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(3) Unless the person claiming is one against whom the document confers no right under section 28:7—503(1), he must surrender for cancellation or notation of partial deliveries any outstanding negotiable document covering the goods, and the bailee must cancel the document or conspicuously note the partial delivery thereon or be liable to any person to whom the document is duly negotiated. (4) "Person entitled under the document means holder in the case of a negotiable document, or the person to whom delivery is to be made by the terms of or pursuant to written instructions under a nonnegotiable document. § 28:7—404. No liability for good faith delivery pursuant to receipt or bill A bailee who in good faith including observance of reasonable commercial standards has received goods and delivered or otherwise disposed of them according to the terms of the document of title or pursuant to this article is not liable therefor. This rule applies even though the person from whom he received the goods had no authority to procure the document or to dispose of the goods and even though the person to whom he delivered the goods had no authority to receive them. PART 5—WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND TRANSFER §28:7—501. Form of negotiation and requirements of "due negotiation" (1) A negotiable document of title running to the order of a named person is negotiated by his indorsement and delivery. After his indorsement in blank or to bearer any person can negotiate it by delivery alone. (2)(a) A negotiable document of title is also negotiated by delivery alone when by its original terms it runs to bearer. (b) When a document running to the order of a named person is delivered to him the effect is the same as if the document had been negotiated. (3) Negotiation of a negotiable document of title after it has been indorsed to a specified person requires indorsement by the special indorsee as well as delivery. (4) A negotiable document of title is "duly negotiated" when it is negotiated in the manner stated in this section to a holder who purchases it in good faith without notice of any defense against or claim to it on the part of any person and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a money obligation. (5) Indorsement of a non-negotiable document neither makes it negotiable nor adds to the transferee's rights. (6) The naming in a negotiable bill of a person to be notified of the arrival of the goods does not limit the negotiability of the bill nor constitute notice to a purchaser thereof of any interest of such person in the goods. §28:7—502. Rights acquired by due negotiation (1) Subject to the following section and to the provisions of section 28:7—205 on fungible goods, a holder to whom a negotiable document of title has been duly negotiated acquires thereby: (a) title to the document; (b) title to the goods; (c) all rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and

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(d) the direct oblipition of the issuer to liold or deliver the tfoods according to the terms of the document free of any defense or chiini by him except those arising under the terms of the document or under this article. In the case of a delivery order the bailee's obligation accrues only upon acceptance and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee. {'2) Subject to the following section, title and rights so acquired are not defeated by any stoppage of the goods represented by the document or by surrender of such goods by the bailee, and are not impaired even though the negotiation or any prior negotiation consituted a breach of duty or even though any person has been deprived of possession of the document by misrepresentation, fraud, accident, mistake, duress, loss, theft or conversion, or even though a previous sale or other transfer of the goods or document has been nuide to a third person. § 28:7—503. Document of title to goods defeated in certain cases (1) A document of title confers no right in goods against a person who before issuance of the document had a legal interest or a perfected security interest in them and who neither (a) delivered or entrusted them or any document of title covering them to the bailor or his nominee with actual or apparent authority to ship, store or sell or with power to obtain delivery under this article (section 28:7—403) or with power of disposition under this subtitle (sections 28:2—403 and 28:9—307) or other statute or rule of law; nor (b) acquiesced in the procurement by the bailor or his nominee of any document of title. (2) Title to goods based upon an unaccepted delivery order is subject to the rights of anyone to whom a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. Such a title may be defeated under the next section to the same extent as the rights of the issuer or a transferee from the issuer. (3) Title to goods based upon a bill of lading issued to a (freight forwarder is subject to the rights of anyone to whom a bill issued by the freight forwarder is duly negotiated; but delivery by the carrier in accordance -with, part 4 of this article pursuant to its own bill of lading discharges the carrier's obligation to deliver. §28:7—504. Rights acquired in the absence of due negotiation; effect of diversion; seller's stoppage of delivery (1) A transferee of a document, whether negotiable or nonnegotiable, to whom the document has been delivered but not duly negotiated, acquires the title and rights which his transferor had or had actual authority to convey. (2) I n the case of a non-negotiable document, until but not after the bailee receives notification of the transfer, the rights of the transferee may be defeated (a) by those creditors of the transferor who could treat the sale as void under section 28:2—402; or (b) by a buyer from the transferor in ordinary course of business if the bailee has delivered the goods to the buyer or received notification of his rights; or (c) as against the bailee by good faith dealings of the bailee with the transferor. (3) A diversion or other change of shipping instructions by the consignor in a non-negotiable bill of lading which causes the bailee not to deliver to the consignee defeats the consignee's title to the goods if they have been delivered to a buyer in ordinary course of business and in any event defeats the consignee's rights against the bailee.

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(4) Delivery pursuant to a non-negotiable document may be stopped by a seller under sex'.tion 28:2—705, and subject to the requirement of due notification there provided. A bailee honoring the seller's instructions is entitled to be indemnified by the seller against any resulting loss or expense. § 28:1'—505. Indorser not a guarantor for other parties The indorsement of a document of title issued by a bailee dims not make the indorser liable for any default by the bailee or by previous indorsers. §28:7—506. Delivery vt^ithout indorsement: right to compel indorsement The transferee of a negotiable document of title has a specifically enforceable right to havehis transferor supply any necessary indorsement but the transfer becomes a negotiation only as of the time the indorsement is supplied. §28:7—507. Warranties on negotiation or transfer of receipt or bill Where a, person negotiates or transfers a document of title for value otherwise than as a mere intermediary under the next following section, then unless otherwise agreed he warrants to his immediate purchaser only in addition to any warranty made in selling the goods (a) that the document is ijenuine; and (b) that he has no knowledge of any fact which would impair its validity or worth; and (c) that his negotiation or transfer is rightful and fully effective with respect to the title to the documeivt and the goods it represents. § 28:7—508. Warranties of collecting bank as to documents A collecting bank or other intermediary known to be entrusted with documents on behalf of another or with collection of a draft or other claim against delivery of documents warrants by such deliveiy of the documents only its own good faith and authority. This rule applies even though the intermediary has purchased or made advances against the claim or draft to be collected. §28:7—509. Receipt or bill: when adequate compliance with commercial contract The question whether a document is adequate to fulfill the obligations of a contract for sale or the conditions of a credit is governed by the articles on sales (article 2) and on letters of credit (article 5). PART 6—WAREHOUSE RECEIPTS AND BILLS OF LADING: MISCELLANEOUS PROVISIONS §28:7—601. Lost and missing documents (1) If a document has been lost, stolen, or destroyed, a court may order delivery of the goods or issuance of a substitute document and the bailee may without liability to any person comply with such order. If the document was negotiable the claimant must post security approved by the court to indemnify any person who may suffer loss as a result of non-surrender of the document. If the document was not negotiable, such security may be required at the discretion of the court. The court may also in its discretion order payment of the bailee's reasonable costs and counsel fees. (2) A bailee who without court order delivers goods to a person claiming under a missing negotiable document is liable to any person injured thereby, and if the delivery is not in good faith becomes liable

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for conversion. Delivery in good faith is not conversion if made in accordance with a filed classification or tariff or, where no classification or tariff is filed, if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify any person injured by the delivery who files a notice of claim within one year after the delivery. §28:7—602. Attachment of goods covered by a negotiable document Except where the document was originally issued upon delivery of the goods by a person who had no power to dispose of them, no lien attaches by virtue of any judicial process to goods in the possession of a bailee for which a negotiable dx)cument of title is outstanding unless the document be first surrendered to the bailee or its negotiation enjoined, and the bailee shall not be compelled to deliver the goods pursuant to process until the document is surrendered to him or impounded by the court. One who purchases the document for value without notice of the process or injunction takes free of the lien imposed by judicial process. §28:7—603. Conflicting claims; interpleader If more than one person claims title or possession of the goods, the bailee is excused from delivery until he has had a reasonable time to ascertain the validity of the adverse claims or to bring an action to compel all claimants to interplead and may compel such interleader, either in defending an action for non-delivery of the goods, or y original action, whichever is appropriate.

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ARTICLE 8—INVESTMENT SECURITIES Sec 28:8—101. 28:8—102. 28:8—103. 28:8—104. 28:8—105. 28:8—106. 28:8—107.

PART 1—SHOET TITLE AND GENEEAL MATTEES

Short title. Definitions and index of definitions. Issuer's lien. Effect of overissue; "overissue". Securities negotiable; presumptions. Applicability. Securities deliverable; action for price. PAET 2—ISSUE—ISSUEE

28:8—201. 28:8—^202. 28:8—^203. 28:8—^204. 28:8—^205. 28:8—^206. 28:8—^207. 28:8—^208.

"Issuer". Issuer's responsibility and defenses; notice of defect or defense. Staleness as notice of defects or defenses. Effect of issuer's restrictions on transfer. Effect of unauthorized signature on issue. Completion or alteration of instrument. Rights of issuer with respect to registered owners. Effect of signature of authenticating trustee, registrar or transfer agent. PAET 3—PUECHASE

28:8—301. Rights acquired by purchaser; "adverse claim"; title acquired by bona fide purchaser. 28:8—302. "Bona fide purchaser". 28:8—303. "Broker". 28:8—304. Notice to purchaser of adverse claims. 28:8—305. Staleness as notice of adverse claims. 28:8—306. Warranties on presentment and transfer. 28:8—307. Effect of delivery without indorsement; right to compel indorsement. 28:8—308. Indorsement, how made; special indorsement; indorser not a guarantor; partial assignment. 28:8—309. Effect of indorsement without delivery. 28:8—310. Indorsement of security in bearer form. 28:8—311. Effect of unauthorized indorsement. 28:8—312. Effect of guaranteeing signature or indorsement.

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ARTICLE 8—INVESTMENT SECURITIES— Continued PART 3—PURCHASE^—Continued

Sec. 28:8—313. 28:8—314. 28:8—315. 28:8—316. 28:8—317. 28:8—318. 28:8—319. 28:8—320.

When delivery to the purchaser occurs; purchaser's broker as holder. Duty to deliver, when completed. Action against purchaser based upon v^•rongful transfer. Purchaser's right to requisites for registration of transfer on books. Attachment or levy upon security. No conversion by good faith delivery. Statute of frauds. Transfer or pledge within a central depository system. PART 4—REGISTRATION

28:8—401. 28:8—402. 28:8—403. 28:8—404. 28:8—405. 28:8—406. 28:8—407.

Duty of issuer to register transfer. Assurance that indorsements are effective. Limited duty of inquiry. Liability and non-liability for registration. Lost, destroyed, and stolen securities. Duty of authenticating trustee, transfer agent or registrar. Limitation of actions.

PART 1—SHORT TITLE A N D GENERAL MATTERS Citation of ai^^'^^^^

§28:8—101. Short title This article shall be known and may be cited as Uniform Commercial Code—Investment Securities. § 28:8—102. Definitions and index of definitions (1) I n this article unless the context otherwise requires (a) A "security" is an instrument which (i) is issued in bearer or registered form; and (ii) is of a type commonly dealt in upon securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment; and (iii) is either one of a class or series or by its terms is divisible into a class or series of instruments; and (iv) evidences a share, participation or other interest in property or in an enterprise or evidences an obligation of the issuer. (b) A writing which is a security is governed by this article and not by Uniform Commercial Code—Commercial Paper even though it also meets the requirements of that article. This article does not apply to money. (c) A security is in "registered form" when it specifies a person entitled to the security or to the rights it evidences and when its transfer may be registered upon books maintained for that purpose by or on behalf of an issuer or the security so states. (d) A security is in "bearer form" when it runs to bearer according to its terms and not by reason of any indorsement. (2) A "subsequent purchaser" is a person who takes other than by original issue. (3) A "clearing corporation" is a corporation all of the capital stock of which is held by or for a national securities exchange or association registered under a statute of the United States such as the Securities p:xchange Act of 1934. (4) A "custodian bank" is any bank or trust company which is supervised and examined by state or federal authority having supervision over banks and which is acting as custodian for a clearing corporation.

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 both letter and spirit by a people of energetic political talents and a keen instinct for progressive practical development; but so long as they adhere to the forms of such a constitution, so long as the machinery of government supplied by it is the only machinery which the legal and moral sense of such a people permits it to use, its political development must be in many directions narrowly restricted because of an insuperable lack of open or adequate channels. Our Constitution, like every other constitution which puts the authority to make laws and the duty of controlling the public expenditure into the hands of a popular assembly, practically sets that assembly to rule the affairs of the nation as supreme overlord. But, by separating it entirely from its executive agencies, it deprives it of the opportunity and means for making its authority complete and convenient. The constitutional machinery is left of such a pattern that other forces less than that of Congress may cross and compete with Congress, though they are too small to overcome or long offset it; and the result is simply an unpleasant, wearing friction which, with other adjustments, more felicitous and equally safe, might readily be avoided.

Congress, consequently, is still lingering and chafing under just such embarrassments as made the English Commons a nuisance both to

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(5) Other definitions applying to this article or to specifie(l i)<irls thereof and the sections in which they appear are: "Adverse claim". Section 28:8—301. "Bona fide purchaser". Section 28:8—302. "Broker". Section 28:8—303. "Guarantee of the signature". Section 28:8—102. "Intermediary bank". Section 28:4—105. "Issuer". Section 28:8—201. "Overissue". Section 28:8—104. (6) I n addition article 1 contains general definitions and principles of construction and interpretation applicable througliout this article. §28:8—103. Issuer's lien A lien upon a security in favor of an issuer thereof is valid against a purchaser only if the right of the issuer to such lien is noted conspicuously on the security. §28:8—104. Effect of overissue; "overissue" (1) The provisions of this article which validate a security or compel its issue or reissue do not apply to the extent that validation, issue or reissue would result in overissue; but (a) if an identical security which does not constitute an overissue is reasonably available for purchase, the person entitled to issue or validation may compel the issuer to purchase and deliver such a security to him against surrender of the security, if any, which he holds; or (b) if a security is not so available for purchase, the person entitled to issue or validation may recover from the issuer the price he or the last purchaser for value paid for it with interest from the date of his demand. (2) "Overissue" means the issue of securities in excess of the amount which the issuer has corporate power to issue. § 28:8—105. Securities negotiable; presumptions (1) Securities governed by this article are negotiable instruments. (2) I n any action on a security (a) unless specifically denied in the pleadings, each signature on the security or in a necessary indorsement is admitted; (b) when the effectiveness of a signature is put in issue the burden of establishing it is on the party claiming under the signature but the signature is presumed to be genuine or authorized; (c) when signatures are admitted or established production of the instrument entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security; and (d) after it is shown that a defense or defect exists the plaintiff has the burden of establishing that he or some person under whom he claims is a person against whom the defense or defect is ineffective (section 28:8—202). §28:8—106. Applicability The validity of a security and the rights and duties of the issuer with respect to registration of transfer are governed by the law (including the conflict of laws rules) of the jurisdiction of organization of the issuer. § 28:8—107. Securities deliverable; action for price (1) Unless otherwise agreed and subject to any applicable law or regulation respecting short sales, a person obligated to deliver securities may deliver any security of the specified issue in bearer form or registered in the name of the transferee or indorsed to him or in blank.

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(2) When the buyer fails to pay the price as it comes due under a contract of sale the seller may recover the price (a) of securities accepted by the buyer; and (b) of other securities if efforts at their resale would be unduly burdensome or if there is no readily available market for their resale. PART 2—ISSUE—ISSUER §28:8—201. "Issuer" (1) With respect to obligations on or defenses to a security "issuer" includes a person who (a) places or authorizes the placing of his name on a security (otherwise than as authenticating trustee, registrar, transfer agent or the like) to evidence that it represents a share, participation or other interest in his property or in an enterprise or to evidence his duty to perform an obligation evidenced by the security; or (b) directly or indirectly creates fractional interests in his rights or property which fractional interests are evidenced by securities; or (c) becomes responsible for or in place of any other person described as an issuer in this section. (2) With respect to obligations on or defenses to a security a guarantor is an issuer to the extent of his guaranty whetlier or not his obligation is noted on the security. (3) With respect to registration of transfer (part 4 of this article) "issuer" means a person on whose behalf transfer b(K)ks are maintained. § 28:8—^202. Issuer's responsibility and defenses; notice of defect or defense (1) Even against a purchaser for value and without notice, the terms of a security include those stated on the security and those made part of the security by reference to another instrument, indenture or document or to a constitution, statute, ordinance, rule, regulation, order or the like to the extent that the terms so referred to do not conflict with the stated terms. Such a reference does not of itself charge a purchaser for value with notice of a defect going to the validity of the security even though the security expressly states that a person accepting it admits such notice. (2)(a) A security other than one issued by a goverimient or governmental agency or unit even though issued with a defect going to its validity is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a violation of constitutional provisions in which case the security is valid in the hands of a subsequent purchaser for value and without notice of the defect. (b) The rule of subparagraph (a) applies to an issuer which is a government or governmental agency or unit only if either there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security. (3) Except as otherwise provided in the case of certain unauthorized signatures on issue (section 28:8—205), lack of genuineness of a security is a complete defense even against a purchaser for value and without notice. (4) All other defenses of the issuer including nondelivery and conditional delivery of the security are ineffective against a purchaser for value who has taken without notice of the particular defense.

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(5) Nothing in this section shall be construed to affect the right of a party to a "when, as and. if issued" or a "when distributed" contract to cancel the contract in the event of a material change in the character of the security which is the subject of the contract or in the plan or arrangement pursuant to which such security is to be issued or distributed. § 28:8—^203. Staleness as notice of defects or defenses (1) After an act or event which creates a right to immediate performance of the principal obligation evidenced by the security or which sets a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer (a) if the act or event is one requiring the payment of money or the delivery of securities or both on presentation or surrender of the security and such funds or securities are available on the date set for payment or exchange and he takes the security more than one year after that date; and (b) if the act or event is not covered by paragraph (a) and he takes the security more than two years after the date set for surrender or presentation or the date on which such performance became due. (2) A call which has been revoked is not within subsection (1). § 28:8—^204. Effect of issuer's restrictions on transfer Unless noted conspicuously on the security a restriction on transfer imposed by the issuer even though otherwise lawful is ineffective except against a person with actual Imowledge of it. § 28:8—^205. Effect of unauthorized signature on issue An unauthorized signature placed on a security prior to or in the course of issue is ineffective except that the signature is effective in favor of a purchaser for value and without notice of the lapk of authority if the signing has been done by (a) an authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security or of similar securities or their immediate preparation for signing; or (b) an employee of the issuer or of any of the foregoing entrusted with responsible handling of the security. §28:8—^206. Completion or alteration of instrument (1) Where a security contains the signatures necessary to its issue or transfer but is incomplete in any other respect (a) any person may complete it by filling in the blanks as authorized; and (b) even though the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who took it for value and without notice of such incorrectness. (2) A complete security which has been improperly altered even though fraudulently remains enforceable but only according to its original terms. §28:8—^207. Rights of issuer with respect to registered owners (1) Prior to due presentment for registriation of transfer of a security in registered form the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, to I'eceive notifications and otherwise to exercise all the rights and powers of an owner. (2) Nothing in this article shall be construed to affect the liability of the registered owner of a security for calls, assessments or the like.

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§28:8—^208. Effect of signature of authenticating trustee, registrar or transfer agent (1) A person placing his signature upon a security as authenticating trustee, registrar, transfer ageiit or the like wan-ants to a purchaser for value without notice of the particular defect that (a) the security is genuine; and (b) his own participation in the issue of the security is within his capacity and witliin the scope of the authorization received by him from the issuer; and (c) lie has reasonable grounds to believe that the security is in the form and within the amount the issuer is authorized to issue. (2) Unless otherwise agreed, a person by so placing his signature does not assume responsibility for the validity of the security in other respects. PART 3—PURCHASE § 28:8—301. Rights acquired by purchaser; "adverse claim"; title acquired by bona fide purchaser (1) Upon delivery of a security the purchaser acquires the rights in the security which his transferor had or had actual authority to convey except that a purchaser who has himself been a party to any fraud or illegality affecting the security or who as a prior holder had notice of an adverse claim cannot improve his position by taking from a later bona fide purchaser. "Adverse claim" includes a claim that a transfer was or would be wrongful or that a particular adverse person is the owner of or has an interest in the security. (2) A bona fide purchaser in addition to acquiring the rights of a purchaser also acquires the security free of any adverse claim. (3) A purchaser of a limited interest acquires rights only to the extent of the interest purchased. §28:8—302. "Bona fide purchaser" A "bona fide purchaser'' is a purchaser for vakie in good faith and without notice of any adverse claim who takes delivery of a security in bearer form or of one in registered form issued to him or indorsed to him or in blank. §28:8—303. "Broker" "Broker" means a person engaged for all or part of his time in the business of buying and selling securities, who in the transaction concerned acts for, or buys a security from or sells a security to a customer. Nothing in this article determines the capacity in which a person acts for purposes of any other statute or rule to which such person is subject. § 28:8—304. Notice to purchaser of adverse claims (1) A purchaser (including a broker for the seller or buyer but excluding an intermediary bank) of a security is charged with notice of adverse claims if (a) the security whether in bearer or registered form has been indorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or (b) the security is m bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor. The mere writing of a name on a security is not such a statement. (2) The fact that the purchaser (including a broker for the seller or buyer) has notice that the security is held for a third person or is registered in the name of or indorsed by a fiduciary does not create a duty of inquiry into the rightfulness of the transfer or constitute

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notice of adverse claims. If, however, the purchaser (exchiding an intermediary bank) lias knowledge that the proceeds are being used or that the transaction is for the individual benefit of the fiduciary or otherwise in breach of duty, the purchaser is charged with notice of adverse claims. §28:8—305. Stateness as notice of adverse claims An act or event which creates a right to immediate performance of the principal obligation evidenced by the security or which sets a date on or after which the security is to be presented or surrendered for redemption or exchange does not of itself constitute any notice of adverse claims except in the case of a purchase (a) after one year from any date set for such presentment or surrender for redemption or exchange; or (b) after six months from any date set for payment of money against presentation or surrender of the security if funds are available for payment on that date. §28:8—306. Warranties on presentment and transfer (1) A person who presents a security for registration of transfer or for payment or exchange warrants to the issuer that he is entitled to Ihe registration, payment or exchange. But a purchaser for value without notice of adverse claims who receives a new, reissued or re-registered security on registration of transfer warrants only that he has no loiowiedge of any unauthorized signature (section 28:8—311) in a necessary indorsement. (2) A person by transferring a security to a purchaser for value warrants only that (a) his transfer is effective and rightful; and (b) the security is genuine and has not been materially altered; and (c) he knows no fact which might impair the validity of the security. (3) Where a security is delivered by an intermediary known to be entrusted with delivery of the security on behalf of another or with collection of a draft or other claim against such delivery, the intermediary by such delivery warrants only his own good faith and authority even though he has purchased or made advances against the claim to be collected against the delivery. (4) A pledgee or other holder for security who redelivers the seculity received, or after payment and on order of the debtor delivers that security to a third person makes only the warranties of an intermediary under subsection (3). (5) A broker gives to his customer and to the issuer and a purchaser the warranties provided in this section and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of his customer. § 28:8—307. Effect of delivery without indorsement; right to compel indorsement Where a security in registered form has been delivered to a purchaser without a necessary indorsement he may become a bona fide purchaser only as of the time the indorsement is supplied, but against the transferor the transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary indorsement supplied. 93-025 0-64-49

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§28:8—308. Indorsement, how made; special indorsement; indorser not a guarantor; partial assignment (1) An indorsement of a security in registered form is made when an appropriate person signs on it or on a separate document an assignment or transfer of the security or a power to assign or transfer it or when the signature of such person is written without more upon the back of the security. (2) An indorsement may be in blank or speciah An indorsement in blank includes an indorsement to bearer. A special indorsement specifies the person to whom the security is to be transferred, or who has power to transfer it. A holder may convert a blank indorsement into a special indorsement. (3) "An appropriate person'" in subsection (1) means (a) thfi person specified by the security or by special indorsement to be entitled to the security; or (b) where the person so specified is described as a fiduciary but is no longer serving in the described capacity,—either that person or his successor; or (c) where the security or indorsement so specifies more than one person as fiduciaries and one or more are no longer serving in the described capacity,—the remaining fiduciary or fiduciaries, whether or not a successor has been appomted or qualified; or (d) where the person so specified is an individual and is without capacity to act by virtue of death, incompetence, infancy or otherwise,—his executor, administrator, guardian or like fiduciary; or (e) where the security or indorsement so specifies more than one person as tenants by the entirety or with right of survivorship and by reason of death all cannot sign,—the survivor or survivors; or (f) a person having power to sign under applicable law or controlling instrument; or (g) to the extent that any of the foregoing persons may act through an agent,—his authorized agent. (4) Unless otherwise agreed the indorser by his indorsement assumes no obligation that the security will be honored by the issuer. (5) An indorsement purporting to be only of part of a security representing units intended by the issuer to be separately transferable is effective to the extent of the indorsement. (6) Whether the person signing is appropriate is determined as of the date of signing and an indorsement by such a person does not become unauthorized for the purposes of this article by virtue of any subsequent change of circumstances. (7) Failure of a fiduciary to comply with a controlling instrument or with the law of the state having jurisdiction of the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of the transfer, does not render his indorsement unauthorized for the purposes of this article. §28:8—309. Effect of indorsement without delivery An indorsement of a security whether special or in blank does not constitute a transfer until delivery of the security on which it appears or if the indorsement is on a separate document until delivery of both the document and the security. § 28:8—310. Indorsement of security in bearer form An indorsement of a security in bearer form may give notice of adverse claims (section 28:8—304) but does not otherwise affect any right to registration the holder may possess.

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§28:8—311. Effect of unauthorized indorsement Unless the owner has ratified an unauthorized indorsement or is otherwise precluded from asserting its ineffectiveness (a) he may assert its ineffectiveness against the issuer or any purchaser other than a purchaser for value and without notice of adverse claims who has in good faith received a new, reissued or re-registered security on registration of transfer; and (b) an issuer who registers the transfer of a security upon the unauthorized indorsement is subject to liability for improper registration (section 28:8—404). § 28:8—312. Effect of guaranteeing signature or indorsement (1) Any person guaranteeing a signature of an indorser of a security warrants that at the time of signing (a) the signature was genuine; and (b) the signer was an appropriate person to indorse (section 28:8—308); and (c) the signer had legal capacity to sign. But the guarantor does not otherwise warrant the rightfulness of the particular transfer. (2) Any person may guarantee an indorsement of a security and by so doing warrants not only the signature (subsection 1) but also the rightfulness of the particular transfer in all respects. But no issuer may require a guarantee of indorsement as a condition to registration of transfer. (3) The foregoing warranties are made to any person taking or dealing with the security in reliance on the guarantee and the guarantor is liable to such person for any loss resulting from breach of the warranties. §28:8—313. When delivery to the purchaser occurs; purchaser's broker as holder (1) Delivery to a purchaser occurs when (a) he or a pereon designated by him acquires possession of a security; or (b) his broker acquires possession of a security specially indorsed to or issued in the name of the purchaser; or (c) his broker sends him confirmation of the purchase and also by book entry or otherwise identifies a specific security in the broker's possession as belonging to the purchaser; or (d) with respect to an identified security to be delivered while still in the possession of a third person when that person acknowledges that he holds for the purchaser; or (e) appropriate entries on the books of a clearing corporation are made under section 28:8—320. (2) The purchaser is the owner of a security held for him by his broker, but is not the holder except as specified in subparagraphs (b), (c) and (e) of subsection (1). Where a security is part of a fungible bulk the purchaser is the owner of a proportionate property interest in the fungible bulk. (3) Notice of an adverse claim received by the broker or by the l)urcliaser after the broker takes delivery as a holder for value is not effective either as to the broker or as to the purchaser. However, as between the broker and the purchaser the purchaser may demand delivery of an equivalent security as to which no notice of an adverse claim has been received.

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§28:8—314. Duty to deliver, when completed (1) Unless otherwise agreed where a sale of a security is made on an exchange or otherwise through brokers (a) the selling customer fulfills his duty to deliver when he places such a security in the possession of the selling broker or of a person designated by the broker or if requested causes an acknowledgment to be made to the selling broker that it is held for him; and (b) the selling^broker including a correspondent broker acting for a selling customer fulfills his duty to deliver by placing the security or a like security in the possession of the buying broker or a person designated by him or by effecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place. (2) Except as otherwise provided in this section and unless otherwise agreed, a transferor's duty to deliver a security under a contract of purchase is not fulfilled until he places the security in form to be negotiated by the purchaser in the possession of the purchaser or of a person designated by him or at the purcliaser's request causes an acknowledgment to be made to the purchaser that it is held for him. r^nless made on an exchange a sale to a broker purchasing for his own account is within this subsection and not within subsection (1). §28:8—315. Action against purchaser based upon wrongful transfer (1) Any person against whom the transfer of a security is wrongful for any reason, including his incapacity, may against anyone except a bona fide purchaser reclaim possession of the security or obtain possession of any new security evidencing all or part of the same rights or have damages. (2) If the transfer is wrongful because of an unauthorized indorsement, the owner may also reclaim or obtain possession of the security or new security even from a bona fide purchaser if the ineffectiveness of the purported indorsement can be asserted against him under the provisions of this article on unauthorized indorsements (section 28:8-^311). (3) The right to obtain or reclaim possession of a security may be specifically enforced and its transfer enjoined and the security impounded pending the litigation. §28:8—316. Purchaser's right to requisites for registration of transfer on books LTnless otherwise agreed the tranferor must on due demand supply his purchaser with any proof of his authority to transfer or with any other requisite which nuiy be necessary to obtain registration of the transfer of the security but if the transfer is not for value a transferor need not do so unless the purchaser furnishes the necessary expenses. Failure to comply with a demand made within a reasonable time gives the purchaser the right to reject or rescind the transfer. §28:8—317. Attachment or levy upon security (1) No attachment or levy upon a security or any share or other interest evidenced thereby which is outstanding shall be valid until the security is actually seized by the officer making the attachment or levy but a security which has been surrendered to the issuer may be attached or levied upon at the source. (2) A creditor whose debtor is the owner of a security shall be entitled to such aid from courts of appropriate jurisdiction, by injunction or otherwise, in reaching such security or in satisfying the claim by means thereof as is allowed at law or in equity in regard

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to property which cannot, readily be attached or levied upon by ordinary legal process. § 28:8—318. No conversion by good faith delivery An agent or bailee who in good faith (including observance of reasonable commercial standards if he is in the business of buying, selling or otherwise dealing with securities) has received securities and sold, pledged or delivered them according to the instructions of his principal is not liable for conversion or for participation in breach of fiduciary duty although the principal had no right to dispose of them. §28:8-^19. Statute of frauds A contract for the sale of securities is not enforceable by way of action or defense unless (a) there is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price; or (b) delivery of the security has been accepted or payment has been made but the contract is enforceable under this provision only to the extent of such delivery or payment; or (c) within a reasonable time a writing in confirmation of the sale or purchase and sufficient against the sender under paragraph (a) has been received by the party against whom enforcement is sought and he has failed to send written objection to its contents within ten days after its receipt; or (d) the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract was made for sale of a stated quantity of described securities at a defined or stated price. §28:8—320. Transfer or pledge within a central depository system (1) If a security (a) is in the custody of a clearing corporation or of a custodian bank or a nominee of either subject to the instructions of the clearing corporation; and (b) is in bearer form or indorsed in blank by an appropriate person or registered in the name of the clearing corporation or custodian bank or a nominee of either; and (c) is shown on the account of a transferor or pledgor on the books of the clearing corporation; then, in addition to other methods, a transfer or pledge of the security or any interest therein may be effected by the making of appropriate entries on the books of the clearing corporation reducing the account of the transferor or pledgor and increasing the account of the transferee or pledgee by the amount of the obligation or the number of shares or rights transferred or pledged. (2) Under this section entries may be with respect to like securities or interests therein as a part of a fungible bulk and may refer merely to a quantity of a particular security without reference to the name of the registered owner, certificate or bond number or the like and, in appropriate cases, may be on a net basis taking into account other transfers or pledges of the same security. (3) A transfer or pledge under this section has the effect of a delivery of a security in bearer form or duly indorsed in blank (section 28:8—301) representing the amount of the obligation or the number of shares or rights transferred or pledged. If a pledge or the creation of a security interest is intended, the making of entries has the effect of a taking of delivery by the pledgee or a secured party (sections 28:9—304 and 28:9—305). A transferee or pledgee under this section is a holder.

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(4) A transfer or pledge under this section does not constitute a registration of transfer under part 4 of this article. (5) That entries made on the books of the clearing corporation as provided in subsection (1) are not appropriate does not affect the validity or effect of the entries nor the liabilities or obligations of the clearing corporation to any person adversely affected thereby. PART 4—REGISTRATION §28:8—401. Duty of issuer to register transfer (1) Where a security in registered form is presented to the issuer with a request to register transfer, the issuer is under a duty to register the transfer as requested if (a) the security is indorsed by the appropriate person or persons (section 28:8—308); and (b) reasonable assurance is given that those indorsements are genuine and effective (section 28:8—402); and (c) the issuer has no duty to inquire into adverse claims or has discharged any such duty (section 28:8—i03); and (d) any applicable law relating to the collection of taxes has been complied with; and (e) the transfer is in fact rightful or is to a bona fide purchaser. (2) Where an issuer is under a duty to register a transfer of a security the issuer is also liable to the person presenting it for registration or his principal for loss resulting from any unreasonable delay in registration or from failure or refusal to register the transfer. § 28:8—402. Assurance that indorsements are effective (1) The issuer may require the following assurance that each necessary indorsement (section 28:8—308) is genuine and effective (a) in all cases, a guarantee of the signature (subsection (1) of section 28:8—312) of the person indorsing; and (b) where the indorsement is by an agent, appropriate assurance of authority to sign; (c) where the indorsement is by a fiduciary, appropriate evidence of appointment or incumbency; (d) where there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; (e) where the indorsement is by a person not covered by any of the foregoing, assurance appropriate to the case corresponding as nearly as may be to the foregoing. (2) A "guarantee of the signature"' in subsection (1) means a guarantee signed by or on behalf of a person reasonably believed by the issuer to be responsible. The issuer may adopt standards with respect to responsibility provided such standards are not manifestly inireasonable. (3) "Appropriate evidence of appointment or incumbency" in subsection (1) means (a) in the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of that court or an officer thereof and dated within sixty days before the date of presentation for transfer; or (b) in any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by the issuer to be responsible or, in the absence of such a document or certificate, other evidence reasonably deemed by the issuer to be appropriate. The issuer may adopt standards with respect to such evidence provided such standards are not manifestly unreasonable. The issuer is not charged with notice of the contents of any document obtained

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pursuant to this paragraph (b) except to the extent that the contents relate directly to the appointment or incumbency. (4) The issuer may elect to require reasonable assurance beyond that specified in this section but if it does so and for a purpose other than that specified in subsection 3(b) both requires and obtains a copy of a Avill, trust, indenture, articles of co-partnership, by-laws or other controlling instrument it is charged with notice of all matters contained therein affecting the transfer. §28:8—403. Limited duty of inquiry (1) An issuer to whom a security is presented for registration is under a duty to inquire into adverse claims if (a) a written notification of an adverse claim is received at a time and in a manner which affords the issuer a reasonable opportunity to act on it prior to the issuance of a new, reissued or re-registered security and the notification identifies the claimant, the registered owner and the issue of which the security is a part and provides an address for communications directed to the claimant; or (b) the issuer is charged with notice of an adverse claim from a controlling instrument which it has elected to require under subsection (4) of section 28:8—402. (2) The issuer may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or certified mail at the address furnished by him or if there be no such address at his residence or regular place of business that the security has been presented for registration of transfer by a named person, and that the transfer will be registered unless within thirty days from the date of mailing the notification, either (a) an appropriate restraining order, injunction or other process issues from a court of competent jurisdiction; or (b) an indemnity bond sufficient in the issuer's judgment to protect the issuer and any transfer agent, registrar or other agent of the issuer involved, from any loss which it or they may suft'er by complying with the adverse claim is filed with the issuer. (3) Unless an issuer is charged with notice of an adverse claim from a controlling instrument which it has elected to require mider subsection (4) of section 28:8—402 or receives notification of an adverse claim under subsection (1) of this section, where a security presented for registration is indorsed by the appropriate person or persons the issuer is under no duty to inquire into adverse claims. In particular (a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent, or correct description of the fiduciary relationship and thereafter the issuer may assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the fiduciary is no longer acting as such with respect to the particular security; (b) an issuer registering transfer on an indorsement by a fiduciary is not bound to inquire whether the transfer is made in compliance with a controlling instrument or with the law of the state having jurisdiction of the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of the transfer; and (c) the issuer is not charged with notice of the contents of any court record or file or other recorded or unrecorded document even though the document is in its possession and even though the transfer is made on the indorsement of a fiduciary to the,fiduciary himself or to his nominee.

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§28:8—404. Liability and non-liability for registration (1) Except as otherwise provided in any law relating to the collection of taxes, the issuer is not liable to the owner or any other person sutfering loss as a result of the registration of a transfer of a secu(a) there Avere on or with the security the necessary indorsements (section 28:8—308); and (b) the issuer had no duty to inquire into adverse claims or has discharged any such duty (section 28:8—1:08). (2) Where an issuer has registered a transfer of a security to a person not entitled to it the issuer on demand must deliver a like security to the true owner unless (a) the registration was pursuant to subsection (1); or (b) the owner is precluded from asserting any claim for registering the transfer under subsection (1) of the following section; or J (c) such deliveiy would result in overissue, in which case the I issuer's liability is governed by section 28:8—10-1. §28:8—405. Lost, destroyed and stolen securities (1) Where a security has been lost, apparently destroyed or wrongfully taken and the owner fails to notify the issuer of that fact within, a reasonable time after he has notice of it and the issuer registers a transfer of the security before receiving such a notification, the owner is precluded from asserting against the issuer any claim for registering the transfer under the preceding section or any claim to a new security under this section. (2) Where the owner of a security claims that the security has been lost, destroyed or wrongfully taken, the issuer must issue a new security in place of the original security if the owner (a) so requests before the issuer has notice that the security has been acquired by a bona fide purchaser; and (b) files with the issuer a sufficient indemnity bond; and (c) satisfies any other reasonable requirements imposed by the issuer. (3) If, after the issue of the new security, a bona fide purchaser of <:he original security presents it for registration of transfer, the issuer must register the transfer unless registration would result in overissue, in which event the issuer's liability is governed by section 28:8—104. In addition to any rights on the indemnity bond, the issuer may recover the new security from the person to whom it was issued or any person taking under him except a bona fide purchaser. §28:8—406. Duty of authenticating trustee, transfer agent or registrar (1) Where a person acts as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of transfere of its securities or in the issue of new securities or in the cancellation of surrendered securities (a) he is under a duty to the issuer to exercise good faith and due diligence in performing his functions; and (b) he has with regard to the particular functions he performs the same obligation to the holder or owner of the security and has the same rights and privileges as the issuer has in regard to those functions. (2) Notice to an authenticating trustee, transfer agent, registrar or other such agent is notice to the issuer with respect to the functions performed by the agent.

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§28:8—407. Limitation of actions (1) In the exenf of registration, either before or after this subtitle becomes effective, of a transfer or purported transfer of a security to a person not entitled to it, no action of any kind, legal or equitable, to compel the issue, reissue or delivery of a like security or to obtain damages or any other relief as a result of or in connection with such registration may be brought, subject to subsection (2), by the true owner or any other person against an issuer, authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of transfers of its securities, more than eight years after the date on which such registration to a person not entitled has taken place. (2) The time limitations in subsections (1) and (8) of this section may not be tolled or suspended for any reason. This section is additional to, and does not prevent or art'ect the application of, any other statute of limitations as a defense to any action. This section applies to claims or causes of action which have accrued before this subtitle becomes effective as well as to those which accrue after this subtitle becomes effective. This section does not apply to any action against an issuer which at the time of such registration has fewer than fifty persons registered upon books maintained for that purpose as holders of the class and series, if any, of the security so registered to the person not entitled to it. (3) If the eight year period specified in this section expires prior to one year after the effective date of this subtitle, such period is extended to one year after such effective date.

ARTICLE 9—SECURED TRANSACTIONS; SALES OF ACCOUNTS, CONTRACT RIGHTS AND CHATTEL PAPER PART 1—SHORT TITLE, APPLICABILITY AND DEFINITIONS

Sec. 28:9—101. Short title. 28:9—102. Policy and scope of article. 28:9—103. Accounts, contract rights, general intangibles and equipment relating to another jurisdiction; and incoming goods already subject to a security interest. 28:9—104. Transactions excluded from article. 28:9—105. Definitions and index of definitions. 28:9—106. Definitions: "account"; "contract right"; "general intangibles". 28:9—107. Definitions: "purchase money security interest". 28:9—108. When after-acquired collateral not security for antecedent debt. 28:9—109. Classification of goods; "consumer goods"; "equipment"; "farm p r o d u c t s "; "inventory". 28:9—110. Sufficiency of description. 28:9—111. Applicability of bulk transfer laws. 28:9—^112. Where collateral is not owned by debtor. 28:9—113. Security interests arising under article on sales. P A R T 2—VALIDITY OF SECURITY AGREEMENT AND R I G H T S OF PARTIES THERETO

28:9—201. 28:9—202. 28:9—203. 28:9—204. 28:9—205. 28:9—206. 28:9—207. 28:9—208.

General validity of security agreement. Title to collateral immaterial. Enforceability of security i n t e r e s t; proceeds, formal requisites. When security interest a t t a c h e s; after-acquired property; future advances. Use or disposition of collateral without accounting permissible. Agreement not to assert defenses against assignee; modification of sales w a r r a n t i e s w h e r e security agreement exists. Rights and duties when collateral is in secured party ' s possession. Request for statement of account or list of collateral.

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ARTICLE 9—SECURED TRANSACTIONS; SALES OF ACCOUNTS, CONTRACT RIGHTS AND CHATTEL PAPER—Continued I'ART 3—KuniTs

OF T H I R D 1'ARTIKS; I'KRFKCTKD AXD r.\PKRKECTKU I N T K R E S T S; I U I. K S OF PRIORITY

SKCURITY

SKf.

28:9—301. I'ersoiis who take priority over uuperfected.seouritj' i n t e r e s t s; "lieu creditor". 28:S)—302. AN'heii tiling is required to perfect security i n t e r e s t; security interests to which filing provisions of this article do not apply. 28:"J—303. When security interest is perfected; continuity of perfection. 28:9—304. Perfection of security interest in instruments, documents, and goods covered by documents; perfection by permissive filing; temporary perfection without filing or transfer of possession. 28:1)—3or». When ix)ssession by secured, party perfects security interest without filing. 28;l)—30(5. "I'roceeds"; secured party ' s rights on disposition of collateral. 28:9—307. I'rotection (•f buyers of goods. 28:1)—308. Purchase (»f chattel paper and non-negotiable instruments. 28:9—309. Protection of purchasers of instruments and documents. 28:9—310. Priority of certain liens arising by operation of law. 28:i)—311. Alienability of debtor's Tights: judicial process. 28:9—312. Priorities among conflicting security interests in the Same collateial. 28:9—313. Priority of security interests in fixtures. 28:9--314. Accessions. 28:J)—3ir>. Priority when goods a r e commingled o r processed. 28:9—316. Priority subject to subordination, 28:9—317. Secured party not obligated on contract of debtor. 28:9—318. Defenses against assignee; modification of contract after notification of a s s i g n m e n t; term prohibiting assignment ineffective; identification and proof of assignment. PART 4 — F I L I N G

28:9—401. Place of filing; erroneous filing; removal of collateral. 28:9—402. For m a l requisites of financing statement; amendments. 28:9—403. W h a t constitutes filing; duration of filing; effect of lapsed duties of filing oflBcer. 28:9—404. Termination statement. 28:9—405. Assignment of security i n t e r e s t; duties of filing officer; fees. 28:9—406. Release of collateral; duties of filing officer; fees. 28:9—407. Information from filing officer.

filing;

PART 5 — D E F A U L T

28:9—501. D e f a u l t; procedure when security agreement covers both real and personal property. 28:9—502. Collection rights of secured party. 28:9—503. Secured party ' s right to t a k e possession after default. 28:9—504. Secured party ' s right to dispose of collateral after d e f a u l t; effect of disposition. 28:9—505. Compulsory disposition of c o l l a t e r a l; acceptance of the collateral a s discharge of obligation. 28:9—506. Debtor's right to redeem collateral. 28:9—507. Secured party ' s liability for failure to comply with this part.

Citation of ar'^'^^^-

PART 1—SHORT TITLE, APPLICABILITY A N D DEFINITIONS §28:9—101. Short title This aiticle shall be known and may be cited as Uniform Commercial Code—Secured Transactions. §28:9—102. Policy and scope of article (1) Except as otherwise provided in section 28:9—103 on multiple state transactions and in section 28:9—104 on excluded transactions, this article applies so far as concerns any personal property and fixtures within the jurisdiction of the District

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(a) to any transaction (regardless of its form) "which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper, accounts or contract rights; and also (b) to any sale of accounts, contract rights or chattel paper. (2) This article applies to security interests created by contract including pledge, assignment, chattel mortgage, chattel trust, trust deed, factor's lien, equipment trust, conditional sale, trust receipt, other lien or title retention contract and lease or consignment intended as security. This article does not apply to statutory liens except as provided in section 28:9—310. (3) The application of this article to a security interest in a secured obligation is not affected 'by the fact that the obligation is itself secured by a transaction or interest to which this article does not apply. §28;9—103. Accounts, contract rights, general intangibles and equipment relating to another jurisdiction; and incoming goods already subject to a security interest (1) If the office where the assignor of accounts or contract rights keep his records concerning them is in the District, the validity and I)erfection of a security interest therein and the possibility and effect of proper filing is governed by this article; otherwise by the law (including the conflict of laws rules) of the jurisdiction where such office is located. (2) If the chief place of business of a debtor is in the District, this article governs the validity and perfection of a security interest and the possibility and effect of proper filing with regard to general intangibles or with regard to goods of a type which are normally used in more than one jurisdiction (such as automotive equipment, rolling stock, airplanes, road building equipment, commercial harvesting equipment, construction machinery and the like) if such goods are classified as equipment or classified as inventory by reason of their being leased by the debtor to others. Otherwise, the law (including the conflict of laws rules) of the jurisdiction where such chief place of business is located shall govern. If the chief place of business is located in a jurisdiction which does not provide for perfection of the security interest by filing or recording in that jurisdiction, then the security interest may be perfected by filing in the District. For the I)urpose of determining the validity and perfection of a security interest in an airplane, the chief place of business of a debtor who is a foreign air carrier under the Federal Aviation Act of 1958, as amended, is the designated office of the agent upon whom service of process may be made on behalf of the debtor. (3) If personal property other than that governed by subsections (1) and (2) is already subject to a security interest when it is brought into the District, the validity of the security interest in the District is to be determined by the law (including the conflict of laws rules) of the jurisdiction where the property was when the security interest attached. However, if the parties to the transaction understood at the time that the security interest attached that the property would be kept in the District and it was brought into the District within 30 days after the security interest attached for purposes other than transportation through the District, then the validity of the security interest in the District is to be determined by the law of the District. If the security interest was already perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into the District, the security interest continues perfected in the District for four months and also thereafter if within the four month period it is perfected in the District. The se-

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ciirity interest'niay also be perfected in the District after the expiration of the four month period; in such case perfection dates from the time of perfection in the District. If the security interest was not perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into the District, it may be perfected in the District; in such case perfection dates from the time of perfection in the District. (4) Notwithstanding subsections (2) and (8), if personal property is covered by a certificate of title issued under a statute of the District or any other jurisdiction which requires indication on a certificate of title of any security interest in the property as a condition of perfection, then the perfection is governed by the law of the jurisdiction which issued the certificate. (5) Notwithstanding subsection (1) and section 28:9—802, if the office where the assignor of accounts or contracts rights keeps his records concerning them is not located in a jurisdiction which is a part of the United States, its territories or possessions, and the accounts or contract rights are within the jurisdiction of the District or the transaction which creates the security interest otherwise bears an appropriate relation to the District, this article governs the validity and perfection of the security interest and the security interest may only be perfected by notification to the account debtor. §28:9—104. Transactions excluded from article This article does not apply (a) to a security interest subject to any statute of the United States such as the Ship Mortgage Act, 1920, to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property; or (b) to a landlord's lien; or (c) to a lien given by statute or other rule of law for services or materials except as provided in section 2S:9—810 on priority of such liens; or (d) to a transfer of a claim for wages, salary or other compensation of an employee; or (e) to an equipment trust covering railway rolling stock; or (f) to a sale of accounts, contract rights or chattel paper as part of a sale of the business out of which they arose, or an assignment of accounts, contract rights or chattel paper which is for the purpose of collection only, or a transfer of a contract right to an assignee who is also to do the performance under the contract; or (g) to a transfer of an interest or claim in or under any policy of insurance; or (h) to a right represented by a judgment; or (i) to any right of set-off; or (j) except to the extent that provision is made for fixtures in section 28:9—813, to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; or (k) to a transfer in whole or in part of any of the following: any claim arising out of tort; any deposit, savings, passbook or like account maintained with a bank, savings and loan association, credit union or like organization. § 28:9—105. Definitions and index of definitions (1) In this article unless the context otherwise requires: (a) "Account debtor" means the person who is obligated on an account, chattel paper, contract right or general intangible; (b) "Chattel paper" means a writing or writings which evidence both a monetary obligation and a security interest in or a

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lease of specific goods. When a transaclion is evideiu'ed holli by such a security agreement or a lease and by an instrunieut or a series of instruments, the group of writings taken together constitutes chattel paper; (c) "Collateral means the property subject to a secm-ity interest, and includes accounts, contract rights and chattel paper which have been sold; (d) "Debtor" means the person who owes payment or other performance of the obligation secured, whether or not he owns or has rights in the collateral, and includes the seller of accounts, contract rights or chattel paper. Where the debtor and the owner of the collateral are not the same person, the term "debtor means the owner of the collateral in any proA'ision of the article dealing with the collateral, the obligor in any provision dealing with the obligation, and may include both where the context so requires: (e) "Document" means document of title as defined in the general definitions of article 1 (section 28:1—201); (f) "Goods" includes all things which are movable at the time the security interest attaches or which are fixtures (section 28:9— 813), but does not include money, documents, instruments, accounts, chattel paper, general intangibles, contract rights and other things in action, "Goods" also include the unborn young of animals and growing crops; (g) "Instrument" means a negotiable instrument (defined in section 28:3—104), or a security (defined in section 28:8—102) or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in ordinary course of business transferred by delivery with any necessary indorsement or assignment; (h) "Security agreement" means an agreement which creates or provides for a security interest; (i) "Secured party" means a lender, seller or other person in whose favor there is a security interest, including a person to whom accounts, contract rights or chattel paper have been sold. When the holders of obligations issued under an indenture of trust, equipment trust agreement or the like are represented by a trustee or other person, the representative is the secured party. (2) Other definitions applying to this article and the sections in which they appear are: "Account". Section 28:9—106. "Consumer goods". Section 28:9—109 (1). "Contract right". Section 28:9—106. "Equipment". Section 28:9—109(2). " F a r m products". Section 28:9—109 (3). "Filing Office". Section 28:9—401 (1). "General intangibles". Section 28:9—106. ."Inventory". Section 28:9—109 (4). "Lien creditor". Section 28:9—301 (3). "Proceeds". Section 28:9—306 (1). "Purchase money security interest". Section 28:9—107. (3) The following definitions in other articles apply to this article: "Check". Section 28:3—104. "Contract for sale". Section 28:2—106. "Holder in due course". Section 28:3~302. "Note". Section 28:3—104. "Sale". Section 28:2—106. (4) I n addition article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

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§28:9—106. Definitions: "account"; "contract right"; "general intangibles" "Account*' means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper. "Contract right" means any right to payment under a contract not yet earned by performance and not evidenced by an instrument or chattel paper, "General intangibles" means any personal property (including things in action) other than goods, accounts, contract rights, chattel paper, documents and insti'uments. § 28:9—107. Definitions: "purchase money security interest" A security interest is a "purchase money secuiity interest" to the extent that it is (a) taken or retained by the seller of the collateral to secure all or part of its price; or (b) taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used. §28:9—108. When after-acquired collateral not security for antecedent debt AVhere a secured party makes an advance, incurs an obligation, releases a perfected security interest, or otherwise gives new value which is to be secured in whole or in part by after-acquired property his security interest in the after-acquired collateral shall be deemed to be taken for new value and not as security for an antecedent debt if the debtor acquires his rights in such collateral either in the ordinary course of his business or under a contract of purchase made pursuant to the security agreement within a reasonable time after new value is given. §28:9—109. Classification of goods; "consumer goods"; "equipment"; "farm products"; "inventory" Goods are (1) "consumer goods" if they are used or bought for use primarily for personal, family or household purposes; (2) "equipment" if they are used or bought for use primarily in business (including farming or a profession) or by a debtor who is a non-profit organization or a governmental subdivision or agency or if the goods are not included in the definitions of inventory, farm products or consumer goods; (3) "farm products" if they are crops or livestock or supplies used or produced in farming operations or if they are products of crops or livestock in their unmanufactured states (such as ginned cotton, woolclip, maple syrup, milk and eggs), and if they are in the possession of a debtor engaged in raising, fattening, grazing or other farming operations. If goods are farm products they are neither equipment nor inventory; (4) "inventory" if they are held by a person who holds them for sale or lease or to be furnished under contracts of service or if he has so furnished them, or if they are raw materials, work in process or materials used or consumed in a business. Inventory of a person is not to be classified as his equipment. § 28:9—110. Sufficiency of description For the purposes of this article any description of pereonal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described. §28:9—111. Applicability of bulk transfer laws The creation of a security interest is not a bulk transfer under article 6 (see section 28:6—103).

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§ 28:9—112. Where collateral is not owned by debtor Unless otherwise agreed, when a secured party knows that collateral is owned by a person who is not the debtor, the owner of the collateral is entitled to receive from the secured party any surplus under section 28:9—502(2) or under section 28:9—504(1), and is not liable for the debt or for any deficiency after resale, and he has the same right as the debtor (a) to receive statements under section 28:9—208; (b) to receive notice of and to object to a secured party's proposal to retain the collateral in satisfaction of the indebtedness under section 28:9—505; (c) to redeem the collateral under section 28:9—506; (d) to obtain injunctive or other relief under section 28:9— 507(1); and (e) to recover losses caused to him under section 28:9—208 (2). §28:9—113. Security interests arising under article on sales A security interest arising solely under the article on sales (article 2) is subject to the provisions of this article except that to the extent that and so long as the debtor does not have or does not lawfully obtain possession of the goods (a) no security agreement is necessary to make the security interest enforceable; and (b) no filing is required to perfect the security interest; and (c) the rights of the secured party on default by the debtor are governed by the article on sales (article 2). PART 2—VALIDITY OF SECURITY AGREEMENT A N D RIGHTS OF PARTIES THERETO §28:9—201. General validity of security agreement Except as otherwise provided by this title a security agreement is effective according to its terms between the parties, against purchasers of the collateral and against creditors. Nothing in this article validates any charge or practice illegal under any statute or regulation thereunder governing usury, small loans, retail installment sales, or the like, or extends the application of any such statute or regulation to any transaction not otherwise subject thereto. §28:9—202. Title to collateral immaterial Each provision of this article with regard to rights, obligations and remedies applies whether title to collateral is in the secured party or in the debtor. §28:9—^203. Enforceability of security interest; proceeds, formal requisites (1) Subject to the provisions of section 28:4—208 on the security interest of a collecting bank and section 28:9—113 on a security interest arising under the article on sales, a security interest is not enforceable against the debtor or third parties unless (a) the collateral is in the possession of the secured party; or (b) the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops or oil, gas or minerals to be extracted or timber to be cut, a description of the land concerned. I n describing collateral, the word "proceeds" is sufficient without further description to cover proceeds of any character. (2) A transaction, although subject to this article, is also subject to chapter 20 of Title 2, relating to pawnbrokers, chapter ( of Title D.C. code 2 > 26, relating to money lenders, chai^ter 7 of Title 40, relating to liens 26-601°to 2019; 26-611; 40-701 to 40-715.

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on iiiotor vehicles, and chapter 9 of Title 40, relatinjr to installment sales of motor vehicles, 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. § 28:9—204. When security interest attaches; after-acquired property; future advances (1) A security interest cannot attach until there is agreement (subsection (3) of section 28:1—201) that it attach and value is given and the debtor has rights in the collateral. It attaches as soon as all of the events in the preceding sentence have taken place iniless explicit agreement postpones the time of attaching. (2) For the purposes of this section the debtor has no rights (a) in crops until they are planted or otherwise become growing crops, in the young of livestock until they are conceived; (b) in fish until caught, in oil, gas or minerals until they are extracted, in timber until it is cut; (c) in a contract right until the contract has been made; (d) in an account until it comes into existence. (3) Except as provided in subsection (4) a security agreement may provide that collateral, whenever actjuired, shall secure all obligations covered by the security agreement. (4) Xo security interest attaches under an after-acquired property clause (a) to crops which become such more than one year after the security agreement is executed except that a security interest in crops which is given in conjunction with a lease or a land purchase or improvement transaction evidenced by a contract, mortgage or deed of trust may if so agreed attach to crops to be grown on the land concerned during the period of such real estate transaction; (b) to consumer goods other than accessions (section 28:9— 314) when given as additional security unless the debtor acquires rights in them within ten days after the secured party gives value. (5) Obligations covered by a security agreement may include future advances or other value whether or not the advances or value are given pursuant to commitment. §28:9—205. Use or disposition of collateral without accounting permissible A security interest is not invalid or fraudulent against creditors by reason of liberty in the debtor to use, commingle or dispose of all or part of the collateral (including returned or repossessed goods) or to collect or compromise accounts, contract rights or chattel paper, or to accept the return of goods or make repossessions, or to use, commingle or dispose of proceeds, or by reason of the failure of the secured party to require the debtor to account for proceeds or replace collateral. This section does not relax the requirements of possession where perfection of a security interest depends upon possession of the collateral by the secured party or by a bailee. §28:9—^206. Agreement not to assert defenses against assignee; modification of sales warranties where security agreement exists (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 instru-

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ment under the article on commercial paper (article 3). A buyer MIIO as p a i t of one transaction signs both a negotiable instrument and a security agreement makes such an agreement. (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. § 28:9—^207. Rights and duties when collateral is in secured party's possession (1) A secured party must use reasonable care in the custody and preservation of collateral in his possession. In the case of an instrument or chattel paper reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed. (2) Unless otherwise agreed, when collateral is in the secured party's possession (a) reasonable expenses (including the cost of any insurance and payment of taxes or other charges) incurred in the custody, preservation, use or operation of the collateral are chargeable to the debtor and are secured by the collateral; (b) the risk of accidental loss or damage is on the debtor to the extent of any deficiency in any effective insurance coverage; (c) the secured party may hold as additional security any increase or profits (except money) received from the collateral, but money so received, unless remitted to the debtor, shall be applied in reduction of the secured obligation; (d) the secured party must keep the collateral identifiable but fungible collateral may he commingled; (e) the secured party may repledge the collateral upon t-enns which do not impair the debtor's right to redeem it. (3) A secured party is liable for any loss caused by his failure to meet any obligation imposed by the preceding subsections but does not lose his security interest. (4) A secured party may use or operate the collateral for the purpose of preserving the collateral or its value or pursuant to the order of a court of appropriate jurisdiction or, except in the case of consumer goods, in the manner and to the extent provided in the security agreement. § 28:9—^208. Request for statement of account or list of collateral (1) A debtor may sign a statement indicating what he believes t-o be the aggregate amount of unpaid indebtedness as of a specified date and may send it to the secured party with a request that the statement be approved or corrected and returned to the debtor. Allien the se<urity agreement or any other record kept by the secured party identifies the collateral a debtor may similarly re(j[uest the secured party to approve or correct a list of the collateral. (2) The secured party must comply with such a request within two weeks after receipt by sending a written correction or approval. If the secured party clanns a security interest in all of a particular type of collateral owned by the debtor he may indicate that fact in his reply, and need not approve or correct an itemized list of such collateral. If the secured party without reasonable excuse fails to comply he is liable for any loss caused to the debtor thereby; and if the debtor has properly included in his request a good faith statement of the obligation or a list of the collateral or both the secured party may claim a security interest only as shown in the statement agamst persons misled by his failure to comply. If he no longer has an interest in the obligation or collateral at the time the request is received he must disclose the name and address of any successor in interest known to him and he is liable for any loss caused to the debtor as a result of failure to dis93-025 O - 6 4 - 5 0

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close. A successor in interest is not subject to this section until a request is received by liini. (8) A debtor is entitled to such a statement once every six months without charge. The secured party may require payment of a charge not exceeding $10 for each additional statement furnished. PART 3 ~ R I G H T S OF THIRD P A R T I E S; PERFECTED AND UNPERFECTED SECURITY I N T E R E S T S; RULES OF PRIORITY §28:9—301. Persons who take priority over unperfected security interests; "lien creditor" (1) Except as otherwise provided in subsection (2), an unperfected security interest is subordinate to the rights of (a) persons entitled to priority under section 28:9—312; (b) a person who becomes a lien creditor without knowledge of the security interest and before it is perfected; (c) in the case of goods, instruments, documents, and chattel paper, a person who is not a secured party and who is a transferee ni bulk or other buyer not in ordinary course of business to the extent that he gives value and receives delivery of the collateral without knowledge of the security interest and before it is perfected; (d) in the case of accounts, contract rights, and general intangibles, a person who is not a secured party and who is a transferee to the extent that he gives value without knowledge of the security interest and before it is perfected. (2) If the secured party files with respect to a purchase money security interest before or within ten days after the collateral comes into possession of the debtor, he takes priority over the rights of a transferee in bulk or of a lien creditor which arise between the time the security interest attaches and the time of filing. (3) A "lien creditor" means a creditor who has acquired a lien on the property involved by attachment, levy or the like and includes an assignee for benefit of creditors from the time of assignment, and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment. Unless all the creditors represented had knowledge of the security interest such a representative of creditors is a lien creditor without knowledge even though he personally has knowledge of the security interest. §28:9—302. When filing is required to perfect security interest; security interests to which filing provisions of this article do not apply (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 section 28:9—805; (b) a security interest temporarily perfected in instruments or documents without delivery under section 28:9—804 or in proceeds for a 10 day period under section 28:9—806; (c) a purchase money security interest in farm equipment having a purchase price not in excess of $2,500; but filing is required for a fixture under section 28:9—818 or for a motor vehicle required to be licensed; (d) a purchase money security interest in consumer goods; but filing is required for a fixture under section 28:9—313 or for a motor vehicle required to be licensed;

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(e) an assignment of accounts or contract rights which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts or contract rights of the assignor; (f) a security interest of a collecting bank (section 28:4— 208) or arising under the article on sales (see section 28:9—113) or covered in subsection (3) of this section. (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 provisions of this article do not apply to a security interest in property subject to a statute (a) of the United States which provides for a national registration or filing of all security interests in such property; or (b) of the United States pertaining to the District which provides for central filing of security interests in a motor vehicle or trailer which is not inventory held for sale for which a certificate of title is required to be issued under the provisions of chapter 7 of Title 40. (4) A security interest in property covered by a statute described in subsection (3) can be perfected only by registration or filing under that statute or by indication of the security interest on a certificate of title or a duplicate thereof by a public official. §28:9—303. When security interest is perfected; continuity of perfection (1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in sections 28:9—302, 28:9—304, 28:9—305, and 28:9—306. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches. (2) If a security interest is originally perfected in any way permitted under this article and is subsequently perfected in some other way under this article, without an intermediate period when it was unperfected, the security interest shall be deemed to be perfected continuously for the purposes of this article. § 28:9—304. Perfection of security interest in instruments, documents, and goods covered by documents; perfection by permissive filing; temporary perfection without filing or transfer of possession (1) A security interest in chattel paper or negotiable documents may be perfected by filing. A security interest in instruments (other than instruments which constitute part of chattel paper) can be perfected only by the secured party's taking possession, except as provided in subsections (4^ and (5). (2) During the period that goods are in the possession of the issuer of a negotiable document therefor, a security interest in the goods is perfected by perfecting a security interest in the document, and any security interest in the goods otherwise perfected during such period is subject thereto. (3) A security interest in goods in the possession of a bailee other than one who has issued a negotiable document therefor is perfected by issuance of a document in the name of the secured party or by the bailee's receipt of notification of the secured party's interest or by filing as to the goods. (4) A security interest in instruments or negotiable documents is perfected without filing or the taking of possession for a period of

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21 clays from the time it attaches to the extent that it arises for new value given under a written security agreement. (5) A security interest remains perfected for a period of 21 days without filing where a secured party having a perfected security interest in an instrument, a negotiable document oi" goods in possession of a bailee other than one who has issued a negotiable document therefor (a) makes available to the debtor the goods or documents representing the goods for the purpose of ultimate sale or exchange or for the purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with them in a manner preliminary to their sale or exchange; or (b) delivers the instrument to the debtor for the purpose of ultimate sale or exchange or of presentation, collection, renewal or registration of transfer. (6) After the 21 day period in subsections (4) and (5) perfection depends upon compliance with applicable provisions of this article. § 28:9—305. When possession by secured party perfects security interest without filing A security interest in letters of credit and advices of credit (subsection (2)(a) of section 28:5—116), goods, instruments, negotiable documents or chattel paper may be perfected by the secured party's i taking possession of the collateral. If such collateral other than goods covered by a negotiable document is held by a bailee, the secured party is deemed to have possession from the time the bailee receives notification of the secured party's interest. A security interest is perfected by possession from the tiipie possession is taken without relation back and continues only so long as possession is retained, unless otherwise specified in this article. The security interest may be otherwise perfected as provided in this article before or after the period of possession by the secured party. §28:9—306. "Proceeds"; secured party's rights on disposition of collateral (1) "Proceeds'' includes whatever is received when collateral or proceeds is sold, exchanged, collected or otherwise disposed of. The term also includes the account arising when the right to payment is earned under a contract right. Money, checks and the like are "cash proceeds". All other proceeds are "non-cash proceeds". (2) Except where this article otherwise provides, a security interest <'ontiniies in collateral notwithstanding sale, exchange or other disposition thereof by the debtor unless his action was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor. (3) The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected but it ceases to be a perfected security interest and becomes unperfected ten days after receipt of the proceeds by the debtor unless (a) a filed financing statement covering the original collateral also covers proceeds; or (b) the security interest in the proceeds is perfected before the expiration of the ten day period. (4) I n the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security interest in proceeds has a perfected security interest (a) in identifiable non-cash proceeds;

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