A. A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed merely as proceeds of inventory subject to a security interest if:

Terms Used In Arizona Laws 47-9330

  • Cash proceeds: means proceeds that are money, checks, deposit accounts or the like. See Arizona Laws 47-9102
  • Chattel paper: means a record or records that evidence both a monetary obligation and a security interest in 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. See Arizona Laws 47-9102
  • Good faith: means honesty in fact and the observance of reasonable commercial standards of fair dealing. See Arizona Laws 47-9102
  • Goods: means all things that are movable when a security interest attaches. See Arizona Laws 47-9102
  • Instrument: means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease and is of a type that in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment. See Arizona Laws 47-9102
  • Inventory: means goods, other than farm products, that:

    (a) Are leased by a person as lessor;

    (b) Are held by a person for sale or lease or to be furnished under a contract of service;

    (c) Are furnished by a person under a contract of service; or

    (d) Consist of raw materials, work in process or materials used or consumed in a business. See Arizona Laws 47-9102

  • New value: means money, money's worth in property, services or new credit or release by a transferee of an interest in property previously transferred to the transferee. See Arizona Laws 47-9102
  • Secured party: means :

    (a) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;

    (b) A person that holds an agricultural lien;

    (c) A consignor;

    (d) A person to which accounts, chattel paper, payment intangibles or promissory notes have been sold;

    (e) A trustee, indenture trustee, agent, collateral agent or other representative in whose favor a security interest or agricultural lien is created or provided for; or

    (f) A person that holds a security interest arising under section 47-2401, 47-2505, 47-2711, 47-2A508, 47-4210 or 47-5118. See Arizona Laws 47-9102

1. In good faith and in the ordinary course of the purchaser’s business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under section 47-9105; and

2. The chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.

B. A purchaser of chattel paper has priority over a security interest in the chattel paper that is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under section 47-9105 in good faith, in the ordinary course of the purchaser’s business and without knowledge that the purchase violates the rights of the secured party.

C. Except as otherwise provided in section 47-9327, a purchaser having priority in chattel paper under subsection A or B of this section also has priority in proceeds of the chattel paper to the extent that:

1. Section 47-9322 provides for priority in the proceeds; or

2. The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser’s security interest in the proceeds is unperfected.

D. Except as otherwise provided in section 47-9331, subsection A, a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.

E. For purposes of subsections A and B of this section, the holder of a purchase money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.

F. For purposes of subsections B and D of this section, if chattel paper or an instrument indicates that it 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.

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