Effect of acceptance of collateral.
(a) A secured party's acceptance of collateral in full or partial satisfaction of the obligation it secures:
(1) discharges the obligation to the extent consented to by the debtor;
(2) transfers to the secured party all of a debtor's rights in the collateral;
(3) discharges the security interest or agricultural lien that is the subject of the debtor's consent and any subordinate security interest or other subordinate lien; and
(4) terminates any other subordinate interest.
(b) A subordinate interest is discharged or terminated under subsection (a), even if the secured party fails to comply with this article.
Source:Laws 1999, LB 550, § 197.
1. Source. New.
2. Effect of Acceptance. Subsection (a) specifies the effect of an acceptance of collateral in full or partial satisfaction of the secured obligation. The acceptance to which it refers is an effective acceptance. If a purported acceptance is ineffective under section 9-620, e.g., because the secured party receives a timely objection from a person entitled to notification, then neither this subsection nor subsection (b) applies. Paragraph (1) expresses the fundamental consequence of accepting collateral in full or partial satisfaction of the secured obligation — the obligation is discharged to the extent consented to by the debtor. Unless otherwise agreed, the obligor remains liable for any deficiency. Paragraphs (2) through (4) indicate the effects of an acceptance on various property rights and interests. Paragraph (2) follows section 9-617(a) in providing that the secured party acquires "all of a debtor's rights in the collateral". Under paragraph (3), the effect of strict foreclosure on holders of junior security interests and other liens is the same regardless of whether the collateral is accepted in full or partial satisfaction of the secured obligation: All junior encumbrances are discharged. Paragraph (4) provides for the termination of other subordinate interests.
Subsection (b) makes clear that subordinate interests are discharged under subsection (a) regardless of whether the secured party complies with this article. Thus, subordinate interests are discharged regardless of whether a proposal was required to be sent or, if required, was sent. However, a secured party's failure to send a proposal or otherwise to comply with this article may subject the secured party to liability under section 9-625.