Revised Article 9 Contradictions?

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Revised Article 9 Contradictions?
by Sam Ott
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QUESTION: I have attended various Revised Article 9 Seminars. I also have read Revised Article 9 extensively. Here is my question, Section 9-616(c) states how the secured party must present the accounting to the debtor or consumer obligor. This provision states that the secured party's debt is credited first, then add the fees incurred during the process to the amount to calculate the surplus or deficiency. "9-616(c) seems to directly contradict 9-608(a)(1) which states that fees are paid first, then the collecting secured party and finally subordinate secured party (ies) and lienholder(s)." I understand that practically speaking the figures will come out the same. However, I still am confused. Is this in fact a contradiction or am I reading it incorrectly? What do you suggest? Thank you for your help.

ANSWER: I believe the apparent contradiction can be explained if you consider the text of 9-616(c) is listing the information that must be provided to the debtor or consumer obligator and 9-608(a)(1)details the order in which the calculations must be made. Section 9-608 authorizes a secured party to recover its expenses of collection and satisfy the obligations owed to the secured party prior to any remaining proceeds being paid to the holders of any subordinate security interests or other liens. Section 9-616 requires the explaination of the calculation of a surplus or deficiency to be presented in a prescribed orderly fashion. It is confusing but I feel the 9-608 application rules prevail over the explanation sequence listed in 9-616.

First published on BankersOnline.com 6/4/01

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