§ 9-615. Application of proceeds of disposition; liability for deficiency and right to surplus.
A. Application of Proceeds. A secured party shall apply or pay over for application the cash proceeds of disposition under 27A ONC § 9-610 in the following order to:
1. The reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party;
2. The satisfaction of obligations secured by the security interest under which the disposition is made;
3. The satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:
a. The secured party receives from the holder of the subordinate security interest or other lien a signed demand for proceeds before distribution of the proceeds is completed; and
b. In a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and
4. A secured party that is a consignor of the collateral if the secured party receives from the consignor a signed demand for proceeds before distribution of the proceeds is completed.
B. Proof of Subordinate Interest. If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder’s demand under subsection (A)(3) of this section.
C. Application of Noncash Proceeds. A secured party need not apply or pay over for application noncash proceeds of disposition under 27A ONC § 9-610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
D. Surplus or Deficiency if Obligation Secured. If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection (A) of this section and permitted by subsection (C) of this section:
1. Unless subsection (A)(4) of this section requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus; and
2. The obligor is liable for any deficiency.
E. Calculation of Surplus or Deficiency in Disposition to Person Related to Secured Party. The surplus or deficiency following a disposition is calculated based on the amount of proceeds received, but if the fairness of the amount of those proceeds is placed in issue and the disposition was to a person related to the secured party, the secured party has the burden of establishing that the amount is not significantly below the range of proceeds that are represented by at least the wholesale value of the collateral.
F. Cash Proceeds Received by Junior Secured Party. A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest under which the disposition is made:
1. Takes the cash proceeds free of the security interest or other lien;
2. Is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and
3. Is not obligated to account to or pay the holder of the security interest or other lien for any surplus. ONCA 07-22, eff. June 18, 2007.