N.D. Cent. Code § 41-09-44
(9-324) Priority of purchase-money security interests
Redline — December 1, 2021 → current.View current text →
Current — January 1, 2022
As of December 1, 2021
(1) Except as otherwise provided in subsection 7, a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in section 41-09-47, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within twenty days thereafter.
(1) Except as otherwise provided in subsection 7, a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in section 41-09-47, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within twenty days thereafter.
(2) Subject to subsection 3 and except as otherwise provided in subsection 7, a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in section 41-09-50, and, except as otherwise provided in section 41-09-47, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if: The purchase-money security interest is perfected when the debtor receives possession of the inventory;
(2) Subject to subsection 3 and except as otherwise provided in subsection 7, a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in section 41-09-50, and, except as otherwise provided in section 41-09-47, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if: The purchase-money security interest is perfected when the debtor receives possession of the inventory;
(3) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
(3) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
(4) The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and
(4) The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and
(5) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.
(5) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.
(6) Subdivisions b through d of subsection 2 apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory: If the purchase-money security interest is perfected by filing, before the date of the filing; or
(6) Subdivisions b through d of subsection 2 apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory: If the purchase-money security interest is perfected by filing, before the date of the filing; or
(7) If the purchase-money security interest is temporarily perfected without filing or possession under subsection 6 of section 41-09-32, before the beginning of the twenty-day period thereunder.
(7) If the purchase-money security interest is temporarily perfected without filing or possession under subsection 6 of section 41-09-32, before the beginning of the twenty-day period thereunder.
(8) Subject to subsection 5 and except as otherwise provided in subsection 7, a perfected purchase-money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in section 41-09-47, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if: The purchase-money security interest is perfected when the debtor receives possession of the livestock;
(8) Subject to subsection 5 and except as otherwise provided in subsection 7, a perfected purchase-money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in section 41-09-47, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if: The purchase-money security interest is perfected when the debtor receives possession of the livestock;
(9) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
(9) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
(10) The holder of the conflicting security interest receives the notification within six months before the debtor receives possession of the livestock; and
(10) The holder of the conflicting security interest receives the notification within six months before the debtor receives possession of the livestock; and
(11) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in livestock of the debtor and describes the livestock.
(11) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in livestock of the debtor and describes the livestock.
(12) Subdivisions b through d of subsection 4 apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock: If the purchase-money security interest is perfected by filing, before the date of the filing; or
(12) Subdivisions b through d of subsection 4 apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock: If the purchase-money security interest is perfected by filing, before the date of the filing; or
(13) If the purchase-money security interest is temporarily perfected without filing or possession under subsection 6 of section 41-09-32, before the beginning of the twenty-day period thereunder.
(13) If the purchase-money security interest is temporarily perfected without filing or possession under subsection 6 of section 41-09-32, before the beginning of the twenty-day period thereunder.
(14) Except as otherwise provided in subsection 7, a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in section 41-09-47, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.
(14) Except as otherwise provided in subsection 7, a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in section 41-09-47, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.
(15) If more than one security interest qualifies for priority in the same collateral under subsection 1, 2, 3, or 4: A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and
(15) If more than one security interest qualifies for priority in the same collateral under subsection 1, 2, 3, or 4: A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and
(16) In all other cases, subsection 1 of section 41-09-42 applies to the qualifying security interests.
(16) In all other cases, subsection 1 of section 41-09-42 applies to the qualifying security interests.
(17) Priority in Proceeds: General. When the purchase-money secured party has priority over another secured party, the question arises whether this priority extends to the proceeds of the original collateral. Subsections (a), (d), and (f) give an affirmative answer, but only as to proceeds in which the security interest is perfected (see Section 9-315). Although this qualification did not appear in former Section 9-312(4), it was implicit in that provision.
(18) Priority in Accounts Constituting Proceeds of Inventory. The application of the priority rules in subsection (b) is shown by the following examples:
(19) Purchase-Money Security Interests in Livestock. New subsections (d) and (e) provide a purchase-money priority rule for farm-products livestock. They are patterned on the purchase-money priority rule for inventory found in subsections (b) and (c) and include a requirement that the purchase-money secured party notify earlier-filed parties. Two differences between subsections (b) and (d) are noteworthy. First, unlike the purchase-money inventory lender, the purchase-money livestock lender enjoys priority in all proceeds of the collateral. Thus, under subsection (d), the purchase-money secured party takes priority in accounts over an earlier-filed accounts financer. Second, subsection (d) affords priority in certain products of the collateral as well as proceeds.
(20) Purchase-Money Security Interests in Aquatic Farm Products. Aquatic goods produced in aquacultural operations (e.g., catfish raised on a catfish farm) are farm products. See Section 9-102 (definition of “farm products”). The definition does not indicate whether aquatic goods are “crops,” as to which the model production money security interest priority in Section 9-324A applies, or “livestock,” as to which the purchase-money priority in subsection (d) of this section applies. This Article leaves courts free to determine the classification of particular aquatic goods on a case-by-case basis, applying whichever priority rule makes more sense in the overall context of the debtor’s business.
(21) Purchase-Money Security Interests in Software. Subsection (f) governs the priority of purchase-money security interests in software. Under Section 9-103(c), a purchase-money security interest arises in software only if the debtor acquires its interest in the software for the principal purpose of using the software in goods subject to a purchase-money security interest. Under subsection (f), a purchase-money security interest in software has the same priority as the purchase-money security interest in the goods in which the software was acquired for use. This priority is determined under subsections (b) and (c) (for inventory) or (a) (for other goods).
(22) Multiple Purchase-Money Security Interests. New subsection (g) governs priority among multiple purchase-money security interests in the same collateral. It grants priority to purchase-money security interests securing the price of collateral (i.e., created in favor of the seller) over purchase-money security interests that secure enabling loans. Section 7.2(c) of the Restatement (3d) of the Law of Property (Mortgages) (1997) adopts this rule with respect to real property mortgages. As Comment d to that section explains:
Official source: North Dakota Legislative Branch. Reproduced from public-domain North Dakota statutes; confirm against the official source for the current text. Not legal advice.