1. Except as provided in subsection 4, a buyer in the ordinary course of business as defined in section 554.1201, subsection 9, takes free of a security interest created by that person's seller even though the security interest is perfected and even though the buyer knows of its existence. For purposes of this section, a buyer or buyer in the ordinary course of business includes any commission merchant, selling agent, or other person engaged in the business of receiving livestock as defined in section 189A.2 on commission for or on behalf of another.
2. In the case of consumer goods, a buyer takes free of a security interest even though perfected if the buyer buys without knowledge of the security interest, for value and for the buyer's own personal, family or household purposes unless prior to the purchase the secured party has filed a financing statement covering such goods.
3. A buyer other than a buyer in ordinary course of business (subsection 1 of this section) takes free of a security interest to the extent that it secures future advances made after the secured party acquires knowledge of the purchase, or more than forty-five days after the purchase, whichever first occurs, unless made pursuant to a commitment entered into without knowledge of the purchase and before the expiration of the forty-five-day period.
4. a. A buyer in the ordinary course of business buying farm products from a debtor engaged in farming operations takes subject to a security interest created by the debtor, if within one year before the sale of the farm products the buyer receives prior written notice of the security interest which complies with this subsection and the buyer fails to perform the payment obligations specified in the notice.
b. A written notice complies with this subsection if the written notice is delivered to the buyer by the secured party or the debtor who sells the farm products and it complies with the following:
(1) Is an original or reproduced copy of the written notice; and
(2) Is signed by either the secured party or the debtor, who transmits the notice to the potential buyer.
(3) Contains all of the following:
(a) The name and address of the secured party.
(b) The name and address of the person indebted to the secured party.
(c) The social security number of the debtor or, in the case of a debtor doing business other than as an individual, the internal revenue service taxpayer identification number of the debtor.
(d) A description of the farm products subject to the security interest created by the debtor, including the amount of the products where applicable.
(e) An identification of the crop year in which the farm products were produced.
(f) An identification of the county in which the farm products were produced.
(g) A reasonable description of the property on which the farm products were produced.
(h) A statement of any payment obligations imposed on the buyer by the secured party as a condition for waiver or release of the security interest.
c. The secured party may require, in documents creating the security interest, that a debtor engaged in farming operations, who creates a security interest in a farm product, furnish to the secured party a list of potential buyers to or through whom the debtor may sell the farm product. Before a potential buyer who is not on the list may receive from the secured party written notice of a security interest in a farm product, the secured party shall notify the debtor of the name and address of the potential buyer.
d. A written notice shall be amended by the secured party within three months of any material change. The amended notice must be signed and transmitted to the potential buyer similarly to the original notice, by either the secured party or the debtor selling the farm products. The notice lapses on the earlier of either one year from the date the notice was received by the buyer or the date the buyer receives a notice signed by the secured party that the security interest has lapsed.
5. If the notice to a potential buyer by a secured party or debtor satisfies the requirements of subsection 4, paragraph "b", and the debtor sells the farm products subject to the security interest to a buyer not included on the list as a potential buyer as required in subsection 4, paragraph "c", or to any other buyer, if the name and address of the buyer was not received by the debtor pursuant to subsection 4, paragraph "c", then the debtor is subject to a civil penalty of the greater of either five thousand dollars or fifteen percent of the value or benefits received by the debtor for the farm products described in the documents creating the security interest.
However, the penalty provided in this subsection shall be imposed on the debtor in lieu of but not in addition to the penalty described in the federal Food Security Act of 1985, Pub. L. No. 99-198, § 1324. A penalty shall not be imposed on the debtor if the debtor has complied with any of the following:
a. Notified the secured party in writing of the identity of the buyer at least seven days prior to the sale.
b. Accounted to the secured party for the proceeds of the sale not later than ten days after the sale.
6. For purposes of this section, written notice shall be considered to be received by the person to whom it was delivered if the notice is delivered in hand to the person with a written receipt returned, or mailed by certified or registered mail with the proper postage and properly addressed to the person to whom it was sent. The refusal of a person to whom a notice is mailed to accept delivery of the notice shall be considered receipt.
[C66, 71, 73, 75, 77, 79, 81, § 554.9307]
85 Acts, ch 188, §1, 2; 86 Acts, ch 1126, § 1--;3; 87 Acts, ch 38, §1--;5
Referred to in § 15E.91, 16.26, 16A.9, 554.7503, 554.9103
© 1997 Cornell College and League of Women Voters of Iowa
Last update: Mon Jan 27 16:05:08 CST 1997