KANSAS OFFICE of
  REVISOR of STATUTES

  

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84-9-505. Filing and compliance with other statutes and treaties for consignments, leases, other bailments, and other transactions. (a) Use of terms other than "debtor" and "secured party." A consignor, lessor, or other bailor of goods, a licensor, or a buyer of a payment intangible or promissory note may file a financing statement, or may comply with a statute or treaty described in K.S.A. 2022 Supp. 84-9-311(a) and amendments thereto, using the terms "consignor," "consignee," "lessor," "lessee," "bailor," "bailee," "licensor," "licensee," "owner," "registered owner," "buyer," "seller," or words of similar import, instead of the terms "secured party" and "debtor."

(b) Effect of financing statement under subsection (a). This part applies to the filing of a financing statement under subsection (a) and, as appropriate, to compliance that is equivalent to filing a financing statement under K.S.A. 2022 Supp. 84-9-311(b), and amendments thereto, but the filing or compliance is not of itself a factor in determining whether the collateral secures an obligation. If it is determined for another reason that the collateral secures an obligation, a security interest held by the consignor, lessor, bailor, licensor, owner, or buyer which attaches to the collateral is perfected by the filing or compliance.

History: L. 2000, ch. 142, § 76; July 1, 2001.

Revisor's Note:

Former section 84-9-505 was repealed by L. 2000, ch. 142, § 155 and the number reassigned to the current text.

KANSAS COMMENT, 1996

Subsection (1) does not vary from the 1995 Official Text and has not been amended since 1975. Subsection (2) has reduced the time for the debtor to object from the uniform 21 days to 15 days in Kansas. The Kansas provision has not been amended since 1975.

Subsection (1). Subsection (1) provides that where sixty percent of the cash price for purchase money security interests in consumer goods, or sixty percent of the loan in other consumer cases, consumer goods (as defined in 84-9-109(1)) must be disposed of within ninety days after possession is taken, unless after default the debtor has signed a written renunciation of his rights to require resale of the collateral. If a foreclosure sale under 84-9-504 is not made within ninety days (assuming no post-default waiver), the creditor is liable in conversion, or under 84-9-507(1) for a minimum civil penalty.

Subsection (2). In cases other than those covered by subsection (1), the secured party may propose to keep the collateral in satisfaction of the debt. There was no such "strict foreclosure" provision in pre-UCC Kansas law. The advantages of strict foreclosure are as follows: (1) it avoids the extra costs of a foreclosure sale in situations where no deficiency claim is likely to be recovered in any case; (2) it insulates the creditor from later attack upon the disposition as "commercially unreasonable" under the previous section; and (3) it is especially useful in a depressed market when the secured party cannot obtain a decent price for the collateral upon sale. Written notice of a proposal to retain the collateral is sent to the debtor (assuming no post-default waiver) and, in non-consumer cases, to other secured parties who sent to the foreclosing creditor written notice of their interest in the collateral. If the secured party receives written objection to the strict foreclosure within 15 days after the proposal was sent, a sale must be held under 84-9-504. As noted, the 15-day response period varies from the 21-day period found in the Official Text. If no notice is received by the deadline, the collateral belongs to the secured party; if a later sale generates a surplus, it would not have to be turned over to the debtor.

Several additional points should be made about strict foreclosure under subsection (2). First, the secured party must be in possession of the collateral in order to invoke the remedy. Second, there is no express authorization for retention of all or part of the collateral in partial satisfaction of the debt. The second sentence of 84-9-505(2), however, permits the debtor to renounce or modify the debtor's rights. This should permit negotiating the value of the collateral under 84-9-505(2), avoiding the inconveniences and inefficiencies which often accompany a forced sale. Third, some cases in other jurisdictions have held that a foreclosing creditor who holds onto collateral for a commercially unreasonable period of time before sale under the previous section loses any right to a deficiency; the undue retention constitutes a kind of "involuntary strict foreclosure" under this subsection. See, e.g., Moran v. Holman, 514 P.2d 817 (Alaska 1973). It must be stressed that if the creditor goes the strict foreclosure route, it loses its right to a deficiency unless there has been a modification of 84-9-505(2) after default. Fourth, since strict foreclosure constitutes an accord and satisfaction, any guarantor will be discharged in whole or in part, unless otherwise agreed. Fifth, strict foreclosure with a post default waiver of the 15-day waiting period by the debtor may be the fastest way to get title out of the debtor and thus avoid the automatic stay under §362 of The Bankruptcy Code.

Law Review and Bar Journal References:

Paragraph (1) mentioned in discussion of impact of the Uniform Consumer Credit Code upon Kansas, Barkley Clark, 18 K.L.R. 277, 291 (1970).

Warranty violations in tripartite finance lease agreements, Winton A. Winter, Jr., 25 K.L.R. 573, 583 (1977).

"Is the Agricultural Security Interest Legally Healthy?" David A. Lander, 34 K.L.R. 505, 508, 512 (1986).

"Revised Article 9 in Kansas," Hon. John K. Pearson, 51 K.L.R. 769, 841 (2003).

CASE ANNOTATIONS

1. Filing of suit by defaulting debtor does not relieve secured party in possession from disposing of goods as required; nature of relief sought determines renouncement or modification of defaulting debtor's rights. Kelley v. Commercial National Bank, 235 K. 45, 49, 50, 678 P.2d 620 (1984).

2. Notification under 84-9-504(3) misrepresenting redemption rights unreasonable as a matter of law. Topeka Datsun Motor Co. v. Stratton, 12 K.A.2d 95, 103, 104, 736 P.2d 82 (1987).


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