§ 41-09-105 — (9-608) Application of proceeds of collection or enforcement - Liability for deficiency and right to surplus

deficiency and right to surplus.
1. If a security interest or agricultural lien secures payment or performance of an
obligation, the following rules apply:

a. A secured party shall apply or pay over for application the cash proceeds of
collection or enforcement under section 41-09-104 in the following order to:
(1) 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;
(2) The satisfaction of obligations secured by the security interest or agricultural
lien under which the collection or enforcement is made; and
(3) 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 a signed demand for proceeds before distribution of the proceeds
is completed.
b. 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 subdivision c.
c. A secured party need not apply or pay over for application noncash proceeds of
collection and enforcement under section 41-09-104 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. A secured party shall account to and pay a debtor for any surplus, and the obligor
is liable for any deficiency.
2. 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.