SUBPART 2

RIGHTS AND DUTIES

§9-1207.__Rights and duties of secured party having possession

or control of collateral

(1)__Except as otherwise provided in subsection (4), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party's possession.__In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

(2)__Except as otherwise provided in subsection (4), if a secured party has possession of collateral:

(a)__Reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use or operation of the collateral, are chargeable to the debtor and are secured by the collateral;

(b)__The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;

(c)__The secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and

(d)__The secured party may use or operate the collateral:

(i)__For the purpose of preserving the collateral or its value;

(ii)__As permitted by an order of a court having competent jurisdiction; or

(iii)__Except in the case of consumer goods, in the manner and to the extent agreed by the debtor.

(3)__Except as otherwise provided in subsection (4), a secured party having possession of collateral or control of collateral under section 9-1104, 9-1105, 9-1106 or 9-1107: