North Dakota § 41-09-40 - (9-320) Buyer of goods

§ 41-09-40. (9-320) Buyer of goods

1. Except as otherwise provided in subsection 5, a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence. A crop or livestock buyer is a buyer in the ordinary course of business as to security interests and agricultural liens if the buyer qualifies under subsection 9. As used in this section, a crop or livestock buyer is a person who buys crops or livestock from, or who sells crops or livestock on a fee or commission for, a person engaged in farming operations. 2. 3. 4. 5. 6. 7. 8. Except as otherwise provided in subsection 5, a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys: a. Without knowledge of the security interest; b. For value; c. Primarily for the buyer's personal, family, or household purposes; and d. Before the filing of a financing statement covering the goods. To the extent that it affects the priority of a security interest over a buyer of goods under subsection 2, the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by subsections 1 and 2 of section 41-09-36. A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance. Subsections 1 and 2 do not affect a security interest in goods in the possession of the secured party under section 41-09-33. If a secured party who has perfected a security interest in crops or livestock, or if a lienholder who has created a lien by statute or otherwise, which includes agricultural liens, intends to impose liability for the security interest or lien against a crop or livestock buyer, the name of the secured party or lienholder must appear on the most current list distributed by the secretary of state pursuant to section 54-09-10. In order to appear on the list, secured parties or lienholders must file with the secretary of state or in the office of the recorder in any county in this state a form prescribed by the secretary of state which contains the information prescribed by the secretary of state under section 41-09-92 or contained on a form prescribed by the secretary of state under section 35-17-04, 35-30-02, or 35-31-02. When a crop or livestock buyer issues a check or draft to a person engaged in farming operations in payment for crops or livestock in order to take free of security interests or liens against such crops or livestock, the crop or livestock buyer must issue the check or draft for payment jointly to the person engaged in farming operations and those secured parties or lienholders who have a security interest or lien in the crops or livestock sold and whose names appear on the most current list or lists distributed by the secretary of state at the time the check or draft is issued. A claim for relief may not be commenced by a secured party or lienholder against a crop or livestock buyer for a loss incurred as a result of issuing a check or draft after January 1, 1986, which does not include the name of a secured party or lienholder under this section more than eighteen months after the date of the check or draft unless within the eighteen-month period the secured party or lienholder sends a notice as provided under this section, but in no event can the action be commenced more than five years after the date of the check or draft. The notice must: a. Be sent by certified mail to, or personally served upon, the crop or livestock buyer; b. Name the person engaged in farming operations and the date of the check or draft that gives rise to the claim; c. State the intention of the secured party or lienholder to make a claim; d. State the amount the secured party or lienholder is claiming; e. Give a description of and the amount of crops or livestock upon which the claim is based; and f. State that the secured party or lienholder has commenced an action seeking judgment against the person engaged in farming operations or such person has filed or has been placed in bankruptcy or receivership proceedings under chapter 32-10. A complaint by a secured party or lienholder may not be filed or served against a crop or livestock buyer for collection of any loss sustained by the secured party or lienholder through any transaction filed pursuant to subsection 6 until: a. A judgment has been obtained and a good-faith effort made to collect that judgment against the person engaged in farming operations, or that proceedings 9. against the person engaged in farming operations were stayed by federal bankruptcy proceedings, or that receivership proceedings have been commenced under chapter 32-10; b. Within eighteen months following the date of the check or draft, the notice required to be sent pursuant to subsection 7 was served upon the crop or livestock buyer and reciting or incorporating by reference all the information contained in that notice; and c. A list is made of any other collateral taken by the secured party or lienholder as security on the same debt from the person engaged in farming operations, including a statement of value, status, and plans for application of such collateral to the indebtedness of the person engaged in farming operations. A crop or livestock buyer takes free of any security interest created by, or any lien against crops or livestock of, the person engaged in farming operations if: a. The crop or livestock buyer has complied with the requirements of subsection 7; b. Evidence of security interests or liens does not appear on the most current list prepared and distributed by the secretary of state pursuant to sections 54-09-09 and 54-09-10; or c. The name of the person represented to be the seller of the crops or livestock does not appear on the most current list prepared and distributed pursuant to sections 54-09-09 and 54-09-10.