HB 348 — Relating to the Uniform Commercial Code; to add Article 12 to the Uniform Commercial Code to govern the property rights of certain intangible digital assets (controllable electronic records), including electronic rights to payment, to provide for a manner to establish the transfer and control of those assets, to provide a mechanism for evidencing certain rights of payment, and to adopt special rules with regard to the payment obligations and conditions of discharge of account debtors on controllable accounts and controllable payment intangibles; to amend Sections 7-1-201, 7-1-204, 7-1-301, 7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202, 7-2-203, 7-2-205, 7-2-209, 7-2A-102, 7-2A-103, 7-2A-107, 7-2A-201, 7-2A-202, 7-2A-203, 7-2A-205, 7-2A-208, 7-3-104, 7-3-105, 7-3-401, 7-3-604, 7-4A-103, 7-4A-201, 7-4A-202, 7-4A-203, 7-4A-207, 7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305, 7-5-104, 7-5-116, 7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106, 7-8-110, 7-8-303, 7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203, 7-9A-204, 7-9A-207, 7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301, 7-9A-304, 7-9A-305, 7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314, 7-9A-316, 7-9A-317, 7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331, 7-9A-332, 7-9A-334, 7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408, 7-9A-509, 7-9A-513, 7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611, 7-9A-613, 7-9A-614, 7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620, 7-9A-621, 7-9A-624, and 7-9A-628, Code of Alabama 1975, and to add Sections 7-9A-107A, 7-9A-107B, 7-9A-306A, 7-9A-306B, 7-9A-314A, and 7-9A-326A to the Code of Alabama 1975, to provide a substantial revision to the Uniform Commercial Code in conformity with a substantial portion of the Uniform Commercial Code Amendments (2022), to clarify the meaning of the term chattel paper and other definitions, to define and provide for hybrid transactions, and to provide extensive amendments to the Uniform Commercial Code providing for the perfection of security interests in controllable electronic records, documents of title, chattel paper, and other assets; and to add Article 12A to the Uniform Commercial Code to provide transitional provisions for the Uniform Commercial Code Amendments (2022).

(c) If (i) a payment order described in subsection (b) is accepted, (ii) the originator's payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary's bank pays the person identified by number as Page 39 HB348 EngrossedEnrolled permitted by subsection (b)(1), the following rules apply:

(2) If the originator is not a bank and is not obliged to pay its payment order, the originator's bank has the right Page 40 HB348 EngrossedEnrolled to recover." "§7-4A-208.

The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute Page 41 HB348 EngrossedEnrolled the order.

A notice of rejection Page 42 HB348 EngrossedEnrolled need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order.

(c) If a receiving bank suspends payments, all Page 43 HB348 EngrossedEnrolled unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.

(1) With respect to a payment order accepted by a receiving bank other than the beneficiary's bank, cancellation Page 44 HB348 EngrossedEnrolled or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made.

Page 45 HB348 EngrossedEnrolled (f) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank's agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney's fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.

(b) If execution of a payment order by a receiving bank in breach of Section 7-4A-302 results in (i) noncompletion of Page 46 HB348 EngrossedEnrolled the funds transfer, (ii) failure to use an intermediary bank designated by the originator, or (iii) issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by subsection (a), resulting from the improper execution.

If a claim is made for breach of an agreement under subsection (d) and the agreement does not provide for damages, reasonable attorney's fees are recoverable if demand for compensation Page 47 HB348 EngrossedEnrolled under subsection (d) is made and refused before an action is brought on the claim.

(c) For the purpose of jurisdiction, choice of law, and Page 48 HB348 EngrossedEnrolled recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection (d).

(e)(g) The forum for settling disputes arising out of an undertaking within this article may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a)." Page 49 HB348 EngrossedEnrolled "§7-7-102.

The term includes a person for which an agent or employee purports to act in issuing a document if the agent or employee has real or Page 50 HB348 EngrossedEnrolled apparent authority to issue documents, even if the issuer did not receive any goods, the goods were misdescribed, or in any other respect the agent or employee violated the issuer's instructions.

(c) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable Page 51 HB348 EngrossedEnrolled throughout this article." "§7-7-106.

(5) Eacheach copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not Page 52 HB348 EngrossedEnrolled the authoritative copy;

(1) the authoritative electronic copy, a record attached to or logically associated with the authoritative electronic copy, or a system in which the authoritative electronic copy is recorded limits the use of the document of Page 53 HB348 EngrossedEnrolled title or has a protocol that is programmed to cause a change, including a transfer or loss of control;

(i) If a person acknowledges that it has or will obtain control on behalf of another person, unless the person Page 54 HB348 EngrossedEnrolled otherwise agrees or law other than this article or Article 9A otherwise provides, the person does not owe any duty to the other person and is not required to confirm the acknowledgment to any other person." "§7-8-102.

or (iii) any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing Page 55 HB348 EngrossedEnrolled corporation, including promulgationadoption of rules, are subject to regulation by a federal or state governmental authority.

or (iii) any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other Page 56 HB348 EngrossedEnrolled person that the property is to be treated as a financial asset under this article.

or Page 57 HB348 EngrossedEnrolled (ii) a person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.

(b) Other definitions applying to this article and the Page 58 HB348 EngrossedEnrolled sections in which they appear are:

"Investment company security" means a share or similar equity Page 59 HB348 EngrossedEnrolled interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered.

(h) A controllable account, controllable electronic record, or controllable payment intangible is not a financial Page 60 HB348 EngrossedEnrolled asset unless Section 7-8-102(a)(9)(iii) applies." "§7-8-106.

or (3) another person has control of the security entitlement on behalf of the purchaser or, having previously Page 61 HB348 EngrossedEnrolled acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser.

(g) An issuer or a securities intermediary may not enter into an agreement of the kind described in subsection (c)(2) or (d)(2) without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so Page 62 HB348 EngrossedEnrolled directs.

(b) The local law of the securities intermediary's Page 63 HB348 EngrossedEnrolled jurisdiction, as specified in subsection (e), governs:

(1) If an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the Page 64 HB348 EngrossedEnrolled securities intermediary's jurisdiction for purposes of this part, this article, or this title, that jurisdiction is the securities intermediary's jurisdiction.

(f) A securities intermediary's jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by Page 65 HB348 EngrossedEnrolled the location of facilities for data processing or other record keeping concerning the account.

(2) "Account," except as used in "account for," "account statement," "account to," "commodity account" in paragraph (14), "customer's account," "deposit account" in paragraph (29), "on account of," and "statement of account," Page 66 HB348 EngrossedEnrolled means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State.

Page 67 HB348 EngrossedEnrolled (4) "Accounting," except as used in "accounting for," means a record:

Page 68 HB348 EngrossedEnrolled (i) is created by a debtor having an interest in the minerals before extraction;

Page 69 HB348 EngrossedEnrolled (9) "Cash proceeds" means proceeds that are money, checks, deposit accounts, or the like.

(11) "Chattel paper" means a record or records that evidence both a monetary obligation and a security interest in Page 70 HB348 EngrossedEnrolled specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods.

Page 71 HB348 EngrossedEnrolled The term does not include a right to payment arising out of a charter or other contract involving the use or hire of a vessel or a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.

(A) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a Page 72 HB348 EngrossedEnrolled contract pursuant to federal commodities laws;

(i) deals in goods of that kind under a name other than Page 73 HB348 EngrossedEnrolled the name of the person making delivery;

Page 74 HB348 EngrossedEnrolled (26) "Consumer transaction" means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes.

or Page 75 HB348 EngrossedEnrolled (C) a consignee.

(35) "Farming operation" means raising, cultivating, Page 76 HB348 EngrossedEnrolled propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.

Page 77 HB348 EngrossedEnrolled (44) "Goods" means all things that are movable when a security interest attaches.

The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under Page 78 HB348 EngrossedEnrolled the laws of the United States.

(50) "Jurisdiction of organization," with respect to a Page 79 HB348 EngrossedEnrolled registered organization, means the jurisdiction under whose law the organization is formed or organized.

Page 80 HB348 EngrossedEnrolled (55) "Mortgage" means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.

(61) "Payment intangible" means a general intangible under which the account debtor's principal obligation is a Page 81 HB348 EngrossedEnrolled monetary obligation.

Page 82 HB348 EngrossedEnrolled (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;

(A) a record consisting of the record initially filed with or issued by a state or the United States to form or Page 83 HB348 EngrossedEnrolled organize an organization and any record filed with or issued by the state or the United States which amends or restates the initial record;

(70) "Record," except as used in "for record," "of record," "record or legal title," and "record owner," means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in Page 84 HB348 EngrossedEnrolled perceivable form.

or (F) a person that holds a security interest arising Page 85 HB348 EngrossedEnrolled under Section 7-2-401, 7-2-505, 7-2-711(3), 7-2A-508(5), 7-4-210, or 7-5-118.

(79) "Tangible chattel paper" means chattel paper evidenced by a record or records consisting of information Page 86 HB348 EngrossedEnrolled that is inscribed on a tangible medium.

Page 87 HB348 EngrossedEnrolled "Contract for sale." Section 7-2-106.

Page 88 HB348 EngrossedEnrolled "Qualifying purchaser." Section 7-12-102.

or (B) obtains control of the deposit account after having acknowledged that it will obtain control of the deposit Page 89 HB348 EngrossedEnrolled account on behalf of the secured party.

(5) each copy of the authoritative copy and any copy of Page 90 HB348 EngrossedEnrolled a copy is readily identifiable as a copy that is not the authoritative copy;

and Page 91 HB348 EngrossedEnrolled (6) any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.

(1) the authoritative electronic copy, a record attached to or logically associated with the authoritative electronic copy, or a system in which the authoritative electronic copy is recorded limits the use of the authoritative electronic copy or has a protocol programmed to Page 92 HB348 EngrossedEnrolled cause a change, including a transfer or loss of control;

Attachment and enforceability of security Page 93 HB348 EngrossedEnrolled interest;

or (D) the collateral is controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic chattel paper, Page 94 HB348 EngrossedEnrolled electronic documents, investment property, or letter-of-credit rights, and the secured party has control under Section 7-7-106, 7-9A-104, 7-9A-105, 7-9A-106, or 7-9A-107, or 7-9A-107A, pursuant to the debtor's security agreement.;

(1) the agreement satisfies subsection (b)(3) with respect to existing or after-acquired property of the new Page 95 HB348 EngrossedEnrolled debtor to the extent the property is described in the agreement;

A Subject to subsection (b.1), a security interest does not Page 96 HB348 EngrossedEnrolled attach under a term constituting an after-acquired property clause to:

In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against Page 97 HB348 EngrossedEnrolled prior parties unless otherwise agreed.

Page 98 HB348 EngrossedEnrolled (1) may hold as additional security any proceeds, except money or funds, received from the collateral;

(1) a secured party having control of a deposit account under Section 7-9A-104(a)(2) shall send to the bank with which Page 99 HB348 EngrossedEnrolled the deposit account is maintained an authenticated a signed record statement that releases the bank from any further obligation to comply with instructions originated by the secured party;

and (C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the Page 100 HB348 EngrossedEnrolled authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;

If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and Page 101 HB348 EngrossedEnrolled instructing the custodian to comply with instructions originated by the debtor;

A demand sent to another address of the secured party will be effective, but the 10-day period for action by the secured party does not begin until the person or department at the address specified Page 102 HB348 EngrossedEnrolled by the secured party has notice of the demand." "§7-9A-209.

A demand sent to another address of the secured party will be effective, but the 10-day period for action by the secured party does not begin until the person or department at Page 103 HB348 EngrossedEnrolled the address specified by the secured party has notice of the demand." "§7-9A-210.

Subject to subsections (c), (d), (e), and (f), a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory Page 104 HB348 EngrossedEnrolled notes or a consignor, shall comply with a request within 14 days after receipt:

(e) Request for accounting or regarding statement of Page 105 HB348 EngrossedEnrolled account;

Except as otherwise provided in Sections 7-9A-303 Page 106 HB348 EngrossedEnrolled through 7-9A-306 7-9A-306B, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:

(4) The local law of the jurisdiction in which the wellhead or mine is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral." Page 107 HB348 EngrossedEnrolled "§7-9A-304.

(4) If none of the preceding paragraphs applies, the bank's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the Page 108 HB348 EngrossedEnrolled customer's account is located.

Page 109 HB348 EngrossedEnrolled (b) Commodity intermediary's jurisdiction.

(5) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary Page 110 HB348 EngrossedEnrolled is located.

Page 111 HB348 EngrossedEnrolled (4) in goods in possession of a bailee which is perfected under Section 7-9A-312(d)(1) or (2);

temporary perfectionPerfection of security interests in chattel paper, controllable accounts, controllable Page 112 HB348 EngrossedEnrolled electronic records, controllable payment intangibles, deposit accounts, negotiable documents, goods covered by documents, instruments, investment property, letter-of-credit rights, and money;

and (2) a security interest perfected in the document has priority over any security interest that becomes perfected in Page 113 HB348 EngrossedEnrolled the goods by another method during that time.

Delivery of security Page 114 HB348 EngrossedEnrolled certificate or instrument to debtor.

(c) Collateral in possession of person other than Page 115 HB348 EngrossedEnrolled debtor.

Page 116 HB348 EngrossedEnrolled (g) Effectiveness of acknowledgment;

A person to which collateral is delivered under subsection (h) 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." Page 117 HB348 EngrossedEnrolled "§7-9A-314.

Page 118 HB348 EngrossedEnrolled (A) if the collateral is a certificated security, the debtor has or acquires possession of the security certificate;

If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it Page 119 HB348 EngrossedEnrolled becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

A security interest described in subsection (d) becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the Page 120 HB348 EngrossedEnrolled applicable requirements for perfection under Section 7-9A-311(b) or 7-9A-313 are not satisfied before the earlier of:

Page 121 HB348 EngrossedEnrolled (g) Subsection (f) security interest perfected or unperfected under law of new jurisdiction.

If the security interest does not become perfected Page 122 HB348 EngrossedEnrolled under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the Page 123 HB348 EngrossedEnrolled collateral for value." "§7-9A-317.

Except as otherwise provided in subsection (e), a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without Page 124 HB348 EngrossedEnrolled knowledge of the security interest or agricultural lien and before it is perfected.

Page 125 HB348 EngrossedEnrolled (g) Buyers of electronic documents.

Page 126 HB348 EngrossedEnrolled (A) under Section 7-9A-309 when it attaches;

Priority of Page 127 HB348 EngrossedEnrolled buyer of goods.

Except as otherwise provided in subsection (g), 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 7-9A-327, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives Page 128 HB348 EngrossedEnrolled possession of the collateral or within 20 days thereafter.

Subsections (b)(2) through (4) apply only if the holder of the conflicting security interest had filed a Page 129 HB348 EngrossedEnrolled financing statement covering the same types of inventory:

(e) Holders of conflicting livestock security interests Page 130 HB348 EngrossedEnrolled to be notified.

and (2) in all other cases, Section 7-9A-322(a) applies to Page 131 HB348 EngrossedEnrolled the qualifying security interests.

A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of each authoritative tangible copy of the record evidencing the chattel paper or and obtains control of under Section 7-9A-105 of each authoritative electronic copy of the record evidencing the chattel paper under Section 7-9A-105 in good faith, in the Page 132 HB348 EngrossedEnrolled ordinary course of the purchaser's business, and without knowledge that the purchase violates the rights of the secured party.

For purposes of subsections (b) and (d), if the authoritative Page 133 HB348 EngrossedEnrolled copies of the record evidencing chattel paper or an instrument indicates indicate that it the chattel paper or instrument has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party." "§7-9A-331.

Filing under this article does not constitute notice of a claim or defense to the holders, or Page 134 HB348 EngrossedEnrolled purchasers, or persons described in subsections (a) and (b)." "§7-9A-332.

In cases not governed by subsections (d) through (h), a security interest in fixtures is subordinate to a Page 135 HB348 EngrossedEnrolled conflicting interest of an encumbrancer or owner of the related real property other than the debtor.

(2) before the goods become fixtures, the security interest is perfected by any method permitted by this article Page 136 HB348 EngrossedEnrolled and the fixtures are readily removable:

The priority of the security interest under paragraph (f)(2) continues for a reasonable time if the debtor's right to remove the goods as against the encumbrancer or owner Page 137 HB348 EngrossedEnrolled terminates.

Except as otherwise provided in Section 7-9A-340(c), and unless the bank otherwise agrees in an authenticated a Page 138 HB348 EngrossedEnrolled signed record, a bank's rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended, or modified by:

Subject to subsection (c) and except as otherwise provided in subsection (d), the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) only to reduce the amount the account debtor Page 139 HB348 EngrossedEnrolled owes.

Subject to subsections (b) through (i) and subsection (l), an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by Page 140 HB348 EngrossedEnrolled paying the assignor until, but not after, the account debtor receives a notification, authenticated signed by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee.

Subject to subsection subsections (h) and (l), if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the Page 141 HB348 EngrossedEnrolled assignment has been made.

Page 142 HB348 EngrossedEnrolled (f) Legal restrictions on assignment generally ineffective.

(i) Inapplicability to health-care-insurance Page 143 HB348 EngrossedEnrolled receivable.

(1) would impair the creation, attachment, or Page 144 HB348 EngrossedEnrolled perfection of a security interest;

or (2) provides that the assignment or transfer or the Page 145 HB348 EngrossedEnrolled creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.

(4) does not entitle the secured party to use or assign the debtor's rights under the promissory note, health-care-insurance receivable, or general intangible, including any related information or materials furnished to Page 146 HB348 EngrossedEnrolled the debtor in the transaction giving rise to the promissory note, health-care-insurance receivable, or general intangible;

or (2) the person holds an agricultural lien that has Page 147 HB348 EngrossedEnrolled become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien.

or (2) the amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required Page 148 HB348 EngrossedEnrolled by Section 7-9A-513(a) or (c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.

In cases not governed by subsection (a), within 20 days after a secured party receives Page 149 HB348 EngrossedEnrolled an authenticated a signed demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:

Except as otherwise provided in Section 7-9A-510, for purposes of Sections 7-9A-519(g), 7-9A-522(a), and 7-9A-523(c), the filing with the filing office of a termination statement relating to a financing statement that indicates that the debtor is a transmitting utility also Page 150 HB348 EngrossedEnrolled causes the effectiveness of the financing statement to lapse." "§7-9A-601.

If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based Page 151 HB348 EngrossedEnrolled upon the judgment relates back to the earliest of:

or (2) to a secured party or lienholder that has filed a financing statement against a person, unless the secured party Page 152 HB348 EngrossedEnrolled knows:

(A) the reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney's fees and legal Page 153 HB348 EngrossedEnrolled expenses incurred by the secured party;

If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency." Page 154 HB348 EngrossedEnrolled "§7-9A-611.

Page 155 HB348 EngrossedEnrolled (i) identified the collateral;

or (B) received a response to the request for information and sent an authenticated a signed notification of disposition to each secured party or other lienholder named in that Page 156 HB348 EngrossedEnrolled response whose financing statement covered the collateral." "§7-9A-613.

(5) The following form of notification and the form appearing in Section 7-9A-614(a)(3), when completed in Page 157 HB348 EngrossedEnrolled accordance with the instructions in subsection (b) and Section 7-9A-614(b), each provides sufficient information:

(Name of debtor, obligor, or other person to which Page 158 HB348 EngrossedEnrolled the notification is sent) From:

Do not include the numbers or braces in the Page 159 HB348 EngrossedEnrolled notification.

and (D) a telephone number or mailing address from which Page 160 HB348 EngrossedEnrolled additional information concerning the disposition and the obligation secured is available.

If we get less money Page 161 HB348 EngrossedEnrolled than you owe, you ________________ (will or will not, as applicable) still owe us the difference.

______________ (Names of all other debtors and obligors, if any) [End of Form] (Name and address of secured party) (Date) NOTICE OF OUR PLAN TO SELL PROPERTY (Name and address of any obligor who is also a debtor) Page 162 HB348 EngrossedEnrolled Subject:

{5} If you want us to explain to you in (writing) (writing or in (description of electronic record)) (description of electronic record) how we have figured the amount that you owe us, {6} call us at (telephone number) (or) (write us at (secured party's address)) (or contact us by (description of electronic communication method)) {7} and Page 163 HB348 EngrossedEnrolled request (a written explanation) (a written explanation or an explanation in (description of electronic record)) (an explanation in (description of electronic record)).

The following instructions apply to the form of notification in Page 164 HB348 EngrossedEnrolled subsection (a)(3):

(7) Include and complete item {8} only if a written explanation is included in item {5} as a method for communicating the explanation and the sender will charge the Page 165 HB348 EngrossedEnrolled recipient for another written explanation.

(A) the secured party receives from the holder of the subordinate security interest or other lien an authenticated a Page 166 HB348 EngrossedEnrolled signed demand for proceeds before distribution of the proceeds is completed;

(1) unless subsection (a)(4) requires the secured party to apply or pay over cash proceeds to a consignor, the secured Page 167 HB348 EngrossedEnrolled party shall account to and pay a debtor for any surplus;

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 or agricultural Page 168 HB348 EngrossedEnrolled lien under which the disposition is made:

and Page 169 HB348 EngrossedEnrolled (C) sent after disposition of the collateral under Section 7-9A-610.

or Page 170 HB348 EngrossedEnrolled (B) if the secured party takes or receives possession of the collateral before default or does not take possession of the collateral, not more than 35 days before the disposition;

The secured party Page 171 HB348 EngrossedEnrolled may require payment of a charge not exceeding $25twenty-five dollars ($25) for each additional response." "§7-9A-619.

no relief of secured Page 172 HB348 EngrossedEnrolled party's duties.

Page 173 HB348 EngrossedEnrolled (b) Purported acceptance ineffective.

Page 174 HB348 EngrossedEnrolled (1) in the case of a person to which the proposal was sent pursuant to Section 7-9A-621, within 20 days after notification was sent to that person;

In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it Page 175 HB348 EngrossedEnrolled secures." "§7-9A-621.

A secured party that desires to accept collateral in partial satisfaction of the obligation it Page 176 HB348 EngrossedEnrolled secures shall send its proposal to any secondary obligor in addition to the persons described in subsection (a)." "§7-9A-624.

and Page 177 HB348 EngrossedEnrolled (2) the secured party's failure to comply with this article does not affect the liability of the person for a deficiency.

or (2) an obligor's representation concerning the purpose Page 178 HB348 EngrossedEnrolled for which a secured obligation was incurred.

Page 179 HB348 EngrossedEnrolled (a) Control under Section 7-12-105.

Except as provided in subsection (d), if chattel paper is evidenced only by an authoritative electronic copy of the chattel paper or is evidenced by an authoritative electronic copy and an authoritative tangible copy, the local law of the Page 180 HB348 EngrossedEnrolled chattel paper's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the chattel paper, even if the transaction does not bear any relation to the chattel paper's jurisdiction.

(4) If paragraphs (1), (2), and (3) do not apply and the rules of the system in which the authoritative electronic Page 181 HB348 EngrossedEnrolled copy is recorded are readily available for review and expressly provide that the chattel paper or the system is governed by the law of a particular jurisdiction, that jurisdiction is the chattel paper's jurisdiction.

Except as provided in subsection (b), the local law of the controllable electronic record's jurisdiction specified in Section 7-12-107(c) and (d) Page 182 HB348 EngrossedEnrolled governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a controllable electronic record and a security interest in a controllable account or controllable payment intangible evidenced by the controllable electronic record.

(c) Application of Section 7-9A-313 to perfection by Page 183 HB348 EngrossedEnrolled possession of chattel paper.

The term does not include a controllable account, a controllable payment intangible, a deposit account, an electronic copy of a record evidencing chattel paper, an electronic document of title, investment Page 184 HB348 EngrossedEnrolled property, a transferable record, or an electronic record that is currently authorized or adopted by a domestic or foreign government and is not a medium of exchange that was recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by a government.

Article 1 Page 185 HB348 EngrossedEnrolled contains general definitions and principles of construction and interpretation applicable throughout this article.

To determine whether a purchaser of a controllable account or a controllable payment intangible is a qualifying purchaser, the purchaser obtains control of the account or payment intangible if it obtains control of the Page 186 HB348 EngrossedEnrolled controllable electronic record that evidences the account or payment intangible.

An Page 187 HB348 EngrossedEnrolled action may not be asserted against a qualifying purchaser based on both a purchase by the qualifying purchaser of a controllable electronic record and a claim of a property right in another controllable electronic record, whether the action is framed in conversion, replevin, constructive trust, equitable lien, or other theory.

and (2) enables the person readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as having the powers specified Page 188 HB348 EngrossedEnrolled in paragraph (1).

A person has Page 189 HB348 EngrossedEnrolled control of a controllable electronic record if another person, other than the transferor to the person of an interest in the controllable electronic record or a controllable account or controllable payment intangible evidenced by the controllable electronic record:

or (2) except as provided in subsection (b), a person that Page 190 HB348 EngrossedEnrolled formerly had control of the controllable electronic record.

(1) unless, before the notification is sent, the account debtor and the person that, at that time, had control Page 191 HB348 EngrossedEnrolled of the controllable electronic record that evidences the controllable account or controllable payment intangible agree in a signed record to a commercially reasonable method by which a person may furnish reasonable proof that control has been transferred;

A person furnishes reasonable proof under subsection (e) that control Page 192 HB348 EngrossedEnrolled has been transferred if the person demonstrates, using the method in the agreement referred to in subsection (d)(1), that the transferee has the power to:

For a controllable electronic record that evidences a controllable account or controllable payment intangible, the local law of the controllable electronic record's jurisdiction governs a matter Page 193 HB348 EngrossedEnrolled covered by Section 7-12-106 unless an effective agreement determines that the local law of another jurisdiction governs.

(4) If paragraphs (1), (2), and (3) do not apply and the rules of the system in which the controllable electronic Page 194 HB348 EngrossedEnrolled record is recorded are readily available for review and expressly provide that the controllable electronic record or the system is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record's jurisdiction.

Article 12A is added to Title 7, Code of Page 195 HB348 EngrossedEnrolled Alabama 1975, to read as follows:

Article 1 of the Uniform Commercial Code contains general definitions and Page 196 HB348 EngrossedEnrolled principles of construction and interpretation applicable throughout this article.

(1) a transaction, lien, or interest in property that was validly entered into, created, or transferred before the effective date of this act and was not governed by the Uniform Commercial Code, but would be subject to Article 9A as amended by this act or Article 12 if it had been entered into, created, or transferred on or after the effective date of this Page 197 HB348 EngrossedEnrolled act, including the rights, duties, and interests flowing from the transaction, lien, or interest, remains valid on and after the effective date of this act;

(1) is a perfected security interest until the earlier of the time perfection would have ceased under the law in effect immediately before the effective date of this act or Page 198 HB348 EngrossedEnrolled the adjustment date;

attachment and Page 199 HB348 EngrossedEnrolled perfection before adjustment date.

Subject to subsection (c), if the priorities of claims to collateral were established before the effective date of this act, Article 9A as in effect Page 200 HB348 EngrossedEnrolled before the effective date of this act determines priority.

Page 201 HB348 EngrossedEnrolled House________________________________________________ Speaker of Representativesthe ReadHouse forof theRepresentatives first________________________________________________ timePresident and referredPresiding ................20-Apr-23Officer toof the Senate House of Representatives committeeI onhereby Judiciarycertify Readthat for the secondwithin timeAct originated in and placedwas ................03-May-23passed onby the calendar:House 09-May-23, as amended.

1 amendment Read for the third time and passed ................09-May-23 as amended Yeas 100 Nays 0 Abstains 3 John Treadwell Clerk Senate 31-May-23 Passed Page 202