Chap. 368.—An ACT to authorize and regulate the use of trust receipts and pledges
of personal property unaccompanied by possession in the pledgee, and to enact
a law with respect thereto which shall be uniform with those of other States.

S 39]
Approved March 31, 1944

Be it enacted by the General Assembly of Virginia. as follows:

1. Section 1. Definitions.—In this act, unless the context or subject
matter otherwise requires:

“Buyer in the ordinary course of trade” means a person to whom
goods are sold and delivered for new value and who acts in good faith
and without actual knowledge of any limitation on the trustee's liberty of
sale, including one who takes by conditional sale or under a preexisting
mercantile contract with the trustee to buy the goods delivered. or like
goods, for cash or on credit. “Buyer in the ordinary course of trade”
does not include a pledgee, or mortgagee, a lienor, or a transferee in bulk.

“Document” means any document of title to goods.

“Entruster” means the person who has or directly or by agent takes
a security interest in goods, documents or instruments under a trust
receipt transaction, and any successor in interest of such person. A person
if the business of selling goods or instruments for profit, who at the outset
of the transaction has, as against the buyer, general property in such
goods or instruments, and who sells the same to the buyer on credit, re-
taining title or other security interest under a purchase money mortgage
or conditional sales contract or otherwise, is excluded.

“Goods” means any chattels personal other than: money, things in
action, or things so affixed to land as to become a part thereof.

“Instruments” means

(a) any negotiable instrument as defined in the Uniform Ne-

gotiable Instruments Law and amendments thereto, or ,

(b) any certificate of stock, or bond or debenture for the pay-

ment of money issued by a public or private corporation as part of a

series, OF

(c) any interim, deposit, or participation certificate or receipt,
or other credit or investment instrument of a sort marketed in the
ordinary course of business or finance, of which the trustee, after
the trust receipt transaction, appears by virtue of possession and the
face of the instrument to be the owner. “Instrument” does not in-
clude any document of title to goods.

“Lien creditor” means any creditor who has acquired a specific lien on
the goods, documents or instruments by attachment, levy, or by any other
similar operation of law or judicial process, including a distraining land-
lord.

“New value” includes new advances or loans made, or new obligation
incurred, or the release or surrender of a valid and existing security
interest, or the release of a claim to proceeds under section ten; but
“new value” shall not be construed to include extensions or renewals of
existing obligations of the trustee, nor obligations substituted for such
existing obligations. °

“Person” means, as the case may be, an individual, trustee, receiver
or other fiduciary, partnership, corporation, business trust, or other as-
sociation, and two or more persons having a joint or common interest.

“Possession”, as used in this act with reference to possession taken
or retained by the entruster, means actual possession of goods, documents
or instruments, or, in the case of goods, such constructive possession as,
by means of tags or signs or other outward marks placed and remaining
in conspicuous places, may reasonably be expected in fact to indicate to
the third party in question that the entruster has control over or interest
in the goods.

“Purchase” means taking by sale, conditional sale, lease, mortgage, or
pledge, legal or equitable.

“Purchaser” means any person taking by purchase. A pledgee, mort-
gagee or other claimant of a security interest created by contract ts, inso-
far as concerns his specific security, a purchaser and not a creditor.

“Security interest’? means a property interest in goods, documents o
instruments, limited in extent to securing performance of some obliga
tion of the trustee or of some third person to the entruster, and include
the interest of a pledgee, and title, whether or not expressed to be abso
lute, whenever such title is in substance taken or retained for securit:
only.

“Transferee in bulk’’ means a mortgagee or a pledgee or a buyer o
the trustee’s business substantially as a whole.

“Trustee” means the person having or taking possession of goods
documents or instruments under a trust receipt transaction, and an
successor in interest of such person. The use of the word “trustee
herein shall not be interpreted or construed to imply the existence of |
trust or any right or duty of a trustee in the sense of equity jurisprudenc
other than as provided by this act.

“Value” means any consideration sufficient to support a simple con
tract. An antecedent or preexisting claim, whether for money or not
and whether against the transferor or against another person, constitute
value where goods, documents or instruments are taken either in satis
faction thereof or as security therefor.

Section 2. What Constitutes Trust Receipt Transaction and Trus
Receipt.—

1. A trust receipt transaction within the meaning of this act is an:
transaction to which an entruster and a trustee are parties, for one of th
purposes set forth in subsection three, whereby

(a) the entruster or any third person delivers to the truste
goods, documents or instruments in which the entruster (i) prior t
the transaction has, or for new value (ii) by the transaction acquire
or (ili) as the result thereof is to acquire promptly, a securit:
interest ; or
(b) the entruster gives new value in reliance upon the transfe
by the trustee to such entruster of a security interest in instrument
which are actually exhibited to such entruster, or to his agent in tha
behalf, at a place of business of either entruster or agent, but posses
sion of which is retained by the trustee ;
provided that the delivery under paragraph (a) or the giving of nev
value under paragraph (b) either
(i) _be against the signing and delivery by the trustee of a writings
designating the goods, documents or instruments concerned, and re
citing that a security interest therein remains in or will remain in, o
has passed to or will pass to, the entruster, or
(ii) be pursuant to a prior or concurrent written and signec
agreement of the trustee to give such a writing.

The security interest of the entruster may be derived from the trustee
or from any other person, and by pledge or ‘by transfer of title or other
wise.

If the trustee's rights in the goods, documents or instruments are
subject to a prior trust receipt transaction, or to a prior equitable pledge
section nine and section three, respectively, of this act, determine the
priorities.

2. A writing such as is described in subsection one, paragraph (i),
signed by the trustee, and given in or pursuant to such a transaction, is
designated in this act as a “trust receipt”. No further formality of execu-
tion or authentication shall be necessary to the validity of a trust receipt.

3. A transaction shall not be deemed a trust receipt transaction un-
less the possession of the trustee thereunder is for a purpose substantially
equivalent to any one of the following :

(a) in the case of goods, documents or instruments, for the
purpose of selling or exchanging them, or of procuring their sale or
exchange; or

(b) in the case of goods or documents, for the purpose of manu-
facturing or processing the goods delivered or covered by the docu-
ments, with the purpose of ultimate sale, or for the purpose of loading,
unloading, storing, shipping, trans-shipping or otherwise dealing with
them in a manner preliminary to or necessary to their sale; or

(c) in the case of instruments, for the purpose of delivering
them to a principal, under whom the trustee is holding them, or for
consummation of some transaction involving delivery to a depositary
or registrar, or for their presentation, collection, or renewal.
Section 3. Attemped Creation or Continuance of Pledge without

Delivery or Retention of Possession.—

1. An attempted pledge or agreement to pledge not accompanied by
delivery of possession, which does not fulfill the requirements of a trust
receipt transaction, shall be valid as against creditors of the pledgor only
as follows:

(a) to the extent that new value is given by the pledgee in re-
liance thereon, such pledge or agreement to pledge shall be valid as
against all creditors with or without notice, for ten days from the time
the new value is given;

(b) to the extent that the value given by the pledgee is not new
value, and in the case of new value after the lapse of ten days from
the giving thereof, the pledge shall have validity as against lien credi-
tors without notice, who become such as prescribed in section eight,
only as of the time the pledgee takes possession, and without relation
back.

2. Purchasers (including entrusters) for value and without notice
of the pledgee’s interest shall take free of any such pledge or agreement
to pledge unless, prior to the purchase, it has been perfected by possession
taken.

3. Where, under circumstances not constituting a trust receipt trans-
action, a person, for a temporary and limited purpose, delivers goods,
documents, or instruments, in which he holds a pledgee’s or other security
interest, to the person holding the beneficial interest therein, the trans-
action has like effect with a purported pledge for new valué under this
section.

Section 4. Contract to Give Trust Receipt.—
1. A contract to give a trust receipt, if in writing and signed by the
trustee, shall, with reference to goods, documents or instruments there-
after delivered by the entruster to the trustee in reliance on such contract,
be equivalent in all respect to a trust receipt.

2. Such a contract shall as to such goods, documents, or instruments
be specifically enforceable against the trustee; but this subsection shall
not enlarge the scope of the entruster’s rights against creditors of the
trustee as limited by this act.

Section 5. Validity Between the Parties.—

Between the entruster and the trustee the terms of the trust receipt
shall, save as otherwise provided by this act, be valid and enforceable.
But no provision for forfeiture of the trustee’s interest shall be valid
except as provided in subsection five of section six.

Section 6. Repossession, and Entruster’s Rights on Default.—

1. The entruster shall be entitled as against the trustee to possession
of the goods, documents or instruments on default, and as may be other-
wise specified in the trust receipt.

2. An entruster entitled to possession under the terms of the trust
receipt or of subsection one may take such possession without legal
process, whenever that 1s possible without breach of the peace.

(a) After possession taken, the entruster shall, subject to sub-
division (b) and subsection five, hold such goods, documents or instru-
ments with the rights and duties of a pledgee.

(b) An entruster in possession may, on or after default, give notice
to the trustee of intention to sell, and may, not less than five days after
the serving or sending of such notice, sell the goods, documents or instru-
ments for the trustee’s account, at public or private sale, and may at a
public sale himself become a purchaser. The proceeds of any such sale,
whether public or private, shall be applied (i) to the payment of the ex-
penses thereof, (11) to the payment of the expenses of re-taking, keeping
and storing the goods, documents, or instruments, (111) to the satisfac-
tion of the trustee’s indebtedness. The trustee shall receive any surplus
and shall be liable to the entruster for any deficiency. Notice of sale shall
be deemed sufficiently given if in writing, and either (i) personally
served on the trustee, or (11) sent by postpaid ordinary mail to the
trustee’s last known business address.

(c) A purchaser in good faith and for value from an entruster in
possession takes free of the trustee’s interest, even in a case in which the
entruster is liable to the trustee for conversion.

4. Surrender of the trustee’s interest to the entruster shall be valid,
on any terms upon which the trustee and the entruster may, after default,
agree.

5, As to articles manufactured by style or model, the terms of the
trust receipt may provide for forfeiture of the trustee’s interest, at the
election of the entruster, in the event of the trustee’s default, against
cancellation of the trustee’s then remaining indebtedness; provided that
in the case of the original maturity of such an indebtedness there must
be cancelled not less than eighty per centum of the purchase price to the
trustee, or of the original indebtedness, whichever is greater; or, in the
case of a first renewal, not less than seventy per centum, or, in the case
of a second or further renewal, not less than sixty per centum.

Section 7. General Effect of Entruster’s Filing or Taking Posses-
sion.—

]. (a) If the entruster within the period of thirty days specitied
in subsection one of section eight files as in this act provided, such filing
shall be effective to preserve his security interest in documents or goods
against all persons, save as otherwise provided by sections eight, nine. ten.
eleven, fourteen and fifteen of this act.

(b) Filing after the lapse of the said period shall be valid; but in
such event, save as provided in subdivision two (b) of section nine, the
entruster’s security interest shall be deemed to be created by the trustee
as of the time of such filing, without relation back, as against all persons
not having notice of such interest.

2. The taking of possession by the entruster shall, so long as such
possession 1s retained, have the effect of filing, in the case of goods or
documents ; and of notice of the entruster’s security interest to all per-
sons, in the case of instruments.

Section 8. Validity Against Creditors.—

1. The entruster’s security interest in goods, documents or instru-
ments under the written terms of a trust receipt transaction, shall without
any filing be valid as against all creditors of the trustee, with or without
notice, for thirty days after delivery of the goods, documents or instru-
ments to the trustee,and thereafter except as in this act otherwise
provided.

But where the trustee at the time of the trust receipt transaction has
and retains instruments, the thirty days shall be reckoned from the time
such instruments are actually shown to the entruster, or from the time
that the entruster gives new value under the transaction, whichever is
prior.

2. Save as provided in subsection one, the entruster’s security
interest shall be void as against lien creditors who become such after
such thirty-day period and without notice of such interest and betore
filing.

(a) Where a creditor secures the issuance of process which within
a reasonable time after such issuance results in attachment of or levv on
the goods, he is deemed to have become a lien creditor as of the date of
the issuance of the process.

(b) Unless prior to the acquisition of notice by all creditors filing
has occurred or possession has been taken by the entruster, (1) an as-
signee for the benefit of creditors, from the time of assignment, or (11)
a receiver in equity from the time of his appointment, or (11) a trustee
in bankruptcy or judicial insolvency proceedings from the time of filing
of the petition in bankruptcy or judicial insolvency by or against the
trustee, shall, on behalf of all creditors, stand in the position of a lien
creditor without notice, without reference to whether he personally has
or has not, in fact, notice of the entruster’s interest.
Section 9. Limitations on Entruster’s Protection Against Pur-
sers.—
1. Purchasers of Negotiable Documents or Instruments.

(a) Nothing in this act shall limit the rights of purchasers in
good faith and for value from the trustee of negotiable instruments
or negotiable documents, and purchasers taking from the trustee for
value, in good faith, and by transfer in the customary manner instru-
ments in such form as are by common practice purchased and sold
as if negotiable, shall hold such instruments free of the entruster’s
interest ; and filing under this act shall not be deemed to constitute
notice of the entruster’s interest to purchasers in good faith and for
value of such documents or instruments, other than transferees in
bulk.

(b) The entrusting (directly, by agent, or through the inter-
vention of a third person) of goods, documents or instruments by
an entruster to a trustee, under a trust receipt transaction or a trans-
action falling within section three of this act, shall be equivalent to the
like entrusting of any documents or instruments which the trustee
may procure in substitution, or which represent the same goods or
instruments or the proceeds thereof, and which the trustee negotiates
to a purchaser in good faith and for value.

2. Where a purchaser from the trustee is not protected under sub-
tion one hereof, the following rules shall govern:

(a) Sales by trustee in the ordinary course of trade.

(1) Where the trustee, under the trust receipt transaction.
has liberty of sale and sells to a buyer in the ordinary course of
trade, whether before or after the expiration of the thirty-day
period specified in subsection one of section eight of this act, and
whether or not filing has taken place, such buyer takes free of the
entruster’s security interest in the goods so sold, and no filing
shall constitute notice of the entruster’s security interest to such
a buyer.

(ii) No limitation placed by the entruster on the liberty of
sale granted to the trustee shall affect a buyer in the ordinary
course of trade, unless the limitation is actually known to the
latter.

(b) Purchasers other than buyers in the ordinary course of
trade.

In the absence of filing, the entruster’s security interest in goods
shall be valid, as against purchasers, save as provided in this section;
but any purchaser, not a buyer in the ordinary course of trade, who,
in good faith and without notice of the entruster’s security interest
and before filing, either (i) gives a new value before the expiration
of the thirty-day period specified in subsection one of section eight,
or (ii) gives value after said period, and who in either event before
filing also obtains delivery of goods from a trustee shall hold the sub-
ject matter of his purchase free of the entruster’s security interest ;
but a transferee in bulk can take only under (11) of this subdi-
vision (b).
receipt transaction in the trustee’s stock in trade or in his sales or ex-

hibition rooms, or allows such goods to be so placed or kept, such con-

sent or allowance shall have like effect as granting the trustee liberty
of sale.

3. As to all cases covered by this section the purchase of goods,
documents or instruments on credit shall constitute a purchase for new
value, but the entruster shall be entitled to any debt owing to the trustee
and any security therefor, by reason of such purchase; except that the
entruster’s rights shall be subject to any set-off or defense valid against
the trustee and accruing before the purchaser has actual notice of the
entruster’s interest.

Section 10, Entruster’s Right to Proceeds.—

Where, under the terms of the trust receipt transaction, the trustce
has no liberty of sale or other disposition, or, having liberty of sale or
other disposition, is to account to the entruster for the proceeds of any
disposition of the goods, documents or instruments, the entruster shall
be entitled, to the extent to which and as against all classes of persons
as to whom his security interest was valid at the time of disposition by
the trustee, as follows:

(a) to the debts described in section nine (3); and also

(b) to any proceeds or the value of any proceeds (whether such
proceeds are identifiable or not) of the goods, documents or instru-
ments, if said proceeds were received by the trustee within ten days
prior to either application for appointment of a receiver of the trustee,
or the filing of a petition in bankruptcy or judicial insolvency pro-
ceedings by or against the trustee, or demand made by the entruster
for prompt accounting ; and to a priority to the amount of such pro-
ceeds or value; and also |

(c) to any other proceeds of the goods, documents or instruments
which are identifiable, unless the provision for accounting has been
waived by the entruster by words or conduct; and knowledge by the
entruster of the existence of proceeds, without demand for accounting
made within ten days from such knowledge, shall be deemed such

a waiver.

Section 11. Liens in Course of Business Good Against Entruster.—

Specific liens arising out of contractual acts of the trustee with
reference to the processing, warehousing, shipping or otherwise dealing
with specific goods in the usual course of the trustee’s business prepara-
tory to their sale shall attach against the interest of the entruster in said
goods as well as against the interest of the trustee, whether or not filing
has occurred under this act ; but this section shall not obligate the entruster
personally for any debt secured by such lien; nor shall it be construed
to include the lien of a landlord.

Section 12. Entruster Not Responsible on Sale by Trustee.—

An entruster holding a security interest shall not, merely by virtue
of such interest or of his having given the trustee liberty of sale or other
isposition, be responsible as principal or as vendor under any sale or
Oontract to sell made by the trustee.

Section 13. Filing and Refiling Concerning Trust Receipt Trans-
ctions Covering Documents or Goods.—

1. Any entruster undertaking or contemplating trust receipt trans-
ctions with reference to documents or goods is entitled to file with the
»ecretary of the Commonwealth and in the clerk’s office where miscel-
aneous liens are recorded in the county or city in this State of the resi-
lence or principal place of business of the trustee a statement, signed br
he entruster and the trustee, containing:

(a) a designation of the entruster and the trustee, and of the
chief place of business of each within this State. if any; and if the
entruster has no place of business within the State, a designation of
his chief place of business outside the State ; and

(b) a statement that the entruster is engaged or expects to be
engaged, in financing under trust receipt transactions the acquisition
of goods by the trustee in an amount not exceeding a specified sum of
money ; and

(c) a description of the kind or kinds of goods covered or to be
covered by such financing.

2. The following form of statement (or any other form of statement
containing substantially the same information) shall suffice for the pur-
poses of this act:

“Statement of Trust Receipt Financing

“The entruster, -.............::::cceeeeeeeeeeeeeeeees , whose chief place of busi-
ness within this State, is at. .............c cee eeeeeeeeeeeees , (or who has no
place of business within this State and whose chief place of business out-
side of this State is at... eel eee eeceneee ,) is or expects to be en-
gaged in financing under trust receipt transactions the acquisition by
the trustee, .....2.... eee eeeeeeeceeeeceeees whose chief place of business within
this State is at... eee eee eeeeee of goods of the following descrip-
tion: (coffee, silk, automobiles, or the like) not exceeding at any time
sence cesses sesseeeseeeeseceeceeeeeeeeees dollars.

(Signed) .............-eeeceeseeeeeeeeeeeeeees Entruster,
(Signed) 0... eeeeeeeeeeeeeeeeeeeeeeeeee, Lust.”

3. It shall be the duty of the filing officer to mark each statement
filed with a consecutive file number, and with the date and hour of filing.
and to keep such statement in a separate file; and to note and index the
filing in a suitable index, indexed according to the name of the trustee
and containing a notation of the trustee’s chief place of business as given
in the statement. The fee for such filing shall be one dollar.

4. Presentation for filing of the statement described in subsection
one, and payment of the filing fee, shall constitute filing under this act,
in favor of the entruster, as to any documents or goods falling within
the description in the statement which are within one vear from the date
of such filing, or have been, within thirty davs previous to such filing.
the subject matter of a trust receipt transaction between the entruster
and the trustee.
5. At any time before expiration of the validity of the filing, as speci
fied in subsection four, a like statement, or an affidavit by the entruste
alone, setting out the information required by subsection one, may |
filed in like manner as the original filing. Any filing of such furthie
statement or affidavit shall be valid in like manner and for like period a
an original filing, and shall also continue the rank of the entruster’s exist
ing security interest as against all junior interests. It shall be the dut
of the filing officer to mark, file and index the further statement or affi
davit in like manner as the original.

Section 14. Limitations on Extent of Obligation Secured.—A:
against purchasers and creditors, the entruster’s security interest may
extend to any obligation for which the goods, documents or instrument:
were security before the trust receipt transaction, and to any new valu
given or agreed to be given as a part of such transaction ; but not, other.
wise, to secure past indebtedness of the trustee; nor shall the obligatior
secured under any trust receipt transaction extend to obligations of the
trustee to be subsequently created.

Section 15. Act Not Applicable to Certain Transactions.—

This act shall not apply to single transactions of legal or equitable
pledge, not constituting a course of business, whether such transaction:
be unaccompanied by delivery of possession, or involve constructive de-
livery, or delivery and redelivery, actual or constructive, so far as sucl
transactions involve only an entruster who is an individual natural per-
son, and a trustee entrusted as a fiduciary with handling investments ot
finances of the entruster; nor shall it apply to transactions of bailment
or consignment in which the title of the bailor or consignor is not retainec
to secure an indebtedness to him of the bailee or consignee; nor shall 11
apply to so-called equipment trusts or any other transactions of carrier:
by rail or water.

Section 16. Election Among Filing Statutes.—

As to any transaction falling within the provision both of this act and
of any other act requiring filing or recording, the entruster shall not be
required to comply with both, but by complying with the provisions ot
either at his election may have the protection given by the act complied
with; except that buyers in the ordinary course of trade as described in
subsection two of section nine, and lienors as described in section eleven.
shall be protected,as therein provided, although the compliance of the
entruster be with the filing or recording requirements of another act.

Section 17. Cases Not Provided For.—

In any case not provided for in this act the rules of law and equity.
including the law merchant, shall continue to apply to trust receipt trans-
actions and purported pledge transactions not accompanied by delivery
of possession.

Section 18. Uniformity of Interpretation.—

This act shall be so interpreted and construed as to effectuate its
general purpose to make uniform the law of the states which enact it.

Section 19. Constitutionality.—

If any provision of this act or the application thereof to any person
or circumstances is held invalid, such invalidity shall not affect other
Provisions or applications of the act which can be given effect without
the invalid provision or application, and to this end the provisions of this
act are declared to be severable.

Section 20. Short Title —

This act may be cited as the Uniform Trusts Receipts Act.

Section 21. Inconsistent Laws Repealed.—

Except so far as they are applicable to trust receipt and pledge trans-
actions entered into before this act takes effect. all acts or parts of acts
inconsistent with this act are hereby repealed.

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