CHAPTER 557

An Act to amend and reenact §§ 8.5-117 and 8.9-812 of the Code of
Virginia, relating to the Uniform Commercial Code, the sections, re-
spectively, relating to the insolvency of bank holding funds for docu-
mentary credit and to priorities among conflicting security interests
in the same collateral.

(S 381]
Approved April 5, 1966

Be it enacted by the General Assembly of Virginia:

1. That § 8.5-117 and 8.9-312 of the Code of Virginia be amended anc
reenacted as follows:

§ 8.5-117. (1) Where an issuer or an advising or confirming bank
or a bank which has for a customer procured issuance of a credit by
another bank becomes insolvent before final payment under the credit
and the credit is one to which this title is made applicable by paragraph:
(a) or (b) of § 8.5-102 (1) on scope, the receipt or allocation of fund:
or collateral to secure or meet obligations under the credit shall have
the following results ;

(a) to the extent of any funds or collateral turned over after or
before the insolvency as indemnity against or specifically for the purpose
of payment of drafts or demands for payment drawn under the designated
credit, the drafts or demands are entitled to payment in preference over
depositors or other general creditors of the issuer or bank; and

on expiration of the credit or surrender of the beneficiary’s
rights under it unused any person who has given such funds or col-
lateral is similarly entitled to return thereof ; and

(c) a * charge to a general or current account with a bank if spe-
cifically consented to for the purpose of indemnity against or payment
of drafts or demands for payment drawn under the designated credit
falls under the same rules as if the funds had been drawn out in cash
and then turned over with specific instructions.

(2) After honor or reimbursement under this section the customer
or other person for whose account the insolvent bank has acted is entitled
to receive the documents involved.

§ 8.9-312. (1) The rules of priority stated in the following sec-
tions shall govern where applicable: § 8.4-208 with respect to the security
interest of collecting banks in items being collected, accompanying docu-
ments and proceeds; § 8.9-301 on certain priorities; § 8.9-304 on goods cov-
ered by documents; § 8.9-306 on proceeds and repossessions; § 8.9-307 on
buyers of goods; § 8.9-308 on possessory against nonpossessory interests
in chattel paper or nonnegotiable instruments; § 8.9-309 on security in-
terests in negotiable instruments, documents or securities; § 8.9-310 on
priorities between perfected security interests and liens by operation of
law; § 8.9-313 on security interests in fixtures as against interest in real
estate; § 8.9-314 on security interest in accessions as against interest in
goods; § * 8.9-$15 on conflicting security interests where goods lose their
identity or become part of a product; and § 8.9-316 on contractual
subordination.

(2) <A perfected security interest in crops for new value given to
enable the debtor to produce the crops during the production season and
given not more than three months before the crops become growing crops
by planting or otherwise takes priority over an earlier perfected security
interest to the extent that such earlier interest secures obligations due
more than six months before the crops become growing crops by planting
or otherwise, even though the person giving new value had knowledge
of the earlier security interest.

(3) A purchase money security interest in inventory collateral has
priority over a conflicting security interest in the same collateral if

(a) the purchase money security interest is perfected at the time the
debtor receives possession of the collateral; and

(b) any secured party whose security interest is known to the
holder of the purchase money security interest, or who, prior to the date
of the filing made by the holder of the purchase money security interest,
had filed a financing statement covering the same items or type of in-
ventory, has received notification of the purchase money security interest
before the debtor receives possession of the collateral covered by the pur-
chase money security interest; and

(c) such notification states that the person giving the notice has
or expects to acquire a purchase money security interest in inventory of
the debtor, describing such inventory by item or type.

(4) A purchase money security interest in collateral other than in-
ventory has priority over a conflicting security interest in the same col-
lateral if the purchase money security interest is perfected at the time
the debtor receives possession of the collateral or within . ren days there.

“(6) In all cases not governed by other rules stated in this section
(including cases of purchase money security interests which do not qualify
for the special priorities set forth in subsections (3) and (4) of this sec-
tion), priority between conflicting security interests in the same col-
lateral shall be determined as follows:

(a) in the order of filing if both are perfected by filing, regardless
of which security interest attached first under § 8.9-204 (1) and whether it
attached before or after filing ; and

(b) in the order of perfection unless both are perfected by filing,
regardless of which security interest attached first under § 8.9-204 (1)
and, in the case of a filed security interest, whether it attached before
or after filing ; >and

(c) in the order of attachment under § 8.9-204 (1) so long as
neither is perfected.

For the purpose of the priority rules of the immediately preced-
ing subsection, a continuously perfected security interest shall be treated
at all times as if perfected by filing if it was originally so perfected and
it shall be treated at all times as if perfected otherwise than by filing if it
was originally perfected otherwise than by filing.