ASSEMBLY, No. 978
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblyman GEIST
An Act concerning certain secured transactions and amending N.J.S.12A:9-301 and N.J.S.12A:9-312.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.12A:9-301 is amended to read as follows:
12A:9-301. Persons who take priority over unperfected security interests; right of "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 12A:9-312;
(b) A person who becomes a lien creditor before the security interest 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 in bulk or other buyer not in ordinary course of business, or is a buyer of farm products 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 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 [10] 20 days after the debtor receives possession of the collateral, 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.
(4) A person who becomes a lien creditor while a security interest is perfected takes subject to the security interest only to the extent that it secures advances made before he becomes a lien creditor or within 45 days thereafter or made without knowledge of the lien or pursuant to a commitment entered into without knowledge of the lien.
(cf: P.L.1981, c.138, s.15)
2. N.J.S.12A:9-312 is amended to read as follows:
12A:9-312. Priorities Among Conflicting Security Interests in the Same Collateral.
(1) The rules of priority stated in other sections of this subchapter and in the following sections shall govern when applicable: 12A:4-208 with respect to the security interests of collecting banks in items being collected, accompanying documents and proceeds; 12A:9-103 on security interests related to other jurisdictions; 12A:9-114 on consignments.
(2) (Deleted by amendment, P.L.1962, c.203, s.4.)
(3) A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory and also has priority in identifiable cash proceeds received on or before the delivery of the inventory to a buyer if:
(a) The purchase money security interest is perfected at the time the debtor receives possession of the inventory; and
(b) The purchase money secured party gives notification in writing to the holder of the conflicting security interest if the holder had filed a financing statement covering the same types of inventory (i) before the date of the filing made by the purchase money secured party, or (ii) before the beginning of the 21-day period where the purchase money security interest is temporarily perfected without filing or possession (subsection (5) of 12A:9-304); and
(c) The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and
(d) The notification states that the person giving the notice has or expects to acquire a purchase money security interest in inventory of the debtor, describing such inventory by item or type.
(4) A purchase money security interest in collateral other than inventory has priority over a conflicting security interest in the same collateral or its proceeds if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within [10] 20 days thereafter.
(5) In all cases not governed by other rules stated in this section (including cases of purchase money security interests which do not qualify for the special priorities set forth in subsections (3) and (4) of this section), priority between conflicting security interests in the same collateral shall be determined according to the following rules:
(a) Conflicting security interests rank according to priority in time of filing or perfection. Priority dates from the time a filing is first made covering the collateral or the time the security interest is first perfected, whichever is earlier, provided that there is no period thereafter when there is neither filing nor perfection.
(b) So long as conflicting security interests are unperfected, the first to attach has priority.
(6) For the purposes of subsection (5) a date of filing or perfection as to collateral is also a date of filing or perfection as to proceeds.
(7) If future advances are made while a security interest is perfected by filing, the taking of possession, or under 12A:8-321 on securities, the security interest has the same priority for the purposes of subsection (5) with respect to the future advances as it does with respect to the first advance. If a commitment is made before or while the security interest is so perfected, the security interest has the same priority with respect to advances, made pursuant thereto. In other cases a perfected security interest has priority from the date the advance is made.
(cf: P.L.1989, c.348, s.55)
3. This act shall take effect immediately.
STATEMENT
The Uniform Commercial Code provides that a purchase money security interest must be perfected within a certain period of time in order for the secured party or creditor to have priority over a conflicting security interest, transferee in bulk, or lien creditor. This bill extends the period for perfection of a purchase money security interest from 10 to 20 days. The benefits of a 20-day period are: it is more cost-effective; it allows for trial periods and inspection periods; it provides a creditor with adequate time to perfect his security interest; and it has already been adopted by approximately 40 states so that a similar adoption by the State of New Jersey will serve to foster achievement of the fundamental objective of establishing uniformity in the various jurisdictions under the Uniform Commercial Code.
Extends period for perfection of a purchase money security interest.