Colorado § 4-9-313 - When possession by or delivery to secured party perfects security interest without filing.

§ 4-9-313. When possession by or delivery to secured party perfects security interest without filing.

(a) Except as otherwise provided in subsection (b) of this section, a secured party may perfect a security interest in goods, instruments, negotiable tangible documents, or money by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under section 4-8-301.

(b) With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in section 4-9-316 (d).

(c) With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business when:

(1) The person in possession signs a record acknowledging that it holds possession of the collateral for the secured party's benefit; or

(2) The person takes possession of the collateral after having signed a record acknowledging that it will hold possession of the collateral for the secured party's benefit.

(d) If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs not earlier than the time the secured party takes possession and continues only while the secured party retains possession.

(e) A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under section 4-8-301 and remains perfected by delivery until the debtor obtains possession of the security certificate.

(f) A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.

(g) If a person acknowledges that it holds possession for the secured party's benefit:

(1) The acknowledgment is effective under subsection (c) of this section or section 4-8-301 (a), even if the acknowledgment violates the rights of a debtor; and

(2) Unless the person otherwise agrees or law other than this article otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.

(h) A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:

(1) To hold possession of the collateral for the secured party's benefit; or

(2) To redeliver the collateral to the secured party.

(i) A secured party does not relinquish possession, even if a delivery under subsection (h) of this section violates the rights of a debtor. A person to which collateral is delivered under subsection (h) of this section does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this article otherwise provides.

(j) References in subsections (g) or (i) of this section regarding violation of the rights of a debtor shall not be construed as limiting the debtor's rights.

Source: L. 2001: Entire article R&RE, p. 1351, § 1, effective July 1. L. 2006: (a) amended, p. 502, § 40, effective September 1. L. 2023: (a), (c), and (d) amended, (SB 23-090), ch. 136, p. 552, § 58, effective August 7.

Editor's note: (1) The provisions of this section are similar to former §§ 4-9-115 (4)(b) and 4-9-305 as they existed prior to 2001.

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

ANNOTATION

Law reviews. For article, "Secured Transactions — Part I: Attachment, Perfection and Priorities", see 11 Colo. Law. 2939 (1982).

Annotator's note. Since § 4-9-313 is similar to § 4-9-305 as it existed prior to the 2001 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

Perfected security interest in negotiable instruments. By virtue of a pledge agreement and seller's endorsement and delivery of the buyer's note and the deed of trust, the bank acquires an initial interest which is a perfected security interest in the instruments, such being personal property. Swofford v. Colo. Nat'l Bank, 628 P.2d 184 (Colo. App. 1981).

Bank was not a constructive bailee for a third party claiming rights to money deposited by defendants, therefore no security interest was perfected under this section, even though bank was given notice of third party's claims. In re Carpenter and McAleer Assoc., 815 F. Supp. 384 (D. Colo. 1993).

A security interest in equipment acquisition agreements could not have been perfected by possession because neither party possessed all of the multiple originally executed duplicates of the documents. A security interest could only have been perfected through proper filing of a financing statement with the secretary of state under § 4-9-304 (1). Denver Tec Bank v. F.D.I.C., 843 P.2d 129 (Colo. App. 1992).

Temporarily perfected security interest not rendered permanently perfected if debtor files for bankruptcy while security interest was temporarily perfected. Expeditors Int'l of Wash., Inc. v. Liquidating Trust, 313 B.R. 473 (D. Colo. 2004).