1. A secured party must use reasonable care in the custody and preservation of collateral in the secured party's possession. In the case of an instrument or chattel paper reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.
2. Unless otherwise agreed, when collateral is in the secured party's possession
a. reasonable expenses (including the cost of any insurance and payment of taxes or other charges) incurred in the custody, preservation, use or operation of the collateral are chargeable to the debtor and are secured by the collateral;
b. the risk of accidental loss or damage is on the debtor to the extent of any deficiency in any effective insurance coverage;
c. the secured party may hold as additional security any increase or profits (except money) received from the collateral, but money so received, unless remitted to the debtor, shall be applied in reduction of the secured obligation;
d. the secured party must keep the collateral identifiable but fungible collateral may be commingled;
e. the secured party may repledge the collateral upon terms which do not impair the debtor's right to redeem it.
3. A secured party is liable for any loss caused by the secured party's failure to meet any obligation imposed by the preceding subsections but does not lose the secured party's security interest.
4. A secured party may use or operate the collateral for the purpose of preserving the collateral or its value or pursuant to the order of a court of appropriate jurisdiction or, except in the case of consumer goods, in the manner and to the extent provided in the security agreement.
[C51, § 2071; R60, § 3649; C73, § 3307; C97, § 4273; C24, 27, 31, 35, 39, § 12352; C46, 50, 54, 58, 62, § 652.1; C66, 71, 73, 75, 77, 79, 81, § 554.9207]
Referred to in § 15E.91, 16.26, 16A.9, 554.9501
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