| | | debtor is not entitled to any surplus, and the obligor is not | | liable for any deficiency. |
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| | | 1. Source. Subsection (a) [Maine cite subsection (1)] is | | new; subsection (b) [Maine cite subsection (2)] derives from | | former Section 9-502(2). |
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| | | 2. Modifications of Prior Law. Subsections (a) and (b) | | [Maine cite subsections (1) and (2)] modify former Section 9- | | 502(2) by explicitly providing for the application of proceeds | | recovered by the secured party in substantially the same manner | | as provided in Section 9-615(a) and (e) [Maine cite section 9- | | 1615, subsections (1) and (5)] for dispositions of collateral. |
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| | | 3. Surplus and Deficiency. Subsections (a)(4) and (b) [Maine | | cite subsection (1), paragraph (d) and subsection (2)] omit, as | | unnecessary, the references contained in former Section 9-502(2) | | to agreements varying the baseline rules on surplus and | | deficiency. The parties are always free to agree that an obligor | | will not be liable for a deficiency, even if the collateral | | secures an obligation, and that an obligor is liable for a | | deficiency, even if the transaction is a sale of receivables. | | For parallel provisions, see Section 9-615(d) and (e) [Maine cite | | section 9-1615, subsections (4) and (5)]. |
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| | | 4. Noncash Proceeds. Subsection (a)(3) [Maine cite | | subsection (1), paragraph (c)] addresses the situation in which | | an enforcing secured party receives noncash proceeds. |
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| | | Example: An enforcing secured party receives a promissory | | note from an account debtor who is unable to pay an account when | | it is due. The secured party accepts the note in exchange for | | extending the date on which the account debtor's obligation is | | due. The secured party may wish to credit its debtor (the | | assignor) with the principal amount of the note upon receipt of | | the note, but probably will prefer to credit the debtor only as | | and when the note is paid. |
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| | | Under subsection (a)(3), [Maine cite subsection (1), paragraph | | (c)] the secured party is under no duty to apply the note or its | | value to the outstanding obligation unless its failure to do so | | would be commercially unreasonable. If the secured party does | | apply the note to the outstanding obligation, however, it must do | | so in a commercially reasonable manner. The parties may provide | | for the method of application of noncash proceeds by agreement, | | if the method is not manifestly unreasonable. See Section 9-603 | | [Maine cite section 9-1603]. This section does not explain when |
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