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SB-283 Commercial law: secured transactions.(2003-2004)

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SB283:v94#DOCUMENT

Senate Bill No. 283
CHAPTER 235

An act to amend Sections 9102, 9304, 9309, 9321, 9408, and 9521 of the Commercial Code, to amend Section 12194 of the Government Code, and to amend Section 5907 of the Vehicle Code, relating to commercial law.

[ Filed with Secretary of State  August 11, 2003. Approved by Governor  August 09, 2003. ]

LEGISLATIVE COUNSEL'S DIGEST


SB 283, Sher. Commercial law: secured transactions.
Existing provisions of the Uniform Commercial Code govern security interests in personal property and fixtures, as well as certain sales of accounts, contract rights, and chattel paper, and specifies when those security interests are perfected.
This bill would revise various definitions relative to secured transactions and would provide that the sale by an individual of an account that is a right to payment of winnings in a lottery or other game of chance is a security interest that is perfected when it attaches. The bill would make other related changes.

The people of the State of California do enact as follows:


SECTION 1.

 Section 9102 of the Commercial Code is amended to read:

9102.
 (a) In this division:
(1) “Accession” means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.
(2) “Account,” except as used in “account for,” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state. The term includes health care insurance receivables. The term does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.
(3) “Account debtor” means a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.
(4) “Accounting,” except as used in “accounting for,” means a record that is all of the following:
(A) Authenticated by a secured party.
(B) Indicating the aggregate unpaid secured obligations as of a date not more than 35 days earlier or 35 days later than the date of the record.
(C) Identifying the components of the obligations in reasonable detail.
(5) “Agricultural lien” means an interest in farm products that meets all of the following conditions:
(A) It secures payment or performance of an obligation for either of the following:
(i) Goods or services furnished in connection with a debtor’s farming operation.
(ii) Rent on real property leased by a debtor in connection with its farming operation.
(B) It is created by statute in favor of a person that does either of the following:
(i) In the ordinary course of its business furnished goods or services to a debtor in connection with a debtor’s farming operation.
(ii) Leased real property to a debtor in connection with the debtor’s farming operation.
(C) Its effectiveness does not depend on the person’s possession of the personal property.
(6) “As-extracted collateral” means either of the following:
(A) Oil, gas, or other minerals that are subject to a security interest that does both of the following:
(i) Is created by a debtor having an interest in the minerals before extraction.
(ii) Attaches to the minerals as extracted.
(B) Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.
(7) “Authenticate” means to do either of the following:
(A) To sign.
(B) To execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record.
(8) “Bank” means an organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions, and trust companies.
(9) “Cash proceeds” means proceeds that are money, checks, deposit accounts, or the like.
(10) “Certificate of title” means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral.
(11) “Chattel paper” means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this paragraph, “monetary obligation” means a monetary obligation secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.
(12) “Collateral” means the property subject to a security interest or agricultural lien. The term includes all of the following:
(A) Proceeds to which a security interest attaches.
(B) Accounts, chattel paper, payment intangibles, and promissory notes that have been sold.
(C) Goods that are the subject of a consignment.
(13) “Commercial tort claim” means a claim arising in tort with respect to which either of the following conditions is satisfied:
(A) The claimant is an organization.
(B) The claimant is an individual and both of the following conditions are satisfied regarding the claim:
(i) It arose in the course of the claimant’s business or profession.
(ii) It does not include damages arising out of personal injury to or the death of an individual.
(14) “Commodity account” means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.
(15) “Commodity contract” means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is either of the following:
(A) Traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws.
(B) Traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.
(16) “Commodity customer” means a person for which a commodity intermediary carries a commodity contract on its books.
(17) “Commodity intermediary” means a person that is either of the following:
(A) Is registered as a futures commission merchant under federal commodities law.
(B) In the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.
(18) “Communicate” means to do any of the following:
(A) To send a written or other tangible record.
(B) To transmit a record by any means agreed upon by the persons sending and receiving the record.
(C) In the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing-office rule.
(19) “Consignee” means a merchant to which goods are delivered in a consignment.
(20) “Consignment” means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and all of the following conditions are satisfied:
(A) The merchant satisfies all of the following conditions:
(i) He or she deals in goods of that kind under a name other than the name of the person making delivery.
(ii) He or she is not an auctioneer.
(iii) He or she is not generally known by its creditors to be substantially engaged in selling the goods of others.
(B) With respect to each delivery, the aggregate value of the goods is one thousand dollars ($1,000) or more at the time of delivery.
(C) The goods are not consumer goods immediately before delivery.
(D) The transaction does not create a security interest that secures an obligation.
(21) “Consignor” means a person that delivers goods to a consignee in a consignment.
(22) “Consumer debtor” means a debtor in a consumer transaction.
(23) “Consumer goods” means goods that are used or bought for use primarily for personal, family, or household purposes.
(24) “Consumer-goods transaction” means a consumer transaction in which both of the following conditions are satisfied:
(A) An individual incurs an obligation primarily for personal, family, or household purposes.
(B) A security interest in consumer goods secures the obligation.
(25) “Consumer obligor” means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes.
(26) “Consumer transaction” means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transactions.
(27) “Continuation statement” means an amendment of a financing statement which does both of the following:
(A) Identifies, by its file number, the initial financing statement to which it relates.
(B) Indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.
(28) “Debtor” means any of the following:
(A) A person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor.
(B) A seller of accounts, chattel paper, payment intangibles, or promissory notes.
(C) A consignee.
(29) “Deposit account” means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.
(30) “Document” means a document of title or a receipt of the type described in subdivision (2) of Section 7201.
(31) “Electronic chattel paper” means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.
(32) “Encumbrance” means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.
(33) “Equipment” means goods other than inventory, farm products, or consumer goods.
(34) “Farm products” means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are any of the following:
(A) Crops grown, growing, or to be grown, including both of the following:
(i) Crops produced on trees, vines, and bushes.
(ii) Aquatic goods produced in aquacultural operations.
(B) Livestock, born or unborn, including aquatic goods produced in aquacultural operations.
(C) Supplies used or produced in a farming operation.
(D) Products of crops or livestock in their unmanufactured states.
(35) “Farming operation” means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.
(36) “File number” means the number assigned to an initial financing statement pursuant to subdivision (a) of Section 9519.
(37) “Filing office” means an office designated in Section 9501 as the place to file a financing statement.
(38) “Filing-office rule” means a rule adopted pursuant to Section 9526.
(39) “Financing statement” means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement.
(40) “Fixture filing” means the filing of a financing statement covering goods that are or are to become fixtures and satisfying subdivisions (a) and (b) of Section 9502. The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.
(41) “Fixtures” means goods that have become so related to particular real property that an interest in them arises under real property law.
(42) “General intangible” means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.
(43) “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(44) “Goods” means all things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.
(45) “Governmental unit” means a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States.
(46) “Health care insurance receivable” means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health care goods or services provided or to be provided.
(47) “Instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include (i) investment property, (ii) letters of credit, or (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.
(48) “Inventory” means goods, other than farm products, which are any of the following:
(A) Leased by a person as lessor.
(B) Held by a person for sale or lease or to be furnished under a contract of service.
(C) Furnished by a person under a contract of service.
(D) Consist of raw materials, work in process, or materials used or consumed in a business.
(49) “Investment property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.
(50) “Jurisdiction of organization,” with respect to a registered organization, means the jurisdiction under whose law the organization is organized.
(51) “Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.
(52) (A) “Lien creditor” means any of the following:
(i) A creditor that has acquired a lien on the property involved by attachment, levy, or the like.
(ii) An assignee for benefit of creditors from the time of assignment.
(iii) A trustee in bankruptcy from the date of the filing of the petition.
(iv) A receiver in equity from the time of appointment.
(B) “Lien creditor” does not include a creditor who by filing a notice with the Secretary of State has acquired only an attachment or judgment lien on personal property, or both.
(53) “Manufactured home” means a structure, transportable in one or more sections, which, in the traveling mode, is eight body-feet or more in width or 40 body-feet or more in length, or, when erected on site, is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. The term includes any structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States Secretary of Housing and Urban Development and complies with the standards established under Title 42 of the United States Code.
(54) “Manufactured home transaction” means a secured transaction that satisfies either of the following:
(A) It creates a purchase money security interest in a manufactured home, other than a manufactured home held as inventory.
(B) It is a secured transaction in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.
(55) “Mortgage” means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.
(56) “New debtor” means a person that becomes bound as debtor under subdivision (d) of Section 9203 by a security agreement previously entered into by another person.
(57) “New value” means (i) money, (ii) money’s worth in property, services, or new credit, or (iii) release by a transferee of an interest in property previously transferred to the transferee. The term does not include an obligation substituted for another obligation.
(58) “Noncash proceeds” means proceeds other than cash proceeds.
(59) “Obligor” means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral, (i) owes payment or other performance of the obligation, (ii) has provided property other than the collateral to secure payment or other performance of the obligation, or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.
(60) “Original debtor,” except as used in subdivision (c) of Section 9310, means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under subdivision (d) of Section 9203.
(61) “Payment intangible” means a general intangible under which the account debtor’s principal obligation is a monetary obligation.
(62) “Person related to,” with respect to an individual, means any of the following:
(A) The spouse of the individual.
(B) A brother, brother-in-law, sister, or sister-in-law of the individual.
(C) An ancestor or lineal descendant of the individual or the individual’s spouse.
(D) Any other relative, by blood or marriage, of the individual or the individual’s spouse who shares the same home with the individual.
(63) “Person related to,” with respect to an organization, means any of the following:
(A) A person directly or indirectly controlling, controlled by, or under common control with the organization.
(B) An officer or director of, or a person performing similar functions with respect to, the organization.
(C) An officer or director of, or a person performing similar functions with respect to, a person described in subparagraph (A).
(D) The spouse of an individual described in subparagraph (A), (B), or (C).
(E) An individual who is related by blood or marriage to an individual described in subparagraph (A), (B), (C), or (D) and shares the same home with the individual.
(64) “Proceeds,” except as used in subdivision (b) of Section 9609, means any of the following property:
(A) Whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral.
(B) Whatever is collected on, or distributed on account of, collateral.
(C) Rights arising out of collateral.
(D) To the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral.
(E) To the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.
(65) “Promissory note” means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.
(66) “Proposal” means a record authenticated by a secured party that includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to Sections 9620, 9621, and 9622.
(67) “Public finance transaction” means a secured transaction in connection with which all of the following conditions are satisfied:
(A) Debt securities are issued.
(B) All or a portion of the securities issued have an initial stated maturity of at least 20 years.
(C) The debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.
(68) “Pursuant to commitment,” with respect to an advance made or other value given by a secured party, means pursuant to the secured party’s obligation, whether or not a subsequent event of default or other event not within the secured party’s control has relieved or may relieve the secured party from its obligation.
(69) “Record,” except as used in “for record,” “of record,” “record or legal title,” and “record owner,” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.
(70) “Registered organization” means an organization organized solely under the law of a single state or the United States and as to which the state or the United States must maintain a public record showing the organization to have been organized.
(71) “Secondary obligor” means an obligor to the extent that either of the following conditions are satisfied:
(A) The obligor’s obligation is secondary.
(B) The obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.
(72) “Secured party” means any of the following:
(A) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding.
(B) A person that holds an agricultural lien.
(C) A consignor.
(D) A person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold.
(E) A trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for.
(F) A person that holds a security interest arising under Section 2401, 2505, 4210, or 5118, or under subdivision (3) of Section 2711 or subdivision (5) of Section 10508.
(73) “Security agreement” means an agreement that creates or provides for a security interest.
(74) “Send,” in connection with a record or notification, means to do either of the following:
(A) To deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances.
(B) To cause the record or notification to be received within the time that it would have been received if properly sent under subparagraph (A).
(75) “Software” means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.
(76) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(77) “Supporting obligation” means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, document, general intangible, instrument, or investment property.
(78) “Tangible chattel paper” means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.
(79) “Termination statement” means an amendment of a financing statement that does both of the following:
(A) Identifies, by its file number, the initial financing statement to which it relates.
(B) Indicates either that it is a termination statement or that the identified financing statement is no longer effective.
(80) “Transmitting utility” means a person primarily engaged in the business of any of the following:
(A) Operating a railroad, subway, street railway, or trolley bus.
(B) Transmitting communications electrically, electromagnetically, or by light.
(C) Transmitting goods by pipeline or sewer.
(D) Transmitting or producing and transmitting electricity, steam, gas, or water.
(b) The following definitions in other divisions apply to this division:
“Applicant”
Section 5102.
“Beneficiary”
Section 5102.
“Broker”
Section 8102.
“Certificated security”
Section 8102.
“Check”
Section 3104.
“Clearing corporation”
Section 8102.
“Contract for sale”
Section 2106.
“Customer”
Section 4104.
“Entitlement holder”
Section 8102.
“Financial asset”
Section 8102.
“Holder in due course”
Section 3302.
“Issuer‛ (with respect to a letter of credit or  letter–of–credit right)

Section 5102.
“Issuer” (with respect to a security)
Section 8201.
“Lease”
Section 10103.
“Lease agreement”
Section 10103.
“Lease contract”
Section 10103.
“Leasehold interest”
Section 10103.
“Lessee”
Section 10103.
“Lessee in ordinary course of business”
Section 10103.
“Lessor”
Section 10103.
“Lessor’s residual interest”
Section 10103.
“Letter of credit”
Section 5102.
“Merchant”
Section 2104.
“Negotiable instrument”
Section 3104.
“Nominated person”
Section 5102.
“Note”
Section 3104.
“Proceeds of a letter of credit”
Section 5114.
“Prove”
Section 3103.
“Sale”
Section 2106.
“Securities account”
Section 8501.
“Securities intermediary”
Section 8102.
“Security”
Section 8102.
“Security certificate”
Section 8102.
“Security entitlement”
Section 8102.
“Uncertificated security”
Section 8102.
(c) Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division.

SEC. 2.

 Section 9304 of the Commercial Code is amended to read:

9304.
 (a) The local law of a bank’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.
(b) The following rules determine a bank’s jurisdiction for purposes of this chapter:
(1) If an agreement between the bank and its customer governing the deposit account expressly provides that a particular jurisdiction is the bank’s jurisdiction for purposes of this chapter, this division, or this code, that jurisdiction is the bank’s jurisdiction.
(2) If paragraph (1) does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank’s jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank’s jurisdiction.
(4) If none of the preceding paragraphs applies, the bank’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer’s account is located.
(5) If none of the preceding paragraphs applies, the bank’s jurisdiction is the jurisdiction in which the chief executive office of the bank is located.

SEC. 3.

 Section 9309 of the Commercial Code is amended to read:

9309.
 The following security interests are perfected when they attach:
(1) A purchase money security interest in consumer goods, except as otherwise provided in subdivision (b) of Section 9311 with respect to consumer goods that are subject to a statute or treaty described in subdivision (a) of Section 9311.
(2) An assignment of accounts or payment intangibles which does not by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor’s outstanding accounts or payment intangibles.
(3) A sale of a payment intangible.
(4) A sale of a promissory note.
(5) A security interest created by the assignment of a health care insurance receivable to the provider of the health care goods or services.
(6) A security interest arising under Section 2401 or 2505, under subdivision (3) of Section 2711, or under subdivision (5) of Section 10508, until the debtor obtains possession of the collateral.
(7) A security interest of a collecting bank arising under Section 4210.
(8) A security interest of an issuer or nominated person arising under Section 5118.
(9) A security interest arising in the delivery of a financial asset under subdivision (c) of Section 9206.
(10) A security interest in investment property created by a broker or securities intermediary.
(11) A security interest in a commodity contract or a commodity account created by a commodity intermediary.
(12) An assignment for the benefit of all creditors of the transferor and subsequent transfers by the assignee thereunder.
(13) A security interest created by an assignment of a beneficial interest in a decedent’s estate.
(14) A sale by an individual of an account that is a right to payment of winnings in a lottery or other game of chance.

SEC. 4.

 Section 9321 of the Commercial Code is amended to read:

9321.
 (a) In this section, “licensee in ordinary course of business” means a person that becomes a licensee of a general intangible in good faith, without knowledge that the license violates the rights of another person in the general intangible, and in the ordinary course from a person in the business of licensing general intangibles of that kind. A person becomes a licensee in the ordinary course if the license to the person comports with the usual or customary practices in the kind of business in which the licensor is engaged or with the licensor’s own usual or customary practices.
(b) A licensee in ordinary course of business takes its rights under a nonexclusive license free of a security interest in the general intangible created by the licensor, even if the security interest is perfected and the licensee knows of its existence.
(c) A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor, even if the security interest is perfected and the lessee knows of its existence.
(d) This section shall remain in effect only until January 1, 2007, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2007, deletes or extends that date.

SEC. 5.

 Section 9321 of the Commercial Code is amended to read:

9321.
 (a) A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor, even if the security interest is perfected and the lessee knows of its existence.
(b) This section shall become operative on January 1, 2007.

SEC. 6.

 Section 9408 of the Commercial Code is amended to read:

9408.
 (a) Except as otherwise provided in subdivision (b), a term in a promissory note or in an agreement between an account debtor and a debtor that relates to a health care insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or the creation, attachment, or perfection of a security interest in, the promissory note, health care insurance receivable, or general intangible, is ineffective to the extent that the term does, or would do, either of the following:
(1) It would impair the creation, attachment, or perfection of a security interest.
(2) It provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health care insurance receivable, or general intangible.
(b) Subdivision (a) applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note.
(c) A rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or the creation of a security interest in, a promissory note, health care insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation does, or would do, either of the following:
(1) It would impair the creation, attachment, or perfection of a security interest.
(2) It provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health care insurance receivable, or general intangible.
(d) To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor that relates to a health care insurance receivable or general intangible or a rule of law, statute, or regulation described in subdivision (c) would be effective under law other than this division but is ineffective under subdivision (a) or (c), the creation, attachment, or perfection of a security interest in the promissory note, health care insurance receivable, or general intangible is subject to all of the following rules:
(1) It is not enforceable against the person obligated on the promissory note or the account debtor.
(2) It does not impose a duty or obligation on the person obligated on the promissory note or the account debtor.
(3) It does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party.
(4) It does not entitle the secured party to use or assign the debtor’s rights under the promissory note, health care insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health care insurance receivable, or general intangible.
(5) It does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor.
(6) It does not entitle the secured party to enforce the security interest in the promissory note, health care insurance receivable, or general intangible.
(e) Subdivision (c) does not apply to an assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, a claim or right to receive compensation for injuries or sickness as described in paragraph (1) or (2) of subdivision (a) of Section 104 of Title 26 of the United States Code, as amended, or a claim or right to receive benefits under a special needs trust as described in paragraph (4) of subdivision (d) of Section 1396p of Title 42 of the United States Code, as amended, to the extent that subdivision (c) is inconsistent with those laws.

SEC. 7.

 Section 9521 of the Commercial Code is amended to read:

9521.
 (a) A filing office that accepts written records may not refuse to accept a written initial financing statement in the following form and format or in the following form and format but lacking a space identified for the disclosure of the social security number of an individual except for a reason set forth in subdivision (b) of Section 9516:
[NOTICE TO PRINTING OFFICE: Insert camera-ready copy here for UCC Financing Statement form, as printed on pp. 123-124 of Ch. 991, Stats. 1999.]
(b) A filing office that accepts written records may not refuse to accept a written record in the following form and format or in the following form and format but lacking a space identified for the disclosure of the social security number of an individual except for a reason set forth in subdivision (b) of Section 9516:
[NOTICE TO PRINTING OFFICE: Insert camera-ready copy here for UCC Financing Statement Amendment form, as printed on pp. 126-127 of Ch. 991.]

SEC. 8.

 Section 12194 of the Government Code is amended to read:

12194.
 The fees for filing liens pursuant to the Code of Civil Procedure and for filing financing statements and other Uniform Commercial Code filings are the following:
(a) Ten dollars ($10) if the record is communicated in writing and consists of one or two pages.
(b) Twenty dollars ($20) if the record is communicated in writing and consists of more than two pages.
(c) Five dollars ($5) if the record is communicated by another medium authorized by a rule adopted by the office of the Secretary of State.
(d) Two dollars ($2) if the record is a state tax lien certificate of release.
The Secretary of State shall collect a special handling fee for filing records in the manner provided in Section 12182.
Financing statements and other Uniform Commercial Code filings shall be submitted on national standard forms as approved by the office of the Secretary of State or on those national forms but lacking a space identified for the disclosure of the social security number of an individual.

SEC. 9.

 Section 5907 of the Vehicle Code is amended to read:

5907.
 A secured party who holds a security interest in a registered vehicle that constitutes inventory as defined in the Uniform Commercial Code, who has possession of the certificate of ownership issued for that vehicle, if the certificate of ownership has been issued, need not make application for a transfer of registration and the Uniform Commercial Code shall exclusively control the validity and perfection of that security interest. This section does not apply to the extent that subdivisions (a) to (c), inclusive, of Section 9311 of the Uniform Commercial Code apply to a security interest, because the transaction is not described in subdivision (d) of Section 9311 of that code.