Okla. Stat. tit. 12A § 1-9-608

Current through Laws 2024, c. 9.

Section 1-9-608 - Application of proceeds of collection or enforcement; liability for deficiency and right to surplus

(a) 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 this section in the following order to:

(A) the reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney's fees and legal expenses incurred by the secured party;

(B) the satisfaction of obligations secured by the security interest or agricultural lien under which the collection or enforcement is made; and

(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 demand for proceeds before distribution of the proceeds is completed.

(2) 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 complies, the secured party need not comply with the holder's demand under subparagraph (C) of paragraph (1) of this subsection.

(3) A secured party need not apply or pay over for application noncash proceeds of collection and enforcement under this section 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.

(4) A secured party shall account to and pay a debtor for any surplus, and the obligor is liable for any deficiency.

(b) 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.

Okla. Stat. tit. 12A, § 1-9-608

Added by Laws 2000 , SB 1519, c. 371, § 115, eff. 7/1/2001.

Oklahoma Code Comment

Sections 9-607 and 9-608 carry forward the rules found in former section 9-502 , but they are broader in scope, and they also elaborate on those rules and provide answers for questions that arose under former section 9-502 . For example, as Official Comment 5 explicitly points out, a junior secured party may collect and enforce its security interest even if that security interest is subordinate to a conflicting security interest in the same right to payment. See also Official Comment 5 to revised section 9-608 . Former Oklahoma law could be read to the contrary. See Consolidated Equipment Sales, Inc. v. First Bank & Trust Co., 627 P.2d 432 (Okla. 1981); First National Bank and Trust Co. of Norman v. Security National Bank and Trust Co., 676 P.2d 837 (Okla. 1984).

Another example concerns a mortgage note or other obligation secured by real estate as collateral where the secured party has not become the assignee of record of the mortgage. See revised sections 9-203(g) and 9-308(e) . Revised section 9-607(b) allows the secured party (in order to foreclose the mortgage non-judicially under 46 Okla. Stat. Chapters 1-5) to record in the office in which a record of the mortgage is recorded a copy of the security agreement and an affidavit of default. See also revised section 9-619 . Of course, any filing should include what is necessary for the real estate records, such as a legal description.

A third example are the rules in revised section 9-608(a)(3) concerning non-cash proceeds. To illustrate, suppose an enforcing secured party receives a promissory note from an account debtor who is unable to pay in return for extending the due date. The secured party may credit the debtor with the principal amount of the note or may credit the debtor as the note is paid, depending on what is commercially reasonable.

Prior cases under former section 9-502 remain good law. See, e.g., F.D.I.C. v. Hulsey, 792 F. Supp. 729 (W.D. Okla. 1992), aff'd in part, rev'd in part, 22 F.3d 1472 (10th Cir. 1994); In re Hammond, 31 B.R. 517 (Bankr. W.D. Okla. 1983); and Frontier Federal Sav. & Loan v. Commercial Bank, 806 P.2d 1140 (Okla. App. 1990).