Okla. Stat. tit. 12A § 1-9-103

Current through Laws 2024, c. 453.

Section 1-9-103 - Purchase-money security interest; application of payments; burden of establishing

(a) In this section:

(1) "purchase-money collateral" means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and

(2) "purchase-money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.

(b) A security interest in goods is a purchase-money security interest:

(1) to the extent that the goods are purchase-money collateral with respect to that security interest;

(2) if the security interest is in inventory that is or was purchase-money collateral, to the extent that the security interest secures a purchase-money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and

(3) to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.

(c) A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:

(1) the debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and

(2) the debtor acquired its interest in the software for the principal purpose of using the software in the goods.

(d) The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.

(e) In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:

(1) in accordance with any reasonable method of application to which the parties agree;

(2) in the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or

(3) in the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:

(A) to obligations that are not secured; and

(B) if more than one obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.

(f) In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:

(1) the purchase-money collateral also secures an obligation that is not a purchase-money obligation;

(2) collateral that is not purchase-money collateral also secures the purchase-money obligation; or

(3) the purchase-money obligation has been renewed, refinanced, consolidated, or restructured.

(g) In a transaction other than a consumer-goods transaction, a secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.

(h) The limitation of the rules in subsections (e), (f), and (g) of this section to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.

Okla. Stat. tit. 12A, § 1-9-103

Added by Laws 2000 , SB 1519, c. 371, § 3, eff. 7/1/2001.

Oklahoma Code Comment

One of the components of the consumer issues compromise that paved the way for approval of revised Article 9 was agreement that there would be no codification of either the "dual status" or "transformation" rules for determining whether a purchase money security interest continues after a refinance of or other subsequent change in a consumer-goods transaction. The compromise indicated an intent that there be no change to the current law in each jurisdiction. See Memorandum of Consumer and Creditor Understanding of Proposal on Consumer Issues, 52 Consumer Fin. L. Q. Rep. 226 (1998). On the transformation and dual status rules generally, see Robert M. Lloyd, Consolidated and Refinanced Purchase Money Loans Under the Bankruptcy Code and the Uniform Commercial Code, 49 Consumer Fin. L. Q. Rep. 69 (1990).

The result of this compromise is revised section 9-103(f) and (h) , excluding consumer-goods transactions from codification of the dual status rule for other transactions and specifying that there shall be no inference that this exclusion is intended to alter "established approaches" in any state. In other words, for consumer-goods transactions current law should continue to apply, for other transactions the dual status rule is codified.

In Oklahoma this should mean there is no change in the law, for either consumer-goods or other transactions, as Oklahoma case law previously adopted the dual status rule and rejected the transformation rule. See, e.g., In re Johnson, BK-89-716-BH (W.D. Okla. June 21, 1989); In re Russell, 29 B.R. 270 (Bankr. W.D. Okla. 1983). See also Notes and Comments, Section 522(f) : A Proposal for the Survival of Purchase Money Security Interests Following Refinancing, 18 Tulsa L. J. 280 (1982) (advocating the dual status rule and criticizing the transformation rule). See also Lloyd, supra (criticizing the transformation rule and stating that the "majority of recent cases" had adopted the dual status rule).

A related issue is illustrated by National Bank of Commerce v. First National Bank & Trust Co. of Tulsa, 446 P.2d 277 (S. Ct. Okla. 1968), where a purchase money security interest was recognized even though the debtor had already acquired the collateral when the loan was extended. Revised section 9- 103(a)(2) arguably might accommodate the National Bank of Commerce view, in appropriate circumstances where a loan is obtained for the purpose of purchasing the collateral, notwithstanding arguments that the loan proceeds check must be payable to the seller of the collateral or that the loan must be closed or funded before the collateral is acquired. Thus perhaps a loan proceeds check deposited in the debtor's bank account to cover a check written by the debtor to purchase the collateral in a previous transaction could qualify as a purchase money loan, but as noted at Official Comment 3 there must be a nexus between the transactions.

.