H-1389.1          _______________________________________________

 

                            SUBSTITUTE HOUSE BILL 1182

                  _______________________________________________

 

State of Washington              54th Legislature             1996 Regular Session

 

By House Committee on Law & Justice (originally sponsored by Representatives Hickel and Appelwick)

 

Read first time 01/31/95.  Referred to Committee on .


 

 

Modifying the uniform commercial code.



     AN ACT Relating to the uniform commercial code; amending RCW 62A.2-511, 62A.3-112, 62A.9‑203, 62A.9-206, and 62A.9-312; and reenacting and amending RCW 62A.1-201 and 62A.9-302.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

 

     Sec. 1.  RCW 62A.1-201 and 1993 c 230 s 2A-602 and 1993 c 229 s 1 are each reenacted and amended to read as follows:

     Subject to additional definitions contained in the subsequent Articles of this Title which are applicable to specific Articles or Parts thereof, and unless the context otherwise requires, in this Title:

     (1) "Action" in the sense of a judicial proceeding includes recoupment, counterclaim, set-off, suit in equity and any other proceedings in which rights are determined.

     (2) "Aggrieved party" means a party entitled to resort to a remedy.

     (3) "Agreement" means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this Title (RCW 62A.1-205 ((and)), RCW 62A.2-208, and RCW 62A.2A-207).  Whether an agreement has legal consequences is determined by the provisions of this Title, if applicable; otherwise by the law of contracts (RCW 62A.1-103).  (Compare "Contract".)

     (4) "Bank" means any person engaged in the business of banking.

     (5) "Bearer" means the person in possession of an instrument, document of title, or certificated security payable to bearer or indorsed in blank.

     (6) "Bill of lading" means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods, and includes an airbill.  "Airbill" means a document serving for air transportation as a bill of lading does for marine or rail transportation, and includes an air consignment note or air waybill.

     (7) "Branch" includes a separately incorporated foreign branch of a bank.

     (8) "Burden of establishing" a fact means the burden of persuading the triers of fact that the existence of the fact is more probable than its non-existence.

     (9) "Buyer in ordinary course of business" means a person who in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker.  All persons who sell minerals or the like (including oil and gas) at wellhead or minehead shall be deemed to be persons in the business of selling goods of that kind.  "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving goods or documents of title under a pre-existing contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

     (10) "Conspicuous":  A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it.  A printed heading in capitals (as:  NON-NEGOTIABLE BILL OF LADING) is conspicuous.  Language in the body of a form is "conspicuous" if it is in larger or other contrasting type or color.  But in a telegram any stated term is "conspicuous".  Whether a term or clause is "conspicuous" or not is for decision by the court.

     (11) "Contract" means the total legal obligation which results from the parties' agreement as affected by this Title and any other applicable rules of law.  (Compare "Agreement".)

     (12) "Creditor" includes a general creditor, a secured creditor, a lien creditor and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity and an executor or administrator of an insolvent debtor's or assignor's estate.

     (13) "Defendant" includes a person in the position of defendant in a cross-action or counterclaim.

     (14) "Delivery" with respect to instruments, documents of title, chattel paper, or certificated securities means voluntary transfer of possession.

     (15) "Document of title" includes bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers.  To be a document of title a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.

     (16) "Fault" means wrongful act, omission or breach.

     (17) "Fungible" with respect to goods or securities means goods or securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit.  Goods which are not fungible shall be deemed fungible for the purposes of this Title to the extent that under a particular agreement or document unlike units are treated as equivalents.

     (18) "Genuine" means free of forgery or counterfeiting.

     (19) "Good faith" means honesty in fact in the conduct or transaction concerned.

     (20) "Holder" with respect to a negotiable instrument, means the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession.  "Holder" with respect to a document of title means the person in possession if the goods are deliverable to bearer or to the order of the person in possession.

     (21) To "honor" is to pay or to accept and pay, or where a credit so engages to purchase or discount a draft complying with the terms of the credit.

     (22) "Insolvency proceedings" includes any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate the estate of the person involved.

     (23) A person is "insolvent" who either has ceased to pay his or her debts in the ordinary course of business or cannot pay his or her debts as they become due or is insolvent within the meaning of the federal bankruptcy law.

     (24) "Money" means a medium of exchange authorized or adopted by a domestic or foreign government and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations.

     (25) A person has "notice" of a fact when

     (a) he or she has actual knowledge of it; or

     (b) he or she has received a notice or notification of it; or

     (c) from all the facts and circumstances known to him or her at the time in question he or she has reason to know that it exists.

A person "knows" or has "knowledge" of a fact when he or she has actual knowledge of it.  "Discover" or "learn" or a word or phrase of similar import refers to knowledge rather than to reason to know.  The time and circumstances under which a notice or notification may cease to be effective are not determined by this Title.

     (26) A person "notifies" or "gives" a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it.  A person "receives" a notice or notification when

     (a) it comes to his or her attention; or

     (b) it is duly delivered at the place of business through which the contract was made or at any other place held out by him or her as the place for receipt of such communications.

     (27) Notice, knowledge or a notice or notification received by an organization is effective for a particular transaction from the time when it is brought to the attention of the individual conducting that transaction, and in any event from the time when it would have been brought to his or her attention if the organization had exercised due diligence.  An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines.  Due diligence does not require an individual acting for the organization to communicate information unless such communication is part of his or her regular duties or unless he or she has reason to know of the transaction and that the transaction would be materially affected by the information.

     (28) "Organization" includes a corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, two or more persons having a joint or common interest, or any other legal or commercial entity.

     (29) "Party", as distinct from "third party", means a person who has engaged in a transaction or made an agreement within this Title.

     (30) "Person" includes an individual or an organization (See RCW 62A.1-102).

     (31) "Presumption" or "presumed" means that the trier of fact must find the existence of the fact presumed unless and until evidence is introduced which would support a finding of its nonexistence.

     (32) "Purchase" includes taking by sale, discount, negotiation, mortgage, pledge, lien, issue or re-issue, gift or any other voluntary transaction creating an interest in property.

     (33) "Purchaser" means a person who takes by purchase.

     (34) "Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

     (35) "Representative" includes an agent, an officer of a corporation or association, and a trustee, executor or administrator of an estate, or any other person empowered to act for another.

     (36) "Rights" includes remedies.

     (37) "Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation, except for lease-purchase agreements under chapter 63.19 RCW.  The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (RCW 62A.2‑401) is limited in effect to a reservation of a "security interest".  The term also includes any interest of a buyer of accounts or chattel paper which is subject to Article 9.  The special property interest of a buyer of goods on identification of such goods to a contract for sale under RCW 62A.2-401 is not a "security interest", but a buyer may also acquire a "security interest" by complying with Article 9.  Unless a consignment is intended as security, reservation of title thereunder is not a "security interest" but a consignment in any event is subject to the provisions on consignment sales (RCW 62A.2-326).

     Whether a transaction creates a lease or security interest is determined by the facts of each case.  However, a transaction creates a security interest if the consideration the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee, and:

     (a) The original term of the lease is equal to or greater than the remaining economic life of the goods;

     (b) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;

     (c) The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement; or

     (d) The lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement.

     A transaction does not create a security interest merely because it provides that:

     (a) The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;

     (b) The lessee assumes risk of loss of the goods, or agrees to pay taxes, insurance, filing, recording, or registration fees, or service or maintenance costs with respect to the goods;

     (c) The lessee has an option to renew the lease or to become the owner of the goods;

     (d) The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed;

     (e) The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed; or

     (f) The amount of rental payments may or will be increased or decreased by reference to the amount realized by the lessor upon sale or disposition of the goods.

     For purposes of this subsection (37):

     (a) Additional consideration is not nominal if (i) when the option to renew the lease is granted to the lessee the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed, or (ii) when the option to become the owner of the goods is granted to the lessee the price is stated to be the fair market value of the goods determined at the time the option is to be performed.  Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised;

     (b) "Reasonably predictable" and "remaining economic life of the goods" are to be determined with reference to the facts and circumstances at the time the transaction is entered into; and

     (c) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain.  The discount is determined by the interest rate specified by the parties if the rate is not manifestly unreasonable at the time the transaction is entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

     (38) "Send" in connection with any writing or notice means to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and in the case of an instrument to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances.  The receipt of any writing or notice within the time at which it would have arrived if properly sent has the effect of a proper sending.

     (39) "Signed" includes any symbol executed or adopted by a party with present intention to authenticate a writing.

     (40) "Surety" includes guarantor.

     (41) "Telegram" includes a message transmitted by radio, teletype, cable, any mechanical method of transmission, or the like.

     (42) "Term" means that portion of an agreement which relates to a particular matter.

     (43) "Unauthorized" signature means one made without actual, implied or apparent authority and includes a forgery.

     (44) "Value".  Except as otherwise provided with respect to negotiable instruments and bank collections (RCW 62A.3-303, RCW ((62A.4-208)) 62A.4-210, and RCW ((62A.4-209)) 62A.4-211) a person gives "value" for rights if he or she acquires them

     (a) in return for a binding commitment to extend credit or for the extension of immediately available credit whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection; or

     (b) as security for or in total or partial satisfaction of a preexisting claim; or

     (c) by accepting delivery pursuant to a pre-existing contract for purchase; or

     (d) generally, in return for any consideration sufficient to support a simple contract     (45) "Warehouse receipt" means a receipt issued by a person engaged in the business of storing goods for hire.

     (46) "Written" or "writing" includes printing, typewriting or any other intentional reduction to tangible form.

 

     Sec. 2.  RCW 62A.2-511 and 1965 ex.s. c 157 s 2-511 are each amended to read as follows:

     (1) Unless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery.

     (2) Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.

     (3) Subject to the provisions of this Title on the effect of an instrument on an obligation (RCW ((62A.3-802)) 62A.3-310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.

 

     Sec. 3.  RCW 62A.3-112 and 1993 c 229 s 14 are each amended to read as follows:

     (a) Unless otherwise provided in the instrument or in RCW 19.52.010, (i) an instrument is not payable with interest, and (ii) interest on an interest-bearing instrument is payable from the date of the instrument.

     (b) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates.  The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument.  If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, then except as otherwise provided in RCW 19.52.010, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.

 

     Sec. 4.  RCW 62A.9‑203 and 1986 c 35 s 47 are each amended to read as follows:

     (1) Subject to the provisions of RCW ((62A.4‑208)) 62A.4-210 on the security interest of a collecting bank, RCW 62A.8‑321 on security interests in securities and RCW 62A.9‑113 on a security interest arising under the Article on Sales, a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:

     (a) the collateral is in the possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned;

     (b) value has been given; and

     (c) the debtor has rights in the collateral.

     (2) A security interest attaches when it becomes enforceable against the debtor with respect to the collateral.  Attachment occurs as soon as all of the events specified in subsection (1) have taken place unless explicit agreement postpones the time of attaching.

     (3) Unless otherwise agreed a security agreement gives the secured party the rights to proceeds provided by RCW 62A.9‑306.

     (4) A transaction, although subject to this Article, is also subject to chapters 31.04, ((31.08,)) 31.12, 31.16, 31.20, and 31.24 RCW, and in the case of conflict between the provisions of this Article and any such statute, the provisions of such statute control.  Failure to comply with any applicable statute has only the effect which is specified therein.

 

     Sec. 5.  RCW 62A.9-206 and 1965 ex.s. c 157 s 9-206 are each amended to read as follows:

     (1) Subject to any statute or decision which establishes a different rule for buyers or lessees of consumer goods, an agreement by a buyer or lessee that he will not assert against an assignee any claim or defense which he may have against the seller or lessor is enforceable by an assignee who takes his assignment for value, in good faith and without notice of a claim or defense, except as to defenses of a type which may be asserted against a holder in due course of a negotiable instrument under the Article on ((Commercial Paper)) Negotiable Instruments (Article 3).

     (2) When a seller retains a purchase money security interest in goods the Article on Sales (Article 2) governs the sale and any disclaimer, limitation or modification of the seller's warranties.

 

     Sec. 6.  RCW 62A.9-302 and 1987 c 189 s 1 and 1986 c 35 s 48 are each reenacted and amended to read as follows:

     (1) A financing statement must be filed to perfect all security interests except the following:

     (a) a security interest in collateral in possession of the secured party under RCW 62A.9-305;

     (b) a security interest temporarily perfected in instruments or documents without delivery under RCW 62A.9-304 or in proceeds for a ten day period under RCW 62A.9-306;

     (c) a security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;

     (d) a purchase money security interest in consumer goods; but filing is required for a motor vehicle required to be registered and other property subject to subsection (3) of this section; and fixture filing is required for priority over conflicting interests in fixtures to the extent provided in RCW 62A.9-313;

     (e) a security interest of a collecting bank (RCW 62A.4-208) or in securities (RCW 62A.8-321) or arising under the Articles on Sales and Leases (RCW 62A.9-113) or covered in subsection (3) of this section;

     (f) an assignment for the benefit of all the creditors of the transferor, and subsequent transfers by the assignee thereunder.

     (2) If a secured party assigns a perfected security interest, no filing under this Article is required in order to continue the perfected status of the security interest against creditors of and transferees from the original debtor.

     (3) The filing of a financing statement otherwise required by this Article is not necessary or effective to perfect a security interest in property subject to

     (a) a statute or treaty of the United States which provides for a national or international registration or a national or international certificate of title or which specifies a place of filing different from that specified in this Article for filing of the security interest; or

     (b) the following statute of this state:  RCW 46.12.095 or 88.02.070; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of this Article (Part 4) apply to a security interest in that collateral created by him as debtor; or

     (c) a certificate of title statute of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection (subsection (2) of RCW 62A.9-103).

     (4) Compliance with a statute or treaty described in subsection (3) is equivalent to the filing of a financing statement under this Article, and a security interest in property subject to the statute or treaty can be perfected only by compliance therewith except as provided in RCW 62A.9-103 on multiple state transactions.  Duration and renewal of perfection of a security interest perfected by compliance with the statute or treaty are governed by the provisions of the statute or treaty; in other respects the security interest is subject to this Article.

     (5) Part 4 of this Article does not apply to a security interest in property of any description created by a deed of trust or mortgage made by any corporation primarily engaged in the railroad or street railway business, the furnishing of telephone or telegraph service, the transmission of oil, gas or petroleum products by pipe line, or the production, transmission or distribution of electricity, steam, gas or water, but such security interest may be perfected under this Article by filing such deed of trust or mortgage with the department of licensing.  When so filed, such instrument shall remain effective until terminated, without the need for filing a continuation statement.  Assignments and releases of such instruments may also be filed with the department of licensing.  The director of licensing shall be a filing officer for the foregoing purposes.

 

     Sec. 7.  RCW 62A.9-312 and 1989 c 251 s 1 are each amended to read as follows:

     (1) The rules of priority stated in other sections of this Part and in the following sections shall govern when applicable:  RCW ((62A.4-208)) 62A.4-210 with respect to the security interests of collecting banks in items being collected, accompanying documents and proceeds; RCW 62A.9-103 on security interests related to other jurisdictions; RCW 62A.9-114 on consignments.

     (2) Conflicting priorities between security interests in crops shall be governed by chapter 60.11 RCW.

     (3) A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory and also has priority in identifiable cash proceeds received on or before the delivery of the inventory to a buyer if

     (a) the purchase money security interest is perfected at the time the debtor receives possession of the inventory; and

     (b) the purchase money secured party gives notification in writing to the holder of the conflicting security interest if the holder had filed a financing statement covering the same types of inventory (i) before the date of the filing made by the purchase money secured party, or (ii) before the beginning of the twenty-one day period where the purchase money security interest is temporarily perfected without filing or possession (subsection (5) of RCW 62A.9-304); and

     (c) the holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and

     (d) the notification states that the person giving the notice has or expects to acquire a purchase money security interest in inventory of the debtor, describing such inventory by item or type.

     (4) A purchase money security interest in collateral other than inventory has priority over a conflicting security interest in the same collateral or its proceeds if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within twenty days thereafter.

     (5) In all cases not governed by other rules stated in this section (including cases of purchase money security interests which do not qualify for the special priorities set forth in subsections (3) and (4) of this section), priority between conflicting security interests in the same collateral shall be determined according to the following rules:

     (a) Conflicting security interests rank according to priority in time of filing or perfection.  Priority dates from the time a filing is first made covering the collateral or the time the security interest is first perfected, whichever is earlier, provided that there is no period thereafter when there is neither filing nor perfection.

     (b) So long as conflicting security interests are unperfected, the first to attach has priority.

     (6) For the purposes of subsection (5) a date of filing or perfection as to collateral is also a date of filing or perfection as to proceeds.

     (7) If future advances are made while a security interest is perfected by filing, the taking of possession, or under RCW 62A.8-321 on securities, the security interest has the same priority for the purposes of subsection (5) with respect to the future advances as it does with respect to the first advance.  If a commitment is made before or while the security interest is so perfected, the security interest has the same priority with respect to advances made pursuant thereto.  In other cases a perfected security interest has priority from the date the advance is made.

 


                                    --- END ---