed.

(b)        Buyers that receive delivery. – That Receive Delivery. – Except as otherwise provided in subsection (e) of this section, a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, tangible documents, or a certificated security takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(c)        Lessees that receive delivery. – That Receive Delivery. – Except as otherwise provided in subsection (e) of this section, a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(d)       Licensees and buyers of certain collateral. – A Buyers of Certain Collateral. – Subject to subsections (f) through (i) of this section, a licensee of a general intangible or a buyer, other than a secured party, of collateral other than tangible chattel paper, tangible documents, electronic money, goods, instruments, tangible documents, or a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.

(e)        Purchase‑money security interest. – Purchase‑Money Security Interest. – Except as otherwise provided in G.S. 25‑9‑320 and G.S. 25‑9‑321, if a person files a financing statement with respect to a purchase‑money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which that arise between the time the security interest attaches and the time of filing.

(f)        Buyers of Chattel Paper. – A buyer, other than a secured party, of chattel paper takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and does both of the following:

(1)        Receives delivery of each authoritative tangible copy of the record evidencing the chattel paper.

(2)        If each authoritative electronic copy of the record evidencing the chattel paper can be subjected to control under G.S. 25‑9‑105, obtains control of each authoritative electronic copy.

(g)        Buyers of Electronic Documents. – A buyer of an electronic document takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and, if each authoritative electronic copy of the document can be subjected to control under G.S. 25‑7‑106, obtains control of each authoritative electronic copy.

(h)        Buyers of Controllable Electronic Records. – A buyer of a controllable electronic record takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and obtains control of the controllable electronic record.

(i)         Buyers of Controllable Accounts and Controllable Payment Intangibles. – A buyer, other than a secured party, of a controllable account or a controllable payment intangible takes free of a security interest if, without knowledge of the security interest and before it is perfected, the buyer gives value and obtains control of the controllable account or controllable payment intangible.

SECTION 26.  G.S. 25‑9‑323 reads as rewritten:

§ 25‑9‑323.  Future advances.

(a)        When priority based on time of advance. – Priority Based on Time of Advance. – Except as otherwise provided in subsection (c) of this section, for purposes of determining the priority of a perfected security interest under G.S. 25‑9‑322(a)(1), perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:that meets both of the following conditions:

(1)        Is The advance is made while the security interest is perfected only:only under either of the following:

a.         Under G.S. 25‑9‑309 when it attaches; orattaches.

b.         Temporarily under G.S. 25‑9‑312(e), (f), or (g); andG.S. 25‑9‑312(e), (f), or (g).

(2)        Is The advance is not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under G.S. 25‑9‑309 or G.S. 25‑9‑312(e), (f), or (g).

(b)        Lien creditor. – Creditor. – Except as otherwise provided in subsection (c) of this section, a security interest is subordinate to the rights of a person that becomes a lien creditor to the extent that the security interest secures an advance made more than 45 days after the person becomes a lien creditor unless the advance is made:made under either of the following circumstances:

(1)        Without knowledge of the lien; orlien.

(2)        Pursuant to a commitment entered into without knowledge of the lien.

(c)        Buyer of receivables. – Receivables. – Subsections (a) and (b) of this section do not apply to a security interest held by a secured party that is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.

(d)       Buyer of goods. – Goods. – Except as otherwise provided in subsection (e) of this section, a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of:of the following:

(1)        The time the secured party acquires knowledge of the buyer's purchase; orpurchase.

(2)        45 Forty‑five days after the purchase.

(e)        Advances made pursuant to commitment: priority of buyer of goods. – Made Pursuant to Commitment; Priority of Buyer of Goods. – Subsection (d) of this section does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer's purchase and before the expiration of the 45‑day period.

(f)        Lessee of goods. – Goods. – Except as otherwise provided in subsection (g) of this section, a lessee of goods, other than a lessee in ordinary course of business, goods takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of:of the following:

(1)        The time the secured party acquires knowledge of the lease; orlease.

(2)        45 Forty‑five days after the lease contract becomes enforceable.

(g)        Advances made pursuant to commitment: priority of lessee of goods. – Made Pursuant to Commitment; Priority of Lessee of Goods. – Subsection (f) of this section does not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the 45‑day period.

SECTION 27.  G.S. 25‑9‑324 reads as rewritten:

§ 25‑9‑324.  Priority of purchase‑money security interests.

(a)        General rule: purchase‑money priority. – Rule for Purchase‑Money Priority. – Except as otherwise provided in subsection (g) of this section, a perfected purchase‑money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in G.S. 25‑9‑327, a perfected security interest in its identifiable proceeds also has priority, if the purchase‑money security interest is perfected when the debtor receives possession of the collateral or within 20 days thereafter.

(b)        Inventory purchase‑money priority. – Purchase‑Money Priority. – Subject to subsection (c) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase‑money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in G.S. 25‑9‑330, and, except as otherwise provided in G.S. 25‑9‑327, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if:if all of the following apply:

(1)        The purchase‑money security interest is perfected when the debtor receives possession of the inventory;inventory.

(2)        The purchase‑money secured party sends an authenticated a signed notification to the holder of the conflicting security interest;interest.

(3)        The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; andinventory.

(4)        The notification states that the person sending the notification has or expects to acquire a purchase‑money security interest in inventory of the debtor and describes the inventory.

(c)        Holders of conflicting inventory security interests to be notified. – Conflicting Inventory Security Interests to be Notified. – Subdivisions (b)(2) through (b)(4) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:inventory as follows:

(1)        If the purchase‑money security interest is perfected by filing, before the date of the filing; orfiling.

(2)        If the purchase‑money security interest is temporarily perfected without filing or possession under G.S. 25‑9‑312(f), before the beginning of the 20‑day period thereunder.under that provision.

(d)       Livestock purchase‑money priority. – Purchase‑Money Priority. – Subject to subsection (e) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase‑money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in G.S. 25‑9‑327, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:if all of the following apply:

(1)        The purchase‑money security interest is perfected when the debtor receives possession of the livestock;livestock.

(2)        The purchase‑money secured party sends an authenticated a signed notification to the holder of the conflicting security interest;interest.

(3)        The holder of the conflicting security interest receives the notification within six months before the debtor receives possession of the livestock; andlivestock.

(4)        The notification states that the person sending the notification has or expects to acquire a purchase‑money security interest in livestock of the debtor and describes the livestock.

(e)        Holders of conflicting livestock security interests to be notified. – Conflicting Livestock Security Interests to be Notified. – Subdivisions (d)(2) through (d)(4) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:livestock as follows:

(1)        If the purchase‑money security interest is perfected by filing, before the date of the filing; orfiling.

(2)        If the purchase‑money security interest is temporarily perfected without filing or possession under G.S. 25‑9‑312(f), before the beginning of the 20‑day period thereunder.under that provision.

(f)        Software purchase‑money priority. – Purchase‑Money Priority. – Except as otherwise provided in subsection (g) of this section, a perfected purchase‑money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in G.S. 25‑9‑327, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase‑money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.

(g)        Conflicting purchase‑money security interests. – Purchase‑Money Security Interests. – If more than one security interest qualifies for priority in the same collateral under subsection (a), (b), (d), or (f) of this section:section, the following provisions apply:

(1)        A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; andcollateral.

(2)        In all other cases, G.S. 25‑9‑322(a) applies to the qualifying security interests.

SECTION 28.  Article 9 of Chapter 25 of the General Statutes is amended by adding a new section to read:

§ 25‑9‑326.1.  Priority of security interest in controllable account, controllable electronic record, and controllable payment intangible.

A security interest in a controllable account, controllable electronic record, or controllable payment intangible held by a secured party having control of the account, electronic record, or payment intangible has priority over a conflicting security interest held by a secured party that does not have control.

SECTION 29.  G.S. 25‑9‑330 reads as rewritten:

§ 25‑9‑330.  Priority of purchaser of chattel paper or instrument.

(a)        Purchaser's priority: security interest claimed merely as proceeds. – Priority; Security Interest Claimed Merely as Proceeds. – A purchaser of chattel paper has priority over a security interest in the chattel paper which that is claimed merely as proceeds of inventory subject to a security interest if:if both of the following requirements are met:

(1)        In good faith and in the ordinary course of the purchaser's business, the purchaser gives new value and value, takes possession of each authoritative tangible copy of the record evidencing the chattel paper or paper, and obtains control of the chattel paper under G.S. 25‑9‑105; andunder G.S. 25‑9‑105 of each authoritative electronic copy of the record evidencing the chattel paper.

(2)        The chattel paper does authoritative copies of the record evidencing the chattel paper do not indicate that it the chattel paper has been assigned to an identified assignee other than the purchaser.

(b)        Purchaser's priority: other security interests. – Priority; Other Security Interests. – A purchaser of chattel paper has priority over a security interest in the chattel paper which that is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and value, takes possession of each authoritative tangible copy of the record evidencing the chattel paper or paper, and obtains control of under G.S. 25‑9‑105 of each authoritative electronic copy of the record evidencing the chattel paper under G.S. 25‑9‑105 in good faith, in the ordinary course of the purchaser's business, and without knowledge that the purchase violates the rights of the secured party.

(c)        Chattel paper purchaser's priority in proceeds. – Paper Purchaser's Priority in Proceeds. – Except as otherwise provided in G.S. 25‑9‑327, a purchaser having priority in chattel paper under subsection (a) or (b) of this section also has priority in proceeds of the chattel paper to the extent that:that either of the following applies:

(1)        G.S. 25‑9‑322 provides for priority in the proceeds; orproceeds.

(2)        The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser's security interest in the proceeds is unperfected.

(d)       Instrument purchaser's priority. – Purchaser's Priority. – Except as otherwise provided in G.S. 25‑9‑331(a), a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.

(e)        Holder of purchase‑money security interest gives new value. – Purchase‑Money Security Interest Gives New Value. – For purposes of subsections (a) and (b) of this section, the holder of a purchase‑money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.

(f)        Indication of assignment gives knowledge. – Assignment Gives Knowledge. – For purposes of subsections (b) and (d) of this section, if the authoritative copies of the record evidencing chattel paper or an instrument indicates indicate that it the chattel paper or instrument has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.

SECTION 30.  G.S. 25‑9‑331 reads as rewritten:

§ 25‑9‑331.  Priority of rights of purchasers of instruments, controllable accounts, controllable electronic records, controllable payment intangibles, documents, instruments, and securities under other Articles; priority of interests in financial assets and security entitlements and protection against assertion of claim under Article 8.Articles 8 and 12.

(a)        Rights under Articles 3, 7, and 8 not limited. – Under Articles 3, 7, 8, and 12 Not Limited. – This Article does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security. security, or a qualifying purchaser of a controllable account, controllable electronic record, or controllable payment intangible. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in Articles 3, 7, and 8 8, and 12 of this Chapter.

(b)        Protection under Article 8. Under Articles 8 and 12. – This Article does not limit the rights of or impose liability on a person to the extent that the person is protected against the assertion of a claim under Article 8 or 12 of this Chapter.

(c)        Filing not notice. – Not Notice. – Filing under this Article does not constitute notice of a claim or defense to the holders, or purchasers, or persons described in subsections (a) and (b) of this section.

SECTION 31.  G.S. 25‑9‑332 reads as rewritten:

§ 25‑9‑332.  Transfer of money; transfer of funds from deposit account.

(a)        Transferee of money. Tangible Money. – A transferee of tangible money takes the money free of a security interest unless the transferee acts if the transferee receives possession of the money without acting in collusion with the debtor in violating the rights of the secured party.

(b)        Transferee of funds Funds from deposit account. Deposit Account. – A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts if the transferee receives the funds without acting in collusion with the debtor in violating the rights of the secured party.

(c)        Transferee of Electronic Money. – A transferee of electronic money takes the money free of a security interest if the transferee obtains control of the money without acting in collusion with the debtor in violating the rights of the secured party.

SECTION 32.  G.S. 25‑9‑334 reads as rewritten:

§ 25‑9‑334.  Priority of security interests in fixtures and crops.

(a)        Security interest in fixtures under this Article. – Interest in Fixtures Under this Article. – A security interest under this Article may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this Article in ordinary building materials incorporated into an improvement on land.

(b)        Security interest in fixtures under real‑property law. – Interest in Fixtures Under Real Property Law. – This Article does not prevent creation of an encumbrance upon fixtures under real property law.

(c)        General rule: subordination of security interest in fixtures. – Rule for Subordination of Security Interest in Fixtures. – In cases not governed by subsections (d) through (h) of this section, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.

(d)       Fixtures purchase‑money priority. – Purchase‑Money Priority. – Except as otherwise provided in subsection (h) of this section, a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:and all of the following apply:

(1)        The security interest is a purchase‑money security interest;interest.

(2)        The interest of the encumbrancer or owner arises before the goods become fixtures; andfixtures.

(3)        The security interest is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.

(e)        Priority of security interest in fixtures over interests in real property. – Security Interest in Fixtures over Interests in Real Property. – A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:if any of the following applies:

(1)        The debtor has an interest of record in the real property or is in possession of the real property and both of the following apply to the security interest:

a.         Is The security interest is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; andrecord.

b.         Has The security interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;owner.

(2)        Before the goods become fixtures, the security interest is perfected by any method permitted by this Article and the fixtures are any of the following readily removable:removable goods:

a.         Factory or office machines;machines.

b.         Equipment that is not primarily used or leased for use in the operation of the real property; orproperty.

c.         Replacements of domestic appliances that are consumer goods;goods.

(3)        The conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this Article; orArticle.

(4)        The security interest is:is created

a.         Created in a manufactured home in a manufactured‑home transaction; andtransaction and perfected

b.         Perfected pursuant to a statute described in G.S. 25‑9‑311(a)(2).

(f)        Priority based on consent, disclaimer, or right to remove. – Based on Consent, Disclaimer, or Right to Remove. – A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:if either of the following applies:

(1)        The encumbrancer or owner has, in an authenticated a signed record, consented to the security interest or disclaimed an interest in the goods as fixtures; orfixtures.

(2)        The debtor has a right to remove the goods as against the encumbrancer or owner.

(g)        Continuation of subdivision (f)(2) priority. – Subdivision (f)(2) Priority. – The priority of the security interest under subdivision (f)(2) of this section continues for a reasonable time if the debtor's right to remove the goods as against the encumbrancer or owner terminates.

(h)        Priority of construction mortgage. – Construction Mortgage. – A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subsections (e) and (f) of this section, a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.

(i)         Priority of security interest in crops. – Security Interest in Crops. – Except as provided in G.S. 42‑15, a perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.

SECTION 33.  G.S. 25‑9‑341 reads as rewritten:

§ 25‑9‑341.  Bank's rights and duties with respect to deposit account.

Except as otherwise provided in G.S. 25‑9‑340(c), and unless the bank otherwise agrees in an authenticated a signed record, a bank's rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended, or modified by:by any of the following:

(1)        The creation, attachment, or perfection of a security interest in the deposit account;account.

(2)        The bank's knowledge of the security interest; orinterest.

(3)        The bank's receipt of instructions from the secured party.

SECTION 34.  G.S. 25‑9‑404 reads as rewritten:

§ 25‑9‑404.  Rights acquired by assignee; claims and defenses against assignee.

(a)        Assignee's rights subject to terms, claims, and defenses; exceptions. – Rights Subject to Terms, Claims, and Defenses; Exceptions. – Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) through (e) of this section, the rights of an assignee are subject to:to both of the following:

(1)        All terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; andcontract.

(2)        Any other defense or claim of the account debtor against the assignor which that accrues before the account debtor receives a notification of the assignment authenticated signed by the assignor or the assignee.

(b)        Account debtor's claim reduces amount owed to assignee. – Debtor's Claim Reduces Amount Owed to Assignee. – Subject to subsection (c) of this section and except as otherwise provided in subsection (d) of this section, the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) of this section only to reduce the amount the account debtor owes.

(c)        Rule for individual under other law. – Individual Under Other Law. – This section is subject to law other than this Article which that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

(d)       Omission of required statement in consumer transaction. – Required Statement in Consumer Transaction. – In a consumer transaction, if a record evidences the account debtor's obligation, law other than this Article requires that the record include a statement to the effect that the account debtor's recovery against an assignee with respect to claims and defenses against the assignor may shall not exceed amounts paid by the account debtor under the record, and the record does not include such a this statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included such a this statement.

(e)        Inapplicability to health‑care‑insurance receivable. – Health‑Care‑Insurance Receivable. – This section does not apply to an assignment of a health‑care‑insurance receivable.

SECTION 35.  G.S. 25‑9‑406 reads as rewritten:

§ 25‑9‑406.  Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.

(a)        Discharge of account debtor; effect of notification. – Account Debtor; Effect of Notification. – Subject to subsections (b) through (i) and (l) of this section, an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated signed by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may shall not discharge the obligation by paying the assignor.

(b)        When notification ineffective. – Notification Ineffective. – Subject to subsection (h) subsections (h) and (l) of this section, notification is ineffective under subsection (a) of this section:section under any of the following conditions:

(1)        If it does not reasonably identify the rights assigned;assigned.

(2)        To the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this Article; orArticle.

(3)        At the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:if any of the following applies:

a.         Only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee;assignee.

b.         A portion has been assigned to another assignee; orassignee.

c.         The account debtor knows that the assignment to that assignee is limited.

(c)        Proof of assignment. – Assignment. – Subject to subsection (h) subsections (h) and (l) of this section, if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a) of this section.

(d)       Term restricting assignment generally ineffective. – Restricting Assignment Generally Ineffective. – In this subsection, promissory note includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subsection (e) of this section and G.S. 25‑2A‑303 and G.S. 25‑9‑407, and subject to subsection (h) of this section, a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:it does either of the following:

(1)        Prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note; ornote.

(2)        Provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible, or promissory note.

(e)        Inapplicability of subsection (d) to certain sales. – Subsection (d) to Certain Sales. – Subsection (d) of this section does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under G.S. 25‑9‑610 or an acceptance of collateral under G.S. 25‑9‑620.

(f)        Legal restrictions on assignment generally ineffective. – Restrictions on Assignment Generally Ineffective. – Except as otherwise provided in G.S. 25‑2A‑303 and G.S. 25‑9‑407 and subject to subsections (h) and (i) of this section, a rule of law, statute, or regulation law that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:law does either of the following:

(1)        Prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; orpaper.

(2)        Provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account or chattel paper.

(g)        Subdivision (b)(3) not waivable. – Not Waivable. – Subject to subsection (h) subsections (h) and (l) of this section, an account debtor may shall not waive or vary its option under subdivision (b)(3) of this section.

(h)        Rule for individual under other law. – Individual Under Other Law. – This section is subject to law other than this Article which that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

…

(j)         Section prevails over inconsistent law. – Prevails over Inconsistent Law. – Except to the extent otherwise provided in subsection (i) of this section, this section prevails over any inconsistent provision of an existing or future statute, rule, or regulation statute or rule of this State unless the provision is contained in a statute of this State, refers expressly to this section, and states that the provision prevails over this section.

(k)        Reserved for future codification purposes.

(l)         Inapplicability of Certain Subsections. – Subsections (a), (b), (c), and (g) of this section do not apply to a controllable account or controllable payment intangible.

SECTION 36.  G.S. 25‑9‑408 reads as rewritten:

§ 25‑9‑408.  Restrictions on assignment of promissory notes, health‑care‑insurance receivables, and certain general intangibles ineffective.

(a)        Term restricting assignment generally ineffective. – Restricting Assignment Generally Ineffective. – Except as otherwise provided in subsection (b) of this section, a term in a promissory note or in an agreement between an account debtor and a debtor which that relates to a health‑care‑insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term that prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health‑care‑insurance receivable, or general intangible, is ineffective to the extent that the term:term would do or does either of the following:

(1)        Would impair the creation, attachment, or perfection of a security interest; orinterest.

(2)        Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health‑care‑insurance receivable, or general intangible.

(b)        Applicability of subsection (a) to sales of certain rights to payment. – Subsection (a) to Sales of Certain Rights to Payment. – Subsection (a) of this section applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note, other than a sale pursuant to a disposition under G.S. 25‑9‑610 or an acceptance of collateral under G.S. 25‑9‑620.

(c)        Legal restrictions on assignment generally ineffective. – Restrictions on Assignment Generally Ineffective. – A rule of law, statute, or regulation law that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health‑care‑insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:law would do or does either of the following:

(1)        Would impair the creation, attachment, or perfection of a security interest; orinterest.

(2)        Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health‑care‑insurance receivable, or general intangible.

(d)       Limitation on ineffectiveness under subsections (a) and (c). – Ineffectiveness Under Subsections (a) and (c). – To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which that relates to a health‑care‑insurance receivable or general intangible or a rule of law, statute, or regulation law described in subsection (c) of this section would be effective under law other than this Article but is ineffective under subsection (a) or (c) of this section, all of the following apply to the creation, attachment, or perfection of a security interest in the promissory note, health‑care‑insurance receivable, or general intangible:

(1)        Is The security interest is not enforceable against the person obligated on the promissory note or the account debtor;debtor.

(2)        Does The security interest does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;debtor.

(3)        Does The security interest does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party;party.

(4)        Does The security interest does not entitle the secured party to use or assign the debtor's rights under the promissory note, health‑care‑insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health‑care‑insurance receivable, or general intangible;intangible.

(5)        Does The security interest does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor; anddebtor.

(6)        Does The security interest does not entitle the secured party to enforce the security interest in the promissory note, health‑care‑insurance receivable, or general intangible.

(e)        Section prevails over inconsistent law. – Prevails over Inconsistent Law. – Except to the extent otherwise provided in subsection (f) of this section, this section prevails over any inconsistent provision of an existing or future statute, rule, or regulation of statute or rule of this State unless the provision is contained in a statute of this State, refers expressly to this section, and states that the provision prevails over this section.

…

(g)        Promissory Note. – In this section, promissory note includes a negotiable instrument that evidences chattel paper.

SECTION 37.  G.S. 25‑9‑509 reads as rewritten:

§ 25‑9‑509.  Persons entitled to file a record.

(a)        Person entitled to file record. – Entitled to File Record. – A person may file an initial financing statement, amendment that adds collateral covered by a financing statement, or amendment that adds a debtor to a financing statement only if:if either of the following applies:

(1)        The debtor authorizes the filing in an authenticated a signed record or pursuant to subsection (b) or (c) of this section; orsection.

(2)        The person holds an agricultural lien that has become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien.

(b)        Security agreement as authorization. – By authenticating Agreement as Authorization. – By signing or becoming bound as debtor by a security agreement, a debtor or new debtor authorizes the filing of an initial financing statement, and an amendment, covering:covering both of the following:

(1)        The collateral described in the security agreement; andagreement.

(2)        Property that becomes collateral under G.S. 25‑9‑315(a)(2), whether or not the security agreement expressly covers proceeds.

(c)        Acquisition of collateral as authorization. – Collateral as Authorization. – By acquiring collateral in which a security interest or agricultural lien continues under G.S. 25‑9‑315(a)(1), a debtor authorizes the filing of an initial financing statement, and an amendment, covering the collateral and property that becomes collateral under G.S. 25‑9‑315(a)(2).

(d)       Person entitled to file certain amendments. – Entitled to File Certain Amendments. – A person may file an amendment other than an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement only if:if either of the following applies:

(1)        The secured party of record authorizes the filing; orfiling.

(2)        The amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required by G.S. 25‑9‑513(a) or (c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.

(e)        Multiple secured parties of record. – Secured Parties of Record. – If there is more than one secured party of record for a financing statement, each secured party of record may authorize the filing of an amendment under subsection (d) of this section.

SECTION 38.  G.S. 25‑9‑513 reads as rewritten:

§ 25‑9‑513.  Termination statement.

(a)        Consumer goods. – Goods. – A secured party shall cause the secured party of record for a financing statement to file a termination statement for the financing statement if the financing statement covers consumer goods and:and either of the following applies:

(1)        There is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; orvalue.

(2)        The debtor did not authorize the filing of the initial financing statement.

(b)        Time for compliance with subsection (a). – Compliance with Subsection (a). – To comply with subsection (a) of this section, a secured party shall cause the secured party of record to file the termination statement:statement by the earlier of the following:

(1)        Within one month after there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; orvalue.

(2)        If earlier, within Within 20 days after the secured party receives an authenticated a signed demand from a debtor.

(c)        Other collateral. – Collateral. – In cases not governed by subsection (a) of this section, within 20 days after a secured party receives an authenticated a signed demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:if any of the following applies:

(1)        Except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value;value.

(2)        The financing statement covers accounts or chattel paper that has been sold but as to which the account debtor or other person obligated has discharged its obligation;obligation.

(3)        The financing statement covers goods that were the subject of a consignment to the debtor but are not in the debtor's possession; orpossession.

(4)        The debtor did not authorize the filing of the initial financing statement.

(d)       Effect of filing termination statement. – Filing Termination Statement. – Except as otherwise provided in G.S. 25‑9‑510, upon the filing of a termination statement with the filing office, the financing statement to which the termination statement relates ceases to be effective. Except as otherwise provided in G.S. 25‑9‑510, for purposes of G.S. 25‑9‑519(g), 25‑9‑522(a), and 25‑9‑523(c), the filing with the filing office of a termination statement relating to a financing statement that indicates that the debtor is a transmitting utility also causes the effectiveness of the financing statement to lapse.

SECTION 39.  G.S. 25‑9‑601 reads as rewritten:

§ 25‑9‑601.  Rights after default; judicial enforcement; consignor or buyer of accounts, chattel paper, payment intangibles, or promissory notes.

(a)        Rights of secured party after default. – Secured Party After Default. – After default, a secured party has the rights provided in this Part and, except as otherwise provided in G.S. 25‑9‑602, those provided by agreement of the parties. A secured party:party may do both of the following:

(1)        May reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure; andprocedure.

(2)        If the collateral is documents, may proceed either as to the documents or as to the goods they cover.

(b)        Rights and duties of secured party in possession or control. – Duties of Secured Party in Possession or Control. – A secured party in possession of collateral or control of collateral under G.S. 25‑7‑106, 25‑9‑104, 25‑9‑105, 25‑9‑105.1, 25‑9‑106, or 25‑9‑107 25‑9‑107, or 25‑9‑107.1 has the rights and duties provided in G.S. 25‑9‑207.

(c)        Rights cumulative; simultaneous exercise. – Cumulative; Simultaneous Exercise. – The rights under subsections (a) and (b) of this section are cumulative and may be exercised simultaneously.

(d)       Rights of debtor and obligor. – Debtor and Obligor. – Except as otherwise provided in subsection (g) of this section and G.S. 25‑9‑605, after default, a debtor and an obligor have the rights provided in this Part and by agreement of the parties.

(e)        Lien of levy after judgment. – Levy After Judgment. – If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based upon the judgment relates back to the earliest of:of the following:

(1)        The date of perfection of the security interest or agricultural lien in the collateral;collateral.

(2)        The date of filing a financing statement covering the collateral; orcollateral.

(3)        Any date specified in a statute under which the agricultural lien was created.

(f)        Execution sale. – Sale. – A sale pursuant to an execution is a foreclosure of the security interest or agricultural lien by judicial procedure within the meaning of this section. A secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this Article.

(g)        Consignor or buyer of certain rights to payment. – Buyer of Certain Rights to Payment. – Except as otherwise provided in G.S. 25‑9‑607(c), this Part imposes no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.

SECTION 40.  G.S. 25‑9‑605 reads as rewritten:

§ 25‑9‑605.  Unknown debtor or secondary obligor.

(a)        A No Duty Generally Owed by Secured Party. – Except as provided in subsection (b) of this section, a secured party does not owe a duty based on its status as secured party:party to either of the following:

(1)        To a person that is a debtor or obligor, unless the secured party knows:knows all of the following:

a.         That the person is a debtor or obligor;obligor.

b.         The identity of the person; andperson.

c.         How to communicate with the person; orperson.

(2)        To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:knows both of the following:

a.         That the person is a debtor; anddebtor.

b.         The identity of the person.

(b)        Exception When Secured Party Owes Duty to Debtor or Obligor. – A secured party owes a duty based on its status as a secured party to a person if, at the time the secured party obtains control of collateral that is a controllable account, controllable electronic record, or controllable payment intangible or at the time the security interest attaches to the collateral, whichever is later, both of the following apply:

(1)        The person is a debtor or obligor.

(2)        The secured party knows that the information in sub‑subdivision (a)(1)a., b., or c. of this section relating to the person is not provided by the collateral, a record attached to or logically associated with the collateral, or the system in which the collateral is recorded.

SECTION 41.  G.S. 25‑9‑608 reads as rewritten:

§ 25‑9‑608.  Application of proceeds of collection or enforcement; liability for deficiency and right to surplus.

(a)        Application of proceeds, surplus, and deficiency if obligation secured. – Proceeds, Surplus, and Deficiency If Obligation Secured. – If a security interest or agricultural lien secures payment or performance of an obligation, the following rules apply:

(1)        A secured party shall apply or pay over for application the cash proceeds of collection or enforcement under G.S. 25‑9‑607 to the following in the following order to:order:

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

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

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

…

(b)        No surplus or deficiency in sales of certain rights to payment. – Surplus or Deficiency in Sales of Certain Rights to Payment. – If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.

SECTION 42.  G.S. 25‑9‑611 reads as rewritten:

§ 25‑9‑611.  Notification before disposition of collateral.

(a)        Notification date. – Date. – In this section, notification date means the earlier of the date on which:the date of the earlier of the following:

(1)        A secured party sends to the debtor and any secondary obligor an authenticated a signed notification of disposition; ordisposition.

(2)        The debtor and any secondary obligor waive the right to notification.

(b)        Notification of disposition required. – Disposition Required. – Except as otherwise provided in subsection (d) of this section, a secured party that disposes of collateral under G.S. 25‑9‑610 shall send to the persons specified in subsection (c) of this section a reasonable authenticated signed notification of disposition.

(c)        Persons to be notified. – Notified. – To comply with subsection (b) of this section, the secured party shall send an authenticated a signed notification of disposition to:to all of the following:

(1)        The debtor;debtor.

(2)        Any secondary obligor; andobligor.

(3)        If the collateral is other than consumer goods:goods, all of the following:

a.         Any other person from which the secured party has received, before the notification date, an authenticated a signed notification of a claim of an interest in the collateral;collateral.

b.         Any other secured party or lienholder that, 10 days before the notification date, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:that meets all of the following requirements:

1.         Identified the collateral;collateral.

2.         Was indexed under the debtor's name as of that date; anddate.

3.         Was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date; anddate.

c.         Any other secured party that, 10 days before the notification date, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in G.S. 25‑9‑311(a).

(d)       Subsection (b) inapplicable: perishable collateral; recognized market. – Inapplicable to Perishable Collateral or Recognized Market. – Subsection (b) of this section does not apply if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market.

(e)        Compliance with sub‑subdivision Sub‑Subdivision (c)(3)b. – A secured party complies with the requirement for notification prescribed by sub‑subdivision (c)(3)b. of this section if:if both of the following apply:

(1)        Not later than 20 days or earlier than 30 days before the notification date, the secured party requests, in a commercially reasonable manner, information concerning financing statements indexed under the debtor's name in the office indicated in sub‑subdivision (c)(3)b. of this section; andsection.

(2)        Before the notification date, the secured party:either of the following applied:

a.         Did The secured party did not receive a response to the request for information; orinformation.

b.         Received The secured party received a response to the request for information and sent an authenticated a signed notification of disposition to each secured party or other lienholder named in that response whose financing statement covered the collateral.

SECTION 43.  G.S. 25‑9‑613 reads as rewritten:

§ 25‑9‑613.  Contents and form of notification before disposition of collateral: general.

(a)        Contents and Form of Notification. – Except in a consumer‑goods transaction, the following rules apply:

(1)        The contents of a notification of disposition are sufficient if the notification:notification does all of the following:

a.         Describes the debtor and the secured party;party.

b.         Describes the collateral that is the subject of the intended disposition;disposition.

c.         States the method of intended disposition;disposition.

d.         States that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting; andaccounting.

e.         States the time and place of a public disposition or the time after which any other disposition is to be made.

(2)        Whether the contents of a notification that lacks any of the information specified in subdivision (1) of this section subsection are nevertheless sufficient is a question of fact.

(3)        The contents of a notification providing substantially the information specified in subdivision (1) of this section subsection are sufficient, even if the notification includes:includes either of the following:

a.         Information not specified by that subdivision; orsubdivision.

b.         Minor errors that are not seriously misleading.

(4)        A particular phrasing of the notification is not required.

(5)        The following form of notification and the form appearing in G.S. 25‑9‑614(3), when completed, G.S. 25‑9‑614(a)(3), when completed in accordance with the instructions in subsection (b) of this section and G.S. 25‑9‑614(b), each provides sufficient information:

NOTIFICATION OF DISPOSITION OF COLLATERAL

To:             [Name of debtor, obligor, or other person to which the notification is sent]

From:         [Name, address, and telephone number of secured party]

Name of Debtor(s):           [Include only if debtor(s) is/are not an addressee]

[For a public disposition:]

We will sell [or lease or license, as applicable] the [describe collateral] [to the highest qualified bidder] in public as follows:

Day and Date:_________________________________

Time:__________________________________

Place:__________________________________

[For a private disposition:]

We will sell [or lease or license, as applicable] the [describe collateral] privately sometime after [day and date].

You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell [or lease or license, as applicable] [for a charge of $ _______]. You may request an accounting by calling us at [telephone number]

NOTIFICATION OF DISPOSITION OF COLLATERAL

To:       (Name of debtor, obligor, or other person to which the notification is sent)

From:   (Name, address, and telephone number of secured party)

{1}      (Name of each debtor that is not an addressee)

{2}      We will sell (describe collateral) (to the highest qualified bidder) at public sale. A sale could include a lease or license. The sale will be held as follows:

            (Date)

            (Time)

            (Place)

{3}      We will sell (describe collateral) at private sale sometime after (date). A sale could include a lease or license.

{4}      You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell or, as applicable, lease or license.

{5}      If you request an accounting, you must pay a charge of $ (amount).

{6}      You may request an accounting by calling us at (telephone number).

(b)        Instructions for Form of Notification. – The following instructions apply to the form of notification in subdivision (a)(5) of this section:

(1)        The instructions in this subsection refer to the numbers in braces before items in the form of notification in subdivision (a)(5) of this section. Do not include the numbers or braces in the notification. The numbers and braces are used only for the purpose of these instructions.

(2)        Include and complete item {1} only if there is a debtor that is not an addressee of the notification and list the name or names.

(3)        Include and complete either item {2}, if the notification relates to a public disposition of the collateral, or item {3}, if the notification relates to a private disposition of the collateral. If item {2} is included, include the words to the highest qualified bidder only if applicable.

(4)        Include and complete items {4} and {6}.

(5)        Include and complete item {5} only if the sender will charge the recipient for an accounting.

SECTION 44.  G.S. 25‑9‑614 reads as rewritten:

§ 25‑9‑614.  Contents and form of notification before disposition of collateral: consumer‑goods transaction.

(a)        Contents and Form of Notification. – In a consumer‑goods transaction, the following rules apply:

(1)        A notification of disposition must provide all of the following information:

a.         The information specified in G.S. 25‑9‑613(1);G.S. 25‑9‑613(a)(1).

b.         A description of any liability for a deficiency of the person to which the notification is sent;sent.

c.         A telephone number from which the amount that must be paid to the secured party to redeem the collateral under G.S. 25‑9‑623 is available; andavailable.

d.         A telephone number or mailing address from which additional information concerning the disposition and the obligation secured is available.

(2)        A particular phrasing of the notification is not required.

(3)        The following form of notification, when completed, completed in accordance with the instructions in subsection (b) of this section, provides sufficient information:

[Name and address of secured party]

[Date]

NOTICE OF OUR PLAN TO SELL PROPERTY

[Name and address of any obligor who is also a debtor]

Subject:  [Identification of Transaction]

We have your [describe collateral], because you broke promises in our agreement.

[For a public disposition:]

We will sell [describe collateral] at public sale. A sale could include a lease or license. The sale will be held as follows:

Date:_________________________________________________

Time:_________________________________________________

Place:_________________________________________________

You may attend the sale and bring bidders if you want.

[For a private disposition:]

We will sell [describe collateral] at private sale sometime after [date]. A sale could include a lease or license.

The money that we get from the sale (after paying our costs) will reduce the amount you owe. If we get less money than you owe, you [will or will not, as applicable] still owe us the difference. If we get more money than you owe, you will get the extra money, unless we must pay it to someone else.

You can get the property back at any time before we sell it by paying us the full amount you owe (not just the past due payments), including our expenses. To learn the exact amount you must pay, call us at [telephone number].

If you want us to explain to you in writing how we have figured the amount that you owe us, you may call us at [telephone number] or write us at [secured party's address] and request a written explanation. [We will charge you $__________ for the explanation if we sent you another written explanation of the amount you owe us within the last six months.]

If you need more information about the sale call us at [telephone number] [or write us at [secured party's address].

We are sending this notice to the following other people who have an interest in [describe collateral] or who owe money under your agreement:

[Names of all other debtors and obligors, if any]

(Name and address of secured party)

(Date)

NOTICE OF OUR PLAN TO SELL PROPERTY

(Name and address of any obligor who is also a debtor)

Subject:     (Identify transaction)

We have your (describe collateral), because you broke promises in our agreement.

{1}      We will sell (describe collateral) at public sale. A sale could include a lease or license. The sale will be held as follows:

(Date)

(Time)

(Place)

You may attend the sale and bring bidders if you want.

{2}      We will sell (describe collateral) at private sale sometime after (date). A sale could include a lease or license.

{3}      The money that we get from the sale, after paying our costs, will reduce the amount you owe. If we get less money than you owe, you (will or will not, as applicable) still owe us the difference. If we get more money than you owe, you will get the extra money, unless we must pay it to someone else.

{4}      You can get the property back at any time before we sell it by paying us the full amount you owe, not just the past due payments, including our expenses. To learn the exact amount you must pay, call us at (telephone number).

{5}      If you want us to explain to you in (writing) (writing or in (description of electronic record)) (description of electronic record) how we have figured the amount that you owe us, {6} call us at (telephone number) (or) (write us at (secured party's address)) (or contact us by (description of electronic communication method)) {7} and request (a written explanation) (a written explanation or an explanation in (description of electronic record)) (an explanation in (description of electronic record)).

{8}      We will charge you $ (amount) for the explanation if we sent you another written explanation of the amount you owe us within the last six months.

{9}      If you need more information about the sale (call us at (telephone number)) (or) (write us at (secured party's address)) (or contact us by (description of electronic communication method)).

{10}    We are sending this notice to the following other people who have an interest in (describe collateral) or who owe money under your agreement: (Names of all other debtors and obligors, if any).

(4)        A notification in the form of subdivision (3) of this section subsection is sufficient, even if additional information appears at the end of the form.

(5)        A notification in the form of subdivision (3) of this section subsection is sufficient, even if it includes errors in information not required by subdivision (1) of this section, subsection, unless the error is misleading with respect to rights arising under this Article.

(6)        If a notification under this section is not in the form of subdivision (3) of this section, subsection, law other than this Article determines the effect of including information not required by subdivision (1) of this section.subsection.

(b)        Instructions for Form of Notification. – The following instructions apply to the form of notification in subdivision (a)(3) of this section:

(1)        The instructions in this subsection refer to the numbers in braces before items in the form of notification in subdivision (a)(3) of this section. Do not include the numbers or braces in the notification. The numbers and braces are used only for the purpose of these instructions.

(2)        Include and complete either item {1}, if the notification relates to a public disposition of the collateral, or item {2}, if the notification relates to a private disposition of the collateral.

(3)        Include and complete items {3}, {4}, {5}, {6}, and {7}.

(4)        In item {5}, include and complete any one of the three alternative methods for the explanation – writing, writing or electronic record, or electronic record.

(5)        In item {6}, include the telephone number. In addition, the sender may include and complete either or both of the two additional alternative methods of communication – writing or electronic communication – for the recipient of the notification to communicate with the sender. Neither of the two additional methods of communication is required to be included.

(6)        In item {7}, include and complete the method or methods for the explanation – writing, writing or electronic record, or electronic record – included in item {5}.

(7)        Include and complete item {8} only if a written explanation is included in item {5} as a method for communicating the explanation and the sender will charge the recipient for another written explanation.

(8)        In item {9}, include either the telephone number or the address or both the telephone number and the address. In addition, the sender may include and complete the additional method of communication – electronic communication – for the recipient of the notification to communicate with the sender. The additional method of electronic communication is not required to be included.

(9)        If item {10} does not apply, insert None after agreement:.

SECTION 45.  G.S. 25‑9‑615 reads as rewritten:

§ 25‑9‑615.  Application of proceeds of disposition; liability for deficiency and right to surplus.

(a)        Application of proceeds. – Proceeds. – A secured party shall apply or pay over for application the cash proceeds of disposition under G.S. 25‑9‑610 to the following in the following order to:order:

(1)        The reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney's attorneys' fees and legal expenses incurred by the secured party;party.

(2)        The satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;made.

(3)        The satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:if both of the following apply:

a.         The secured party receives from the holder of the subordinate security interest or other lien an authenticated a signed demand for proceeds before distribution of the proceeds is completed; andcompleted.

b.         In a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; andconsignor.

(4)        A secured party that is a consignor of the collateral if the secured party receives from the consignor an authenticated a signed demand for proceeds before distribution of the proceeds is completed.

(b)        Proof of subordinate interest. – Subordinate Interest. – If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder's demand under subdivision (a)(3) of this section.

(c)        Application of noncash proceeds. – Noncash Proceeds. – A secured party need not apply or pay over for application noncash proceeds of disposition under G.S. 25‑9‑610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.

(d)       Surplus or deficiency if obligation secured. – Deficiency If Obligation Secured. – If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection (a) of this section and permitted by subsection (c) of this section:section, both of the following apply:

(1)        Unless subdivision (a)(4) of this section requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus; andsurplus.

(2)        The obligor is liable for any deficiency.

(e)        No surplus or deficiency in sales of certain rights to payment. – Surplus or Deficiency in Sales of Certain Rights to Payment. – If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes:notes, both of the following apply:

(1)        The debtor is not entitled to any surplus; andsurplus.

(2)        The obligor is not liable for any deficiency.

(f)        Calculation of surplus or deficiency in disposition to person related to secured party. – Surplus or Deficiency in Disposition to Person Related to Secured Party. – The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this Part to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:if both of the following apply:

(1)        The transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; andobligor.

(2)        The amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.

(g)        Cash proceeds received by junior secured party. – A Proceeds Received by Junior Secured Party. – All of the following apply to a secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:

(1)        Takes The secured party takes the cash proceeds free of the security interest or other lien;lien.

(2)        Is The secured party is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; andlien.

(3)        Is The secured party is not obligated to account to or pay the holder of the security interest or other lien for any surplus.

SECTION 46.  G.S. 25‑9‑616 reads as rewritten:

§ 25‑9‑616.  Explanation of calculation of surplus or deficiency.

(a)        Definitions. – In this section:section, the following definitions apply:

(1)        Explanation means a writing that:Explanation. – A record that does all of the following:

a.         States the amount of the surplus or deficiency;deficiency.

b.         Provides an explanation information in accordance with subsection (c) of this section of explaining how the secured party calculated the surplus or deficiency;deficiency.

c.         States, if applicable, that future debits, credits, charges, including additional credit service charges or interest, rebates, and expenses may affect the amount of the surplus or deficiency; anddeficiency.

d.         Provides a telephone number or mailing address from which additional information concerning the transaction is available.

(2)        Request means a record:Request. – A record to which all of the following apply:

a.         Authenticated It is signed by a debtor or consumer obligor;obligor.

b.         Requesting It requests that the recipient provide an explanation; andexplanation.

c.         Sent It is sent after disposition of the collateral under G.S. 25‑9‑610.

(b)        Explanation of calculation. – Calculation. – In a consumer‑goods transaction in which the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency under G.S. 25‑9‑615, the secured party shall:shall do either of the following:

(1)        Send an explanation to the debtor or consumer obligor, as applicable, after the disposition and:and in accordance with both of the following:

a.         Before or when the secured party accounts to the debtor and pays any surplus or first makes written demand in a record on the consumer obligor after the disposition for payment of the deficiency; anddeficiency.

b.         Within 14 days after receipt of a request; orrequest.

(2)        In the case of a consumer obligor who is liable for a deficiency, within 14 days after receipt of a request, send to the consumer obligor a record waiving the secured party's right to a deficiency.

(c)        Required information. – Information. – To comply with sub‑subdivision (a)(1)b. of this section, a writing must an explanation shall provide the following information in the following order:

(1)        The aggregate amount of obligations secured by the security interest under which the disposition was made, and, if the amount reflects a rebate of unearned interest or credit service charge, an indication of that fact, calculated as of a specified date:date as follows:

a.         If the secured party takes or receives possession of the collateral after default, not more than 35 days before the secured party takes or receives possession; orpossession.

b.         If the secured party takes or receives possession of the collateral before default or does not take possession of the collateral, not more than 35 days before the disposition;disposition.

(2)        The amount of proceeds of the disposition;disposition.

(3)        The aggregate amount of the obligations after deducting the amount of proceeds;proceeds.

(4)        The amount, in the aggregate or by type, and types of expenses, including expenses of retaking, holding, preparing for disposition, processing, and disposing of the collateral, and attorney's attorneys' fees secured by the collateral which that are known to the secured party and relate to the current disposition;disposition.

(5)        The amount, in the aggregate or by type, and types of credits, including rebates of interest or credit service charges, to which the obligor is known to be entitled and which that are not reflected in the amount in subdivision (1) of this subsection; andsubsection.

(6)        The amount of the surplus or deficiency.

(d)       Substantial compliance. – Compliance. – A particular phrasing of the explanation is not required. An explanation complying substantially with the requirements of subsection (a) of this section is sufficient, even if it includes minor errors that are not seriously misleading.

(e)        Charges for responses. – Responses. – A debtor or consumer obligor is entitled without charge to one response to a request under this section during any six‑month period in which the secured party did not send to the debtor or consumer obligor an explanation pursuant to subdivision (b)(1) of this section. The secured party may require payment of a charge not exceeding twenty‑five dollars ($25.00) for each additional response.

SECTION 47.  G.S. 25‑9‑619 reads as rewritten:

§ 25‑9‑619.  Transfer of record or legal title.

(a)        Transfer statement. – Statement. – In this section, transfer statement means a record authenticated signed by a secured party stating:stating all of the following:

(1)        That the debtor has defaulted in connection with an obligation secured by specified collateral;collateral.

(2)        That the secured party has exercised its postdefault remedies with respect to the collateral;collateral.

(3)        That, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral; andcollateral.

(4)        The name and mailing address of the secured party, debtor, and transferee.

(b)        Effect of transfer statement. – Transfer Statement. – A transfer statement entitles the transferee to the transfer of record of all rights of the debtor in the collateral specified in the statement in any official filing, recording, registration, or certificate‑of‑title system covering the collateral. If a transfer statement is presented with the applicable fee and request form to the official or office responsible for maintaining the system, the official or office shall:shall do all of the following:

(1)        Accept the transfer statement;statement.

(2)        Promptly amend its records to reflect the transfer; andtransfer.

(3)        If applicable, issue a new appropriate certificate of title in the name of the transferee.

(c)        Transfer not a disposition; no relief of secured party's duties. – Not a Disposition; No Relief of Secured Party's Duties. – A transfer of the record or legal title to collateral to a secured party under subsection (b) of this section or otherwise is not of itself a disposition of collateral under this Article and does not of itself relieve the secured party of its duties under this Article.

SECTION 48.  G.S. 25‑9‑620 reads as rewritten:

§ 25‑9‑620.  Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.

(a)        Conditions to acceptance in satisfaction. – Acceptance in Satisfaction. – Except as otherwise provided in subsection (g) of this section, a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:if all of the following apply:

(1)        The debtor consents to the acceptance under subsection (c) of this section;section.

(2)        The secured party does not receive, within the time set forth in subsection (d) of this section, a notification of objection to the proposal authenticated by:signed by either of the following:

a.         A person to which the secured party was required to send a proposal under G.S. 25‑9‑621; orG.S. 25‑9‑621.

b.         Any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;proposal.

(3)        If the collateral is consumer goods, the collateral is not in the possession of the debtor when the debtor consents to the acceptance; andacceptance.

(4)        Subsection (e) of this section does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to G.S. 25‑9‑624.

(b)        Purported acceptance ineffective. – Acceptance Ineffective. – A purported or apparent acceptance of collateral under this section is ineffective unless:unless both of the following apply:

(1)        The secured party consents to the acceptance in an authenticated a signed record or sends a proposal to the debtor; anddebtor.

(2)        The conditions of subsection (a) of this section are met.

(c)        Debtor's consent. – Consent. – For purposes of this section:section, both of the following apply:

(1)        A debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated signed after default; anddefault.

(2)        A debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated signed after default or the secured party:all of the following apply:

a.         Sends The secured party sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;maintained.

b.         In the proposal, the secured party proposes to accept collateral in full satisfaction of the obligation it secures; andsecures.

c.         Does The secured party does not receive a notification of objection authenticated signed by the debtor within 20 days after the proposal is sent.

(d)       Effectiveness of notification. – Notification. – To be effective under subdivision (a)(2) of this section, a notification of objection must shall be received by the secured party:party as follows:

(1)        In the case of a person to which the proposal was sent pursuant to G.S. 25‑9‑621, within 20 days after notification was sent to that person; andperson.

(2)        In other cases:cases as follows:

a.         Within 20 days after the last notification was sent pursuant to G.S. 25‑9‑621; orG.S. 25‑9‑621.

b.         If a notification was not sent, before the debtor consents to the acceptance under subsection (c) of this section.

(e)        Mandatory disposition of consumer goods. – Disposition of Consumer Goods. – A secured party that has taken possession of collateral shall dispose of the collateral pursuant to G.S. 25‑9‑610 within the time specified in subsection (f) of this section if:if either of the following applies:

(1)        Sixty percent (60%) of the cash price has been paid in the case of a purchase‑money security interest in consumer goods; orgoods.

(2)        Sixty percent (60%) of the principal amount of the obligation secured has been paid in the case of a non‑purchase‑money security interest in consumer goods.

(f)        Compliance with mandatory disposition requirement. – Mandatory Disposition Requirement. – To comply with subsection (e) of this section, the secured party shall dispose of the collateral:collateral within either of the following time periods: