The Language of Revised Article 9

Scott J. Burnham, The Language of Revised Article 9, 46 Gonz. L. Rev. 215 (2011).

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I. INTRODUCTION

A great deal of self-congratulation is to be expected as we celebrate the tenth anniversary of the enactment of Uniform Commercial Code Revised Article 9.  Indeed, it was present at the beginning, when the Chair of the Drafting Committee praised, among other things, the text itself.[1]  It can probably fairly be said that the comprehensiveness of that text has produced more certainty in the law, for an answer can be found to virtually every hypothetical.[2]  My concern is not with what is said, but the way it is said.[3]

For a number of years, I have presented Continuing Legal Education programs on Revised Article 9.[4]  I told the attendees that because I am an academic, they might expect me to tell them that the best way to understand Revised Article 9 is to actually read it.  Indeed, the practitioners might have told themselves that some rainy day they will get around to reading it.  They were taken aback when I did not give this advice.  Instead, I told them, if you want to understand Revised Article 9, don’t read it.

For one thing, a well-written text has an organizing principle.  Grant Gilmore, the principal author of the original Article 9, once said that it made secured financing safe for “country bankers.”[5]  The glory of original Article 9 is that it united disparate security devices into one device—the secured transaction—and gave the attorney the job of mastering the concepts used in applying that device.  We have now returned to a system of different security devices, with rules that depend on the kind of collateral employed, and thus have exceptions compounded on exceptions.  Although these different beasts reside under one roof, they do so uncomfortably, and rare will be the country banker who can sort them out and tame them.[6]

Within a well-organized text, it seems to me that good writing 1) makes appropriate use of definitions; 2) avoids ambiguity; 3) puts the main idea first; 4) puts related concepts together; and 5) says what it means.  This essay shows how Revised Article 9 violates these principles of good writing.  Each part addresses a different drafting problem and exemplifies it with a different section of Revised Article 9.  I call these problems: Definitions That Don’t Define, How’s That Again, The Back-asswards Section, The Rest of the Story, and Best Concealed Trap.  Working through them will serve the purposes of indicating to the reader some of the drafting weaknesses of Revised Article 9 and instructing the reader in some of the substantive law that is concealed in that verbiage.  A conclusion reiterates some of the consequences of this problematic language.%CODE2%
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II. SCOPE OF ARTICLE 9: DEFINITIONS THAT DON’T DEFINE

For our first hypothetical, we will attempt to determine from the text whether Article 9 applies to this transaction:

Joe’s Consignment Shop has arrangements with a number of Manufacturers under which the Manufacturers place their goods in Joe’s shop, but Joe does not buy the goods.  Instead, Joe tries to sell the goods.  As to the goods that Joe sells, he shares the sales proceeds with the Manufacturers.  As to the goods that Joe is unable to sell, he returns them to the Manufacturers.

The rule on the scope of Article 9 is found in section 9-109(a):

Scope
(a) [T]his article applies to:
. . . .
(4) a consignment.

We might conclude that because this transaction is a consignment,[7]  Article 9 applies to it.  Before so concluding, we should read the definition of consignment in section 9-102(a)(20):

(20) “Consignment” means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a name other than the name of the person making delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its creditors to be substantially engaged in selling the goods of others;
(B) with respect to each delivery, the aggregate value of the goods is $1,000 or more at the time of delivery;
(C) the goods are not consumer goods immediately before delivery; and
(D) the transaction does not create a security interest that secures an obligation.

Applying this definition to our hypothetical, we would probably conclude that 1) under the flush language, a person (Manufacturer) delivered goods to a merchant (Joe’s Consignment Shop) for the purpose of sale, 2) under (A)(i), the merchant deals in goods of that kind under a name other than the name of the person making delivery, 3) under (A)(ii), the merchant is not an auctioneer, but 4) under A(iii), Joe’s Consignment Shop is known by its creditors to be substantially engaged in selling the goods of others.  Therefore, because our facts do not satisfy the (A)(iii) element, the transaction is not a consignment.  Because Article 9 applies to consignments, Article 9 does not apply to this transaction.  This is, of course, the right result, but does the correct end justify the tortured means used to get there?[8]

Once we have determined that a transaction is within the scope of Article 9, which state’s law applies to the transaction?

III. CHOICE OF LAW: HOW’S THAT AGAIN?

Contracting parties generally have freedom to choose the applicable relevant law.  Article 9, however, limits this freedom.  The Code provides in section 1-301(c):

Parties’ Power to Choose Applicable Law
(c) [I]f one of the following provisions of [the Uniform Commercial Code] specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:
. . . .
(8) Sections 9-301 through 9-307.

This limitation makes sense.  Although parties are free to choose the law governing the contract law aspects of their transaction (attachment of the security interest), they cannot choose the law governing perfection, because a third party needs to be able to readily determine where perfection (generally filing) takes place.  In other words, the reliability of the filing system depends on all similarly situated creditors (creditors having the same debtor and the same collateral) filing and searching in the same place.  Therefore, sections 9‑301 through 9-307 contain rules that trump the choice of law provision in the security agreement.  Let us look to section 9-301 to ascertain these rules.  Section 9-301 provides in part:

Law Governing Perfection and Priority of Security Interests

Except as otherwise provided in Sections 9-303 through 9-306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:
(1)  Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.
(2)  While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.

This section relies heavily on parallel structure, with the initial language telling us that these rules govern three matters: “perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.”[9]  Subsection (1) tells us that “while a debtor is located in a jurisdiction, the local law of that jurisdiction” governs these three matters.[10]  Subsection (2) tells us that “[w]hile collateral is located in a jurisdiction, the local law of that jurisdiction” governs these three matters, except that the third matter has seemingly been subtly changed from “the priority of a security interest in collateral” to “the priority of a possessory security interest in that collateral.”[11]

Let us return to the first matter, perfection.  Subsection (1) seems to say that “while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection,” while subsection (2) seems to say that “[w]hile collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection.”[12]  After ten readings, I couldn’t figure it out.  Does the location of the debtor govern perfection or does the location of the collateral govern perfection?  On the eleventh reading, I finally figured it out.  The structure of this section creates a syntactical ambiguity, for it is not clear whether the final phrase in subsections (1) and (2) modifies only the last item on the list or all of the preceding items.[13]  This problem is made clear (and can be resolved) through a tabulated structure.[14]  I was originally reading the subsections as though they were written like this:

(1)  [W]hile a debtor is located in a jurisdiction, the local law of that jurisdiction governs
perfection,
the effect of perfection or nonperfection, and
the priority of a security interest in collateral.

(2)  While collateral is located in a jurisdiction, the local law of that jurisdiction governs
perfection,
the effect of perfection or nonperfection, and
the priority of a possessory security interest in that collateral.

Finally, I realized that I was supposed to read them like this:

(1)  [W]hile a debtor is located in a jurisdiction, the local law of that jurisdiction governs
perfection,
the effect of perfection or nonperfection, and
the priority
of a security interest in collateral.

(2)  While collateral is located in a jurisdiction, the local law of that jurisdiction governs
perfection,
the effect of perfection or nonperfection, and
the priority
of a possessory security interest in that collateral.[15]

This structure, with the final phrase modifying all the enumerated items, makes clear that the first rule is the general rule for security interests and the second rule is an exception for possessory security interests.  This ambiguity could have been resolved through the use of tabulation, as indicated above.  It also could have been resolved through the use of captions, as found in many of the Code sections.  For example:

(1) General rule.  Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.

(2) Possessory security interests.  While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.

By contrast, subsection (3) as presently drafted employs both tabulation and the parallel structure for clarity.  That subsection provides:

(3)  Except as otherwise provided in paragraph (4), while negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
(A) perfection of a security interest in the goods by filing a fixture filing;
(B) perfection of a security interest in timber to be cut; and
(C) the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.[16]

Here, the three matters governed by the initial language are broken down into enumerated items.[17]  Furthermore, while the language at the beginning of the section and subsections (1) and (2) each list three matters that are governed, the omission of the item “perfection” in subsection (3)(C) makes clear that the local law of that jurisdiction does not govern perfection.[18]

Having determined that under the general rule, the location of the debtor determines the relevant jurisdiction, we now attempt to ascertain the location of the debtor.

IV. LOCATION OF DEBTOR: THE BACK-ASSWARDS SECTION

Let’s imagine that we are a reader of Revised Article 9 who is trying to find the location of the debtor for purposes of perfecting the security agreement.  We start working our way through section 9-307:

Location of Debtor
(a)  [“Place of business.”]  In this section, “place of business” means a place where a debtor conducts its affairs.

This definition, prominently placed at the beginning of the section, leads us to believe that the place where the debtor does business will be a significant factor in determining location.  We read on.

(b)  [Debtor’s location: general rules.]  Except as otherwise provided in this section, the following rules determine a debtor’s location:[19]

This structure, giving us the general rules first, leads us to believe that the general rules are the most important ones, and will be followed by the exceptions.  The first general rule provides:

(1)  A debtor who is an individual is located at the individual’s principal residence.[20]

This rule further confirms that we have found the important rules, for it gives us the rule for location of an individual.  Now what about the location of a business?  The next two rules provide:

(2)  A debtor that is an organization and has only one place of business is located at its place of business.
(3)  A debtor that is an organization and has more than one place of business is located at its chief executive office.[21]

These rules, presented as the general rules, and placed immediately following the rule for individuals, lead us to believe that we have now found the rules for businesses: a business is located at its place of business, or, if it has more than one, at its chief executive office.[22]  These rules have a comforting ring if we are familiar with the old Article 9, for they track the old rules for certain forms of collateral.[23]

As we continue on, we get into some of those dreaded exceptions we were warned about in subsection (b):

(c)  [Limitation of applicability of subsection (b).]  Subsection (b) applies only if a debtor’s residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral.  If subsection (b) does not apply, the debtor is located in the District of Columbia.[24]

Our eyes are now glazing over as we get to the next exception:

(d)  [Continuation of location: cessation of existence, etc.]  A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c).[25]

This subsection seems like the afterthought of a drafter who was addressing all contingencies.  If we are still awake, we get to what seems, in context, the next in a long series of exceptions:

(e)  [Location of registered organization organized under State law.]  A registered organization that is organized under the law of a State is located in that State.[26]

If we are sentient enough to wonder what a registered organization is, we find the definition in section 9-102(a)(70):

(70) “Registered organization” means an organization organized solely under the law of a single State or the United States and as to which the State or the United States must maintain a public record showing the organization to have been organized.[27]

It slowly dawns on us that this definition embraces corporations and certain partnership entities, such as LLPs.  These businesses are located where they are organized.  If we got this far, we now realize that if our debtor is a corporation organized in Delaware, with its chief executive offices in New York and other offices in many states, this debtor is located in Delaware.  As we saw in section 9-301, that state’s laws govern perfection.  We have to file in Delaware![28]  Could we not have been told that in the general rules?

Now that we know where we are going to perfect our security interest, let us turn to the contents of the financing statement we intend to file in that location.

V. CONTENTS OF FINANCING STATEMENT: THE REST OF THE STORY

To find what we have to include in our financing statement, we turn to section 9-502(a), which provides in pertinent part:

Contents of Financing Statement; . . .
(a)  [Sufficiency of financing statement.]  Subject to subsection (b) [extracted collateral timber, fixture filings], a financing statement is sufficient only if it:
(1) provides the name of the debtor;
(2) provides the name of the secured party or a representative of the secured party; and
(3) indicates the collateral covered by the financing statement.

I had heard that filing requirements were going to be simplified, but I had no idea they would be so simple as to require only three things.  This should be a piece of cake.  As a thorough lawyer, however, I might read the Official Comments, where I would feel a sense of foreboding from the caption to Official Comment 4: “Certain Other Requirements.”[29]  That Comment states in pertinent part:

In addition, the filing office must reject a financing statement lacking certain other information formerly required as a condition for perfection (e.g., an address for the debtor or secured party).  See Sections 9-516(b), 9-520(a).[30]

To find out what these ominous “other requirements” are, I turn first to section 9-520(a):

Acceptance and Refusal to Accept Record
(a)  [Mandatory refusal to accept record.]  A filing office shall refuse to accept a record for filing for a reason set forth in Section 9‑516(b) and may refuse to accept a record for filing only for a reason set forth in Section 9-516(b).

If the filing office must refuse a record for a reason set forth in section 9‑516(b), I figure I’d better look at that section to see what additional requirements there might be.  Here’s what I find:

What Constitutes Filing; Effectiveness of Filing
. . . .
(b)  [Refusal to accept record; filing does not occur.]  Filing does not occur with respect to a record that a filing office refuses to accept because:
(1) the record is not communicated by a method or medium of communication authorized by the filing office;
(2) an amount equal to or greater than the applicable filing fee is not tendered;
(3) the filing office is unable to index the record because:
(A) in the case of an initial financing statement, the record does not provide a name for the debtor;
(B) in the case of an amendment or correction statement, the record:
(i) does not identify the initial financing statement as required by Section 9‑512 or 9‑518, as applicable; or
(ii) identifies an initial financing statement whose effectiveness has lapsed under Section 9‑515;
(C) in the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor’s last name; or
(D) in the case of a record filed [or recorded] in the filing office described in Section 9-501(a)(1), the record does not provide a sufficient description of the real property to which it relates;
(4) in the case of an initial financing statement or an amendment that adds a secured party of record, the record does not provide a name and mailing address for the secured party of record;
(5) in the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, the record does not:
(A) provide a mailing address for the debtor;
(B) indicate whether the debtor is an individual or an organization; or
(C) if the financing statement indicates that the debtor is an organization, provide:
(i) a type of organization for the debtor;
(ii) a jurisdiction of organization for the debtor; or
(iii) an organizational identification number for the debtor or indicate that the debtor has none;
(6) in the case of an assignment reflected in an initial financing statement under Section 9‑514(a) or an amendment filed under Section 9‑514(b), the record does not provide a name and mailing address for the assignee; or
(7) in the case of a continuation statement, the record is not filed within the six-month period prescribed by Section 9‑515(d).

I conclude that there are a few more requirements than those set out in section 9-502.  Reading sections 9-502, 9-516, and 9-520 again, I conclude that what those sections are trying to tell me is that the filing office is supposed to reject a filing if it does not contain the information required by section 9-516(b), but if the filing office accepts it anyway, the filing is effective as long as it contains the section 9-502 information.

Here’s a follow-up issue.  Assume that the filing office wrongfully rejects a filing because it does not contain information that it does not need to contain, such as a signature or a tax identification number.  Is the attempted filing nevertheless effective for perfection?  For example, assume the filing office wrongfully rejects Creditor 1’s filing against Debtor.  Creditor 2 then checks the filings, finds none, takes a security interest in Debtor’s collateral, and properly files.  On Debtor’s default, does Creditor 1 have priority over Creditor 2?

Section 9-516(d) anticipates this situation:

(d)  [Refusal to accept record; record effective as filed record.]  A record that is communicated to the filing office with tender of the filing fee, but which the filing office refuses to accept for a reason other than one set forth in subsection (b), is effective as a filed record except as against a purchaser of the collateral which gives value in reasonable reliance upon the absence of the record from the files.

An initial reading may lead us to conclude that Creditor 1 is home free, because the subsection provides that the filing that was refused is effective “except as against a purchaser of the collateral.”[31]  We now have to determine whether Creditor 2 is a purchaser of the collateral.

Section 1-201(b)(30) provides that “‘Purchaser’ means a person who takes by purchase.”  Section 1-201(b)(29) provides that “‘Purchase’ means taking by sale, discount, negotiation, mortgage, pledge, lien, security interest, issue or re-issue, gift or any other voluntary transaction creating an interest in property.”[32]  Because Creditor 2 took a security interest, Creditor 2 is a purchaser who has priority over Creditor 1.

Memo to Creditors: If the filing office rejects your filing (section 9-520(b) requires the office to promptly notify you), do what the clerks tell you to do even if they are wrong.  Revised Article 9 may have tried to make the filing office passive, but I think we will find that it is not just in Third World countries that the clerks control the system.

Now that we know what information is required in the financing statement, let’s examine one of those required pieces of information: the name of the debtor.

VI. SEARCH LOGIC: BEST CONCEALED TRAP

Because searches are conducted by debtor’s name, it is essential that the creditor get the name right.  In many reported cases, the creditor finds its security interest unperfected because another secured party (or, in the case of the bankruptcy trustee, a hypothetical secured party), could not find the filing under the filed name.[33]  What name should the creditor use and how close to the correct name does it have to be?  Let’s start with section 9-503(a):

Name of Debtor and Secured Party.
(a)  [Sufficiency of debtor’s name.]  A financing statement sufficiently provides the name of the debtor:
(1) if the debtor is a registered organization, only if the financing statement provides the name of the debtor indicated on the public record of the debtor’s jurisdiction of organization which shows the debtor to have been organized;
. . . .
(4) in other cases:
(A) if the debtor has a name, only if it provides the individual or organizational name of the debtor;

According to this section, for a registered organization, we need “the name of the debtor indicated on the public record”[34] such as the certificate of incorporation or partnership registration; for others, we need “the individual or organizational name.”[35]  If we don’t get it exactly right, how close do we have to come?  Under old Article 9, the rule of thumb seemed to be “close enough that a reasonably diligent searcher would find it.”  We must keep in mind that the rule developed when a reasonable searcher was literally thumbing through paper records.[36]  Section 9-506 apparently answers this question under Revised Article 9:

Effect of Errors or Omissions.
(a)  [Minor errors and omissions.]  A financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.

Subsection (a) gives the error-prone some comfort, for it seems to tell us we can make minor errors, as long as those minor errors do not make the financing statement “seriously misleading.”  So what does that term mean?  We read on:
(b)  [Financing statement seriously misleading.]  Except as otherwise provided in subsection (c), a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9‑503(a) is seriously misleading.[37]

Now we are thrown back to section 9-503(a).  With respect to the debtor’s name, if we don’t comply with that section, our financing statement is “seriously misleading” under section 9-506(b).[38]  Does this mean that with respect to the registered organization, for example, we have to get it exactly right?  Subsection 9-506(c) provides further elaboration:

(c)  [Financing statement not seriously misleading.]  If a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9‑503(a), the name provided does not make the financing statement seriously misleading.

As arbiter of what is a “seriously misleading” name on the financing statement, our old friend the reasonably diligent searcher has been replaced with “the filing office’s standard search logic.”[39]  In other words, if a searcher plugs the correct name into the computer system and it finds our filing, even though the filing contains “minor errors” in the words of section 9-506(a), then those minor errors do not render our financing statement ineffective.  On the other hand, if a searcher plugs the correct name into the computer system and it does not find our filing, does it mean that our financing statement is seriously misleading and therefore ineffective?  That is what we really want to know.

What does this search logic look like?  The administrative rule setting forth the search logic in one jurisdiction provides in part:

Defining Search Criteria for Uniform Commercial Code Certified Searches
. . . .
(4) Basic standards for searching individual names include:
(a) exact match of surnames and exact match of first names; and
(b) middle names become an initial or blank space.
(5) Basic standards for searching business names include:
(a) an exact match of the name requested;
(b) “the” at the beginning of a name is disregarded;
(c) words and abbreviations that indicate the existence or nature of an entity are disregarded.
. . . .
(6) A search of the secretary of state’s database will not result in accurate findings if:
(a) first or last names are misspelled;
(b) non-universal identifiers are in the name and not included in the search request, such as “a Montana corporation” or “a general partnership”;
(c) nicknames or shortened versions of names, i.e., if the debtor’s first name is filed as “Robert,” the search will not result in finding “Bob”; or
(d) plurals are used in the search but not in original filing.[40]

Subsections (4) and (5) state that with respect to individual names and business names respectively, “exact match of surnames and exact match of first names” and “an exact match of the name requested” is required.[41]  The margin for error built into this search logic may be gleaned from the cautions in subsection (6):

(6) A search of the secretary of state’s database will not result in accurate findings if:
(a) first or last names are misspelled;[42]

If the debtor’s name is “Lori L. Jensen,” and we file in the name of “Lorri L. Jensen,” we have not made an effective filing because the searcher who plugs in the name “Lori L. Jensen” will not find “Lorri L. Jensen.”  Note that under the old scheme, our reasonably diligent searcher thumbing through paper records probably would have found this filing, but the search logic of our computer will not.

Similar rigor is found with respect to business names:
(6) A search of the secretary of state’s database will not result in accurate findings if:
. . . .
(b) non-universal identifiers are in the name and not included in the search request, such as “a Montana corporation” or “a general partnership”;[43]

If a creditor properly filed in the name “ALCO, a Montana Corporation,” a search in the name of “ALCO, Inc.,” or “ALCO” will not find this filing.  The message to creditors is clear: get the legal name from the debtor by requiring a copy of the certificate of incorporation or other formal indication of the name.  File using that name only.  Similarly, searchers need to search under only one name, the legal name of the debtor, and if they find no filings they may assume priority.

Nicknames and shortened names will clearly not do:

(6) A search of the secretary of state’s database will not result in accurate findings if:
. . . .
(c) nicknames or shortened versions of names, i.e., if the debtor’s first name is filed as “Robert,” the search will not result in finding “Bob”;[44]

If the legal name of the debtor is “John O. Mudd,” a search under “Jack O. Mudd” will not locate the filing.  However, this rule assumes that, like registered organizations, individuals have only a single legal name.  Because we recognize common law name changes, that may not be true.  If “John O. Mudd” has been known all his life as “Jack O. Mudd,” is the latter no less a legal name?  If my wife was born “Teresa Bodwell,” but is now sometimes known as “Teresa Burnham,” is each not a legal name?  Unlike the searcher dealing with registered organizations, the duty of the searcher for individual names may have an obligation to search under various legal names.[45]

Many statutes inform us that the singular and the plural are interchangeable.[46]  Not so this particular filing system:

(6) A search of the secretary of state’s database will not result in accurate findings if:
. . . .
(d) plurals are used in the search but not in original filing.[47]

If the name of the registered organization is “Beall Trailer of Montana, Inc.,” a search for “Beall Trailers of Montana, Inc.” will not find the filing.  The opposite is also true.  If the name of the registered organization is “Beall Trailers of Montana, Inc.,” a search for “Beall Trailer of Montana, Inc.” will not find the filing.

The national “safe harbor” Form UCC-1 contained in section 9-521 gets it right.[48]  That model form admonishes the filer to provide “DEBTOR’S EXACT FULL LEGAL NAME.”[49]  Creditors must get the exact full legal name from the debtor, file in the exact full legal name, and search in the exact full legal name.[50]  If an individual has more than one legal name, file and search under both.  Again, I have no quarrel with this result, but I must ask whether a creditor would know this by reading Revised Article 9?  I understand that there was some talk about deleting this language in the 2010 Amendments to Article 9 because there is no justification for it in the language of the Code itself, but fortunately it remains.  In fact, it has been strengthened to read “use exact, full name; do not omit, modify, or abbreviate any word in the Debtor’s name.”[51]

VII. CONCLUSION

During the early promulgation of the Code, the late David Mellinkoff wrote:

The official resistance to “clarifying” the UCC does not mean that it is fruitless to criticize the Code’s draftsmanship.  Even if we are to be stuck with UCC talk for another generation or so, if we are sufficiently annoyed with this language midden we may be aroused to do something about it the next time around. . . .

First must come a recognition that it is not enough to be concerned with what is said and not with how it is said.  Having been burned more often than most people, lawyers ought to know by now that what and how are inseparably joined, and that when how gets drunk, what stumbles.[52]

This essay is intended to demonstrate that the drafters of Revised Article 9 did not heed Mellinkoff’s warning.  We have seen that they have lost sight of the organizing principle, and have used definitions that do not define, have employed syntactical ambiguity, have buried fundamental concepts within exceptions, have scattered a rule among disparate sections, and have withheld vital information.  As a result, they have frustrated law school instructors, for whom the first three rules of statutory interpretation have always been: 1) read the statute, 2) read the statute, and 3) read the statute.  Equally significantly, those country lawyers Gilmore spoke of are not going to read it in their practice.  Until another generation takes upon itself the task of again redrafting Article 9, we may well recommend: read the secondary sources and consult an expert in solving this Code.

——————————————————————————–

*         Curley Professor of Commercial Law, Gonzaga University School of Law.  I am grateful to my former law school, The University of Montana School of Law, for providing research support for this essay, and to Prof. Bob Lloyd of the University of Tennessee College of Law for his helpful comments.
[1].        See William M. Burke, Some Thoughts on the Success of the Revised Article 9 Enactment Effort, 23 A.L.I. REP. 5, 5 (Summer 2001), available at http://www.ali.org/ali_old/RSummer01.pdf.  Among the “factors that contributed to the success of the legislative enactment effort with respect to Revised Article 9,” Burke includes:
15. Excellent work product.  The Act is well drafted.  While there may be disagreements about the policy choices made by the Drafting Committee, those policy choices can be defended and are expressed well in the statutory text.  In this respect, the Act sold itself in the state legislatures.

Id. at 8.

[2].        In writing this essay, I have not researched the actual drafting of the document.  I have simply dissected it as a text and made deductions there from.  As to what I may have deduced about the author based on this study, I tell my students, “remember in your first year classes, how there was this guy who always seemed to sit in the front row (and it did always seem to be a guy)?  As the professor lectured, you could see the wheels turning in his mind.  His head would tilt, a gleam would appear in his eye, and his hand would slowly rise.  When called on, he would spin out the most bizarre hypothetical, then triumphantly ask the professor how the rules would deal with it.  That’s the guy who wrote Revised Article 9.”
[3].        Criticism of the language of the Uniform Commercial Code is not new.  See, e.g., Louis F. Del Duca, Vincent C. DeLiberato, Jr. & David L. Hostetter, Applying Plain English Techniques in Revising the UCC, 29 UCC L.J. 428, 429-30 (1997); see also David Mellinkoff, The Language of the Uniform Commercial Code, 77 YALE L.J. 185, 185-86 (1967).
[4].        Revised Article 9 might well have been subtitled The Continuing Legal Education Presenters Relief Bill.
[5].        Grant Gilmore, The Good Faith Purchase Idea and the Uniform Commercial Code: Confessions of a Repentant Draftsman, 15 GA. L. REV. 605, 620 (1981).
[6].        This disparity has pedagogical implications.  Because there seems to be a separate Article 9 for each type of collateral, it is sensible not to teach it conceptually, but by collateral type.  For example, here is the Table of Contents of James J. White’s, Secured Transactions Teaching Materials:
Chapter 1.  Security in Business Equipment
Chapter 2.  Bankruptcy
Chapter 3.  Security in Inventory and Its Proceeds
Chapter 4.  Security Interests in Rights to Payment and Other Intangibles
Chapter 5.  Security in Fixtures
Chapter 6.  Security in Consumer Goods
Chapter 7.  Security in Stocks, Bonds and Other Investment Property.
JAMES J. WHITE, SECURED TRANSACTIONS TEACHING MATERIALS, at vii, ix-xi (3rd ed. 2006).
[7].        BLACK’S LAW DICTIONARY 307 (6th ed. 1990) defines “Consignment” in relevant part as “[e]ntrusting of goods to another to sell for the consignor” and “Consignment contract” as “[c]onsignment of goods to another (consignee) for sale under agreement that consignee will pay consignor for any sold goods and will return any unsold goods.”
[8].        Those who are looking for another definitional puzzler might try to figure out the difference between a “Consumer transaction,” defined in section 9-102(a)(26), and a “Consumer-goods transaction,” defined in section 9-102(a)(24).  To top it off, figure out why the distinction is important.  And for bonus points, explain why there is a definition of “Consumer debtor” in section 9-102(a)(22) when the term is never used.
[9].        U.C.C. § 9-301 (2008).
[10].      U.C.C. § 9-301(1) (2008).
[11].      U.C.C. § 9-301(1)-(2) (2008) (emphasis added) (comparing subsections (1) and (2)).
[12].      U.C.C. § 9-301(1)-(2) (2008).
[13].      See U.C.C. § 9-301(1)-(2) (2008).
[14].      See SCOTT J. BURNHAM, THE CONTRACT DRAFTING GUIDEBOOK § 8.7.2 (1992).
[15].      See id. (applying the tabulation structure to sections 9-301(1)-(2)).
[16].      U.C.C. § 9-301(3) (2008).
[17].      U.C.C. § 9-301(3) (2008).
[18].      See U.C.C. § 9-301(3) (2008).
[19].      U.C.C. § 9-307(b) (2008).
[20].      U.C.C. § 9-307(b)(1) (2008).
[21].      U.C.C. § 9-307(b)(2)-(3) (2008).
[22].      U.C.C. § 9-307(b)(2)-(3) (2008).
[23].      Former section 9-103 provided in part:
(3) Accounts, general intangibles and mobile goods.

. . . .

(b) The law (including the conflict of laws rules) of the jurisdiction in which the debtor is located governs the perfection and the effect of perfection or non-perfection of the security interest.

. . . .

(d) A debtor shall be deemed located at his place of business if he has one, at his chief executive office if he has more than one place of business, otherwise at his residence.

U.C.C. § 9-103(b), (d) (1994).

[24].      U.C.C. § 9-307(c) (2008).
[25].      U.C.C. § 9-307(d) (2008).
[26].      U.C.C § 9-307(e) (2008).
[27].      U.C.C. § 9-102(a)(70) (2008).
[28].      Once that realization dawns, the attorney who writes opinion letters on the effectiveness of documentation may further realize that he or she must give that opinion under Delaware law.  Attorneys will want to check their malpractice insurance to be sure they are covered if they give an opinion as to the law of a state in which they are not licensed to practice.
[29].      U.C.C. § 9-502 cmt. 4 (2008).
[30].      U.C.C. § 9-502 cmt. 4 (2008).
[31].      U.C.C. § 9-502 cmt. 4 (2008).
[32].      U.C.C. § 1-201(b)(29) (2008) (emphasis added).
[33].      Many casebooks, for example, use Pearson v. Salina Coffee House, Inc., 831 F.2d 1531 (10th Cir. 1987), which is really an easy case because the creditor filed in the trade name.
[34].      U.C.C. § 9-503(a)(1) (2008).
[35].      U.C.C. § 9-503(a)(4)(A) (2008).
[36].      See BARKLEY CLARK, THE LAW OF SECURED TRANSACTIONS UNDER THE UNIFORM COMMERCIAL CODE (2d ed. 1988) ¶ 2.09[1][a]; see also JAMES J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE § 23-12 (6th ed. 2010).
[37].      U.C.C. § 9-506(b) (2008).
[38].      U.C.C. § 9-506(b) (2008).
[39].      U.C.C § 9-502(c) (2008).
[40].      MONT. ADMIN. R. 44.6.201(4)-(6) (2001).  Although each jurisdiction may independently determine its search logic, the filing offices in many states coordinate their efforts through national organizations.  In fact, because it lacks the resources to develop its own system and relies on nationally promulgated models, Montana’s search logic is more typical than its source may suggest.
[41].      Id. at 44.6.201(4)-(5).
[42].      Id. at 44.6.201(6)(a).
[43].      Id. at 44.6.201(6)(b).
[44].      Id. at 44.6.201(6)(c).
[45].      It is curious that our friend in the front row did not come up with a solution to this problem, perhaps because there was no consensus on a fix. See supra note 2.  The proposed revisions to Revised Article 9 give the enacting jurisdiction alternative choices. See U.C.C. § 9-503 (as amended 2010), available at http://www.law.upenn.edu/bll/archives/ulc/ucc9/2010am_approved.pdf.
[46].      The U.C.C. itself provides in section 1-106(1):
Use of Singular and Plural; . . .

In [the Uniform Commercial Code], unless the statutory context otherwise requires:

(1) words in the singular number include the plural, and those in the plural include the singular . . . .

[47].      MONT. ADMIN. R. 44.6.201(6)(d).
[48].      U.C.C. § 9-521(a) (2008).  Comment 2 to section 9-521 describes the form as a “safe harbor.”
[49].      U.C.C. § 9-521(a) (2008).
[50].      See U.C.C. § 9-521(a) (2008).
[51].      See U.C.C. § 9-521 (as amended 2010), available at http://www.law.upenn.edu/bll/archives/ulc/ucc9/2010am_approved.pdf.
[52].      Mellinkoff, supra note 3, at 225-26 (citing by comparison SAMUEL L. CLEMENS, THOSE EXTRAORDINARY TWINS, reprinted in WRITINGS OF MARK TWAIN 205 (Stormfield ed. 1929)).

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