9207 - Rights and duties of secured party having possession or control of collateral.
SUBCHAPTER B RIGHTS AND DUTIES Sec. 9207. Rights and duties of secured party having possession or control of collateral. 9208. Additional duties of secured party having control of collateral. 9209. Duties of secured party if account debtor has been notified of assignment. 9210. Request for accounting; request regarding list of collateral or statement of account. § 9207. Rights and duties of secured party having possession or control of collateral. (a) Duty of care when secured party in possession.--Except as otherwise provided in subsection (d), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed. (b) Expenses, risks, duties and rights when secured party in possession.--Except as otherwise provided in subsection (d), if a secured party has possession of collateral: (1) Reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use or operation of the collateral are chargeable to the debtor and are secured by the collateral. (2) The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage. (3) The secured party shall keep the collateral identifiable, but fungible collateral may be commingled. (4) The secured party may use or operate the collateral: (i) for the purpose of preserving the collateral or its value; (ii) as permitted by an order of a court having competent jurisdiction; or (iii) except in the case of consumer goods, in the manner and to the extent agreed by the debtor. (c) Duties and rights when secured party in possession or control.--Except as otherwise provided in subsection (d), a secured party having possession of collateral or control of collateral under section 7106 (relating to control of electronic document of title), 9104 (relating to control of deposit account), 9105 (relating to control of electronic chattel paper), 9106 (relating to control of investment property) or 9107 (relating to control of letter-of-credit right): (1) may hold as additional security any proceeds, except money or funds, received from the collateral; (2) shall apply money or funds received from the collateral to reduce the secured obligation unless remitted to the debtor; and (3) may create a security interest in the collateral. (d) Buyer of certain rights to payment.--If the secured party is a buyer of accounts, chattel paper, payment intangibles or promissory notes or a consignor: (1) Subsection (a) does not apply unless the secured party is entitled under an agreement: (i) to charge back uncollected collateral; or (ii) 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. (2) Subsections (b) and (c) do not apply. (Apr. 16, 2008, P.L.57, No.13, eff. 60 days) 2008 Amendment. Act 13 amended subsec. (c) intro. par. Cross References. Section 9207 is referred to in sections 9601, 9602 of this title.