When Possession by or Delivery to Secured Party Perfects Security Interest Without Filing

  1. Law
  2. Georgia Code
  3. Commercial Code
  4. Secured Transactions
  5. Perfection and Priority
  6. When Possession by or Delivery to Secured Party Perfects Security Interest Without Filing

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  1. Perfection by possession or delivery. Except as otherwise provided in subsection (b) of this Code section, a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under Code Section 11-8-301.
  2. Goods covered by certificate of title. With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in subsection (d) of Code Section 11-9-316.
  3. Collateral in possession of person other than debtor. With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business, when:
    1. The person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party's benefit; or
    2. The person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party's benefit.
  4. Time of perfection by possession; continuation of perfection. If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.
  5. Time of perfection by delivery; continuation of perfection. A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under Code Section 11-8-301 and remains perfected by delivery until the debtor obtains possession of the security certificate.
  6. Acknowledgment not required. A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.
  7. Effectiveness of acknowledgment; no duties or confirmation. If a person acknowledges that it holds possession for the secured party's benefit:
    1. The acknowledgment is effective under subsection (c) of this Code section or subsection (a) of Code Section 11-8-301, even if the acknowledgment violates the rights of a debtor; and
    2. Unless the person otherwise agrees or law other than this article otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.
  8. Secured party's delivery to person other than debtor. A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:
    1. To hold possession of the collateral for the secured party's benefit; or
    2. To redeliver the collateral to the secured party.
  9. Effect of delivery under subsection (h) of this Code section; no duties or confirmation. A secured party does not relinquish possession, even if a delivery under subsection (h) of this Code section violates the rights of a debtor. A person to which collateral is delivered under subsection (h) of this Code section does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this article otherwise provides.

(Code 1981, §11-9-313, enacted by Ga. L. 2001, p. 362, § 1; Ga. L. 2010, p. 481, § 2-26/HB 451.)

The 2010 amendment, effective May 27, 2010, inserted "tangible" in the middle of the first sentence of subsection (a). See the Editor's notes for applicability.

Editor's notes.

- Ga. L. 2010, p. 481, § 3-1, not codified by the General Assembly, provides that: "This Act applies to a document of title that is issued or a bailment that arises on or after the effective date of this Act. This Act does not apply to a document of title that is issued or a bailment that arises before the effective date of this Act even if the document of title or bailment would be subject to this Act if the document of title had been issued or bailment had arisen on or after the effective date of this Act. This Act does not apply to a right of action that has accrued before the effective date of this Act." This Act became effective May 27, 2010.

Ga. L. 2010, p. 481, § 3-2, not codified by the General Assembly, provides that: "A document of title issued or a bailment that arises before the effective date of this Act and the rights, documents, and interests flowing from that document or bailment are governed by any statute or other rule amended or repealed by this Act as if such amendment or repeal had not occurred and may be terminated, completed, consummated, or enforced under that statute or other rule." This Act became effective May 27, 2010.

Law reviews.

- For note, "Limits on Residential Mortgage Lender Protection Section 1322(b) of the Bankruptcy Code," see 9 Ga. St. U.L. Rev. 647 (1993).

JUDICIAL DECISIONS

Editor's notes.

- In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.

Scope of section.

- This section deals with perfection of security interests so as to protect and give priority to secured creditors over claims of third parties in personal property taken as security; it does not govern creation of property rights or security interests. McCrackin v. Hayes, 118 Ga. App. 267, 163 S.E.2d 246 (1968) (decided under former Code Section11-9-305).

Money.

- Security interest in money (either originally given or received as proceeds from negotiation of instrument) is perfected by possession. In re Atlanta Times, Inc., 259 F. Supp. 820 (N.D. Ga. 1966), aff'd sub nom. Sanders v. National Acceptance Co. of Am., 383 F.2d 606 (5th Cir. 1967) (decided under former Code Section 11-9-305).

Escrow account.

- Creditor's security interest in escrow account perfected by possession. Dent v. Associates Equity Servs. Co., 130 Bankr. 623 (Bankr. S.D. Ga. 1991) (decided under former Code Section 11-9-305).

Rights vested.

- This provision does not nullify rule that "transfer of instrument vests in transferee such rights as transferor has." McCrackin v. Hayes, 118 Ga. App. 267, 163 S.E.2d 246 (1968) (decided under former Code Section11-9-305).

Ring.

- Creditor perfected its security interest in a diamond ring by taking possession of it. First Am. Bank & Trust Co. v. Harris (In re Stewart), 74 Bankr. 350 (Bankr. M.D. Ga. 1987) (decided under former Code Section 11-9-305).

Computer information and programming.

- Computer information and programming recorded on magnetic tape were "general intangibles" which are not included in the types of collateral in which security interests can be perfected by possession under former § 11-9-305 (see now § 11-9-313), and a security interest therein could therefore only be perfected by filing a financing statement. Dabney v. Information Exch., Inc., 98 Bankr. 603 (Bankr. N.D. Ga. 1989) (decided under former Code Section11-9-305).

RESEARCH REFERENCES

Am. Jur. 2d.

- 68A Am. Jur. 2d, Secured Transactions, §§ 16, 49, 55, 109, 288 et seq., 444-479.

C.J.S.

- 6A C.J.S., Assignments, §§ 79, 80, 85. 72 C.J.S., Pledges, § 22.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-313.

ALR.

- Rights of holders of different notes in respect of collateral securing them, 52 A.L.R. 1391.

Perfection of security interests by possession, delivery, or control under revised Article 9 of Uniform Commercial Code, 53 A.L.R.6th 159.

Definition and Treatment of "Instruments" Under Revised Article 9 of Uniform Commercial Code, 42 A.L.R.7th Art. 5.


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