                                 CODE OF VIRGINIA

PURCHASE-MONEY SECURITY INTEREST; APPLICATION OF PAYMENTS; BURDEN OF
ESTABLISHING (§ 8.9A-103)

a. Definitions. In this section:

   1. &#8220;purchase-money collateral&#8221; means goods or software that
   secures a purchase-money obligation incurred with respect to that collateral;
   and

   2. &#8220;purchase-money obligation&#8221; means an obligation of an obligor
   incurred as all or part of the price of the collateral or for value given to
   enable the debtor to acquire rights in or the use of the collateral if the
   value is in fact so used.

b. Purchase-money security interest in goods. A security interest in goods is a
purchase-money security interest:

   1. to the extent that the goods are purchase-money collateral with respect to
   that security interest;

   2. if the security interest is in inventory that is or was purchase-money
   collateral, also to the extent that the security interest secures a
   purchase-money obligation incurred with respect to other inventory in which
   the secured party holds or held a purchase-money security interest; and

   3. also to the extent that the security interest secures a purchase-money
   obligation incurred with respect to software in which the secured party holds
   or held a purchase-money security interest.

c. Purchase-money security interest in software. A security interest in software
is a purchase-money security interest to the extent that the security interest
also secures a purchase-money obligation incurred with respect to goods in which
the secured party holds or held a purchase-money security interest if:

   1. the debtor acquired its interest in the software in an integrated
   transaction in which it acquired an interest in the goods; and

   2. the debtor acquired its interest in the software for the principal purpose
   of using the software in the goods.

d. Consignor&#8217;s inventory purchase-money security interest. The security
interest of a consignor in goods that are the subject of a consignment is a
purchase-money security interest in inventory.

e. Application of payment in nonconsumer-goods transaction. In a transaction
other than a consumer-goods transaction, if the extent to which a security
interest is a purchase-money security interest depends on the application of a
payment to a particular obligation, the payment must be applied:

   1. in accordance with any reasonable method of application to which the
   parties agree;

   2. in the absence of the parties&#8217; agreement to a reasonable method, in
   accordance with any intention of the obligor manifested at or before the time
   of payment; or

   3. in the absence of an agreement to a reasonable method and a timely
   manifestation of the obligor&#8217;s intention, in the following order:

A. to obligations that are not secured; and

B. if more than one obligation is secured, to obligations secured by
purchase-money security interests in the order in which those obligations were
incurred.

f. No loss of status of purchase-money security interest in nonconsumer-goods
transaction. In a transaction other than a consumer-goods transaction, a
purchase-money security interest does not lose its status as such, even if:

   1. the purchase-money collateral also secures an obligation that is not a
   purchase-money obligation;

   2. collateral that is not purchase-money collateral also secures the
   purchase-money obligation; or

   3. the purchase-money obligation has been renewed, refinanced, consolidated,
   or restructured.

g. Burden of proof in nonconsumer-goods transaction. In a transaction other than
a consumer-goods transaction, a secured party claiming a purchase-money security
interest has the burden of establishing the extent to which the security
interest is a purchase-money security interest.

h. Nonconsumer-goods transactions; no inference. The limitation of the rules in
subsections (e), (f), and (g) to transactions other than consumer-goods
transactions is intended to leave to the court the determination of the proper
rules in consumer-goods transactions. The court may not infer from that
limitation the nature of the proper rule in consumer-goods transactions and may
continue to apply established approaches.

i. Goods covered by negotiable document. The attachment of a security interest
in a negotiable document is also attachment of a security interest in the goods
covered by the negotiable document.

HISTORY: 1964, c. 219, § 8.9-107; 2000, c. 1007.