336.9-207 Rights and duties of secured party having 
  possession or control of collateral. 

    (a)    Duty of care when secured party in possession.  
 Except as otherwise provided in subsection (d), a secured party 
 shall use reasonable care in the custody and preservation of 
 collateral in the secured party's possession.  In the case of 
 chattel paper or an instrument, reasonable care includes taking 
 necessary steps to preserve rights against prior parties unless 
 otherwise agreed. 

    (b)    Expenses, risks, duties, and rights when secured 
 party in possession.  Except as otherwise provided in 
 subsection (d), if a secured party has possession of collateral: 

    (1) reasonable expenses, including the cost of 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; 

    (2) the risk of accidental loss or damage is on the debtor 
 to the extent of a deficiency in any effective insurance 
 coverage; 

    (3) the secured party shall keep the collateral 
 identifiable, but fungible collateral may be commingled; and 

    (4) the secured party may use or operate the collateral: 

    (A) for the purpose of preserving the collateral or its 
 value; 

    (B) as permitted by an order of a court having competent 
 jurisdiction; or 

    (C) except in the case of consumer goods, in the manner and 
 to the extent agreed by the debtor. 

    (c)    Duties and rights when secured party in possession 
 or control.  Except as otherwise provided in subsection (d), a 
 secured party having possession of collateral or control of 
 collateral under section 336.9-104, 336.9-105, 336.9-106, or 
 336.9-107: 

    (1) may hold as additional security any proceeds, except 
 money or funds, received from the collateral; 

    (2) shall apply money or funds received from the collateral 
 to reduce the secured obligation, unless remitted to the debtor; 
 and 

    (3) may create a security interest in the collateral. 

    (d)    Buyer of certain rights to payment.  If the 
 secured party is a buyer of accounts, chattel paper, payment 
 intangibles, or promissory notes or a consignor: 

    (1) subsection (a) does not apply unless the secured party 
 is entitled under an agreement: 

    (A) to charge back uncollected collateral; or 

    (B) otherwise to full or limited recourse against the 
 debtor or a secondary obligor based on the nonpayment or other 
 default of an account debtor or other obligor on the collateral; 
 and 

    (2) subsections (b) and (c) do not apply. 

    HIST: 2000 c 399 art 1 s 17 

*   NOTE:  This section, as added by Laws 2000, chapter 399, 
*article 1, section 17, is effective July 1, 2001.  Laws 2000, 
*chapter 399, article 1, section 130. 

*   NOTE:  Minnesota Statutes 1998, section 336.9-207, which 
*reads as follows, is repealed July 1, 2001.  Laws 2000, chapter 
*399, article 1, section 130. 

*   "336.9-207 Rights and duties when collateral is in 
*secured party's possession.  

*   (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 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."