Colorado § 4-9-203 - Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites.

§ 4-9-203. Attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites.

(a) A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.

(b) Except as otherwise provided in subsections (c) to (i) of this section, a security interest is enforceable against the debtor and third parties with respect to the collateral only if:

(1) Value has been given;

(2) The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and

(3) One of the following conditions is met:

(A) The debtor has signed a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;

(B) The collateral is not a certificated security and is in the possession of the secured party under section 4-9-313 pursuant to the debtor's security agreement;

(C) The collateral is a certificated security in registered form, and the security certificate has been delivered to the secured party under section 4-8-301 pursuant to the debtor's security agreement;

(D) The collateral is controllable accounts, controllable electronic records, controllable payment intangibles, deposit accounts, electronic documents, investment property, or letter-of-credit rights, and the secured party has control under section 4-7-106, 4-9-104, 4-9-106, 4-9-107, or 4-9-107.5 pursuant to the debtor's security agreement; or

(E) The collateral is chattel paper, and the secured party has possession and control under section 4-9-314.5 pursuant to the debtor's security agreement.

(c) Subsection (b) of this section is subject to section 4-4-210 on the security interest of a collecting bank, section 4-5-117.5 on the security interest of a letter-of-credit issuer or nominated person, section 4-9-110 on a security interest arising under article 2 or 2.5 of this title, and section 4-9-206 on security interests in investment property.

(d) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this article or by contract:

(1) The security agreement becomes effective to create a security interest in the person's property; or

(2) The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

(e) If a new debtor becomes bound as debtor by a security agreement entered into by another person:

(1) The agreement satisfies paragraph (3) of subsection (b) of this section with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and

(2) Another agreement is not necessary to make a security interest in the property enforceable.

(f) The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by section 4-9-315 and is also attachment of a security interest in a supporting obligation for the collateral.

(g) The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.

(h) The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.

(i) The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.

(j) No security interest in consumer goods owned by a married person and used primarily for personal, family, or household purposes, other than property referred to in section 4-9-311 and other than any purchase money security interest, shall be enforceable unless the security agreement describing the collateral in accordance with section 4-9-108 is authenticated by both husband and wife if they are residing together at the time the security interest is created.

Source: L. 2001: Entire article R&RE, p. 1334, § 1, effective July 1. L. 2006: (b)(3)(D) amended, p. 500, § 34, effective September 1. L. 2023: (b)(3)(A), (b)(3)(C), and (b)(3)(D) amended and (b)(3)(E) added, (SB 23-090), ch. 136, p. 546, § 46, effective August 7.

Editor's note: (1) The provisions of this section are similar to provisions of several former sections as they existed prior to 2001. For a detailed comparison, see the comparative tables located in the back of the index.

(2) Colorado legislative change: Colorado added a new subsection (j).

ANNOTATION

Law reviews. For article, "The Revolution in Consumer Credit Legislation", see 45 Den. L.J. 679 (1968). For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75). For article, "Secured Transactions — Part I: Attachment, Perfection and Priorities", see 11 Colo. Law. 2939 (1982). For article, "Commercial and Corporate Law", which discusses a Tenth Circuit decision dealing with description of crops in financing statements, see 65 Den. U. L. Rev. 469 (1988).

Annotator's note. The following annotations include cases decided under this section as it existed prior to its 2001 repeal and reenactment.

When security interest may attach to debtor's accounts receivable. A security interest cannot attach to the accounts receivable of a debtor, if the debtor does not have a "right to payment", Weld Colo. Bank v. E & E Constr., Inc., 653 P.2d 758 (Colo. App. 1982).

Security interest may attach to accounts receivable of public contractor. A bank's security interest in the accounts receivable of a public contractor is valid only insofar as the contractor has rights to the funds retained by the public body to ensure the payment of any claims against the contractor. Where a supplier files a notice of claim with the public body, the contractor has no rights to these funds until this claim is settled. Thus, the security interest does not attach to these funds. Heinrichsdorff v. Raat, 655 P.2d 860 (Colo. App. 1982).

Right of reformation due to mutual mistake not displaced by this section in cases of security agreements. Although this section requires a security agreement to be in writing, the fact that an agreement must be in writing to satisfy a statute of frauds is not inconsistent with reformation of that written agreement if, by the reason of mutual mistake, the true agreement of the parties is not expressed in writing. Medallion Biomed., LLC v. Rosania, 298 B.R. 442 (Bankr. D. Colo. 2003).

Interest under § 38-22-127 claim takes priority over prior perfected security interest. An unsecured supplier claiming an interest under § 38-22-127, which imposes a trust fund for materialmen and laborers, takes priority over a prior perfected security interest in all present and future accounts receivable and proceeds of accounts. First Com. Corp. v. First Nat'l Bancorporation, Inc., 572 F. Supp. 1430 (D. Colo. 1983).

There is an inconsistency between this section and former § 4-9-306 on subject of proceeds. Fort Collins Prod. Credit Ass'n v. Carroll Dairy, 37 Colo. App. 536, 553 P.2d 95 (1976) (decided prior to the 1977 amendment of this section and § 4-9-306).

Lessor has no security interest in extracted gravel remaining on leased premises. The owner of a gravel pit who executes a lease allowing the extraction of gravel from his pit does not have a security interest in extracted gravel remaining on the leased premises after the right to extract gravel is terminated. The lessee acquires possession of the gravel once it is extracted. Palmer v. Corey (In re Musick Constr., Inc.), 34 B.R. 105 (Bankr. D. Colo. 1983).

Security agreement which provides that secured collateral includes debtor's tangible personal property "now or hereafter acquired" does not cover property subsequently acquired by a third party who purchased debtor's property in foreclosure. This is true even though the third party has a director, officer, and minority shareholder in common with the debtor. Vance v. Casebolt, 841 P.2d 394 (Colo. App. 1992).

Trial court did not err in holding that an unpaid seller in a cash sale did not take priority over a perfected security interest. UCC applies to determine when the title to heifers passed. Here title passed to debtor upon delivery of heifers to debtor. At the time of delivery creditor's interest in the heifers was sufficient to allow creditor's perfected security interest in after-acquired property to attach. This interest takes priority over the interests of the cash seller. Coop. Fin. Ass'n v. B & J Cattle, 937 P.2d 915 (Colo. App. 1997).

Trial court did not err that value had been given. Agreements, including assuming the responsibility to pay long-term liabilities and entering into a security agreement, constituted sufficient consideration to support a simple contract. Compass Bank v. Kone, 134 P.3d 500 (Colo. App. 2006).

Under the circumstances, a stock redemption agreement and its various incorporated exhibits constitute an integrated and authenticated security agreement that provided a description of the collateral. Compass Bank v. Kone, 134 P.3d 500 (Colo. App. 2006).

Applied in Welbourne Dev. Co. v. Affiliated Clearance Corp., 28 Colo. App. 313, 472 P.2d 684 (1970); Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 32 Colo. App. 235, 511 P.2d 912 (1973), aff'd, 184 Colo. 166, 519 P.2d 354 (1974); Young v. Golden State Bank, 39 Colo. App. 45, 560 P.2d 855 (1977); Bank of Am. Nat'l Trust & Savings Ass'n v. Denver Hotel Ass'n Ltd. P'ship, 830 P.2d 1138 (Colo. App. 1992).