Collection and Enforcement by Secured Party

1. Law
2. Georgia Code
3. Commercial Code
4. Secured Transactions
5. Default
6. Collection and Enforcement by Secured Party

1. Collection and enforcement generally. If so agreed, and in any event after default, a secured party:
   1. May notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party;
   2. May take any proceeds to which the secured party is entitled under Code Section 11-9-315;
   3. May enforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral;
   4. If it holds a security interest in a deposit account perfected by control under paragraph (1) of subsection (a) of Code Section 11-9-104, may apply the balance of the deposit account to the obligation secured by the deposit account; and
   5. If it holds a security interest in a deposit account perfected by control under paragraph (2) or (3) of subsection (a) of Code Section 11-9-104, may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party.
2. Nonjudicial enforcement of mortgage. If necessary to enable a secured party to exercise under paragraph (3) of subsection (a) of this Code section the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:
   1. A copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and
   2. The secured party's sworn affidavit in recordable form stating that:
      1. A default has occurred with respect to the obligation secured by the mortgage; and
      2. The secured party is entitled to enforce the mortgage nonjudicially.
3. Commercially reasonable collection and enforcement. A secured party shall proceed in a commercially reasonable manner if the secured party:
   1. Undertakes to collect from or enforce an obligation of an account debtor or other person obligated on collateral; and
   2. Is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor or a secondary obligor.
4. Expenses of collection and enforcement. A secured party may deduct from the collections made pursuant to subsection (c) of this Code section reasonable expenses of collection and enforcement, including reasonable attorney's fees and legal expenses incurred by the secured party.
5. Duties to secured party not affected. This Code section does not determine whether an account debtor, bank, or other person obligated on collateral owes a duty to a secured party.

(Code 1981, §11-9-607, enacted by Ga. L. 2001, p. 362, § 1; Ga. L. 2013, p. 690, § 17/SB 185.)

The 2013 amendment, effective July 1, 2013, inserted "with respect to the obligation secured by the mortgage" in subparagraph (b)(2)(A).

Law reviews.

- For note discussing creditor's remedy of direct collection of accounts and instruments owed to the defaulting debtor, see 3 Ga. L. Rev. 198 (1968).

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.

Meaning of "indebtedness".

- Although security agreement authorizing creditor to collect debtor's receivables "for application on the indebtedness hereby secured" was authorized by the former provisions of this section, the term "indebtedness" as used does not include unmatured balance of loan, since such a construction would effectively permit acceleration of indebtedness without default and at whim of the lender, at least to extent of receivables. First Nat'l Bank v. Appalachian Indus., Inc., 146 Ga. App. 630, 247 S.E.2d 422 (1978), cert. denied, 243 Ga. 353, 255 S.E.2d 726 (1979) (decided under former Code Section11-9-502).

Term "indebtedness" does not include unmatured balance of loan; such construction would effectively permit acceleration of indebtedness without default and at whim of lender, at least to extent of receivables. Washington Loan & Banking Co. v. First Fulton Bank & Trust, 155 Ga. App. 141, 270 S.E.2d 242 (1980) (decided under former Code Section11-9-502).

Duty of bank where acceleration was improper.

- In event acceleration of note is eventually determined to have been improper, bank is not authorized to retain any income from accounts receivable in excess of amount actually required to keep installments current. Washington Loan & Banking Co. v. First Fulton Bank & Trust, 155 Ga. App. 141, 270 S.E.2d 242 (1980) (decided under former Code Section11-9-502).

Action in name of holder of note as collateral security.

- When note is placed in hands of party as collateral security, the holder thereof has legal right to maintain suit thereon in the holder's own name, and to obtain judgment thereon. Peters v. Washington Loan & Banking Co., 133 Ga. App. 293, 211 S.E.2d 148 (1974) (decided under former Code Section11-9-502).

The apparent reason for the requirement of commercial reasonableness in former subsection (2) of this section (see O.C.G.A. § 11-9-607(c)) is to assure, where the secured assignee of receivables undertakes to collect on accounts, that the assignee act with the same degree of prudence which the original account creditor would exercise. CC Fin., Inc. v. Ross, 250 Ga. 832, 301 S.E.2d 262 (1983) (decided under former Code Section11-9-502).

Factoring agreement takes precedence over commercial reasonableness standard.

- Where an accounts receivable factor in no way undertook to collect factored accounts, but rather, by the express terms of the factoring agreement, the duty of collection was placed exclusively upon the debtor and this is an agreement between merchants dealing at arms' length, with consideration flowing to both sides, there is no obstacle to leaving the duty of collection with the debtor, and the debtor may not rely on the standard of commercial reasonableness embodied in former subsection (2) of this section (see O.C.G.A. § 11-9-607 (c)), but must look to the terms of the factoring agreement. CC Fin., Inc. v. Ross, 250 Ga. 832, 301 S.E.2d 262 (1983) (decided under former Code Section11-9-502).

RESEARCH REFERENCES

Am. Jur. 2d.

- 68A Am. Jur. 2d, Secured Transactions, §§ 533-537, 546, 584-589, 638.

C.J.S.

- 6A C.J.S., Assignments, § 98. 72 C.J.S., Pledges, §§ 49, 50.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-607.

ALR.

- Right, upon buyer's default in payment of installment due, to recover amount not due, in absence of acceleration clause, 57 A.L.R. 825.

Bar of statute of limitations against debt secured by pledge as affecting rights and remedies in respect of pledge, 137 A.L.R. 928.

Right of conditional seller to retake property without legal process, 146 A.L.R. 1331.

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