§ 10:9-615 — Application of proceeds of disposition; liability for deficiency and right to surplus

§9-615. Application of proceeds of disposition; liability for deficiency and right to surplus
(a) Application of proceeds. A secured party shall apply or pay over for application
the cash proceeds of disposition under R.S. 10:9-610 in the following order to:
(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 fees and legal expenses incurred by the secured party;
(2) the satisfaction of obligations secured by the security interest or agricultural lien
under which the disposition is made;
(3) the satisfaction of obligations secured by any subordinate security interest in or
subordinate lien on the collateral if:
(A) the secured party receives from the holder of the subordinate security interest or
lien a signed demand for proceeds before distribution of the proceeds is completed; and
(B) in a case in which a consignor has an interest in the collateral, the subordinate
security interest or lien is senior to the interest of the consignor; and
(4) a secured party that is a consignor of the collateral if the secured party receives
from the consignor a signed demand for proceeds before distribution of the proceeds is
completed.
(b) Proof of subordinate interest. If requested by a secured party, a holder of a
subordinate security interest or 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 Subsection (a)(3).
(c) Application of noncash proceeds. A secured party need not apply or pay over for
application noncash proceeds of disposition under R.S. 10:9-610 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. 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) and permitted by Subsection (c):
(1) unless Subsection (a)(4) 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;
and
(2) the obligor is liable for any deficiency.
(e) No 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:
(1) the debtor is not entitled to any surplus; and
(2) the obligor is not liable for any deficiency.
(f) Calculation of 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:
(1) the transferee in the disposition is the secured party, a person related to the
secured party, or a secondary obligor; and
(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 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 lien that is not subordinate to the security
interest or agricultural lien under which the disposition is made:
(1) takes the cash proceeds free of the security interest or lien;
(2) is not obligated to apply the proceeds of the disposition to the satisfaction of
obligations secured by the security interest or lien; and
(3) is not obligated to account to or pay the holder of the security interest or lien for
any surplus.

Legislative History

Acts 2001, No. 128, §1, eff. July 1, 2001; Acts 2024, No. 773, §1.