Article 9 of the Uniform Commercial Code governs security interests in collateral consisting of personal property to secure payment or performance of an obligation. Most of the types of collateral subject to a security interest are things or property items in which one can have a property interest. The defined terms for the types and subtypes of collateral consisting of deposit accounts, securities accounts, commodity accounts, and commodity contracts, however, are not property items in which any person can have an ownership or security interest. Instead, they are contractual relationships. Designating these contractual relationships as property items a confusion of contract and property concepts creates difficulties and ambiguities in the application of Article 9 property law rules for the creation, perfection, priority, and enforcement of security interests in the rights arising from these relationships. In some cases, this confusion has produced errors in the rules themselves. This article proposes a revision, and pending such revision, a method of interpretation of Article 9 that would allow these provisions to function as intended.

Since its inception, Article 9 has authorized both non-possessory assignment of chattel paper perfected by the filing of a financing statement and a possessory assignment perfected by possession. As a result, tangible chattel paper is “quasi-negotiable” because certain purchasers for value with possession can have priority over previously perfected secured parties. The 2000 revision of Article 9 authorized security agreements evidenced by an electronic record or records and created electronic chattel paper as a new sub-type of collateral. To extend quasi-negotiability to electronic chattel paper, it also introduced the concept of “control” as an analogue to possession of tangible chattel paper. The initial definition of control required, in part, the existence of a “single authoritative copy” which is “unique.” Given that an electronic record may be perfectly replicated, this definition created challenges for achieving this standard, but the chattel paper finance industry has developed methods for complying with this definition. Nevertheless, the requirement for a single and unique authoritative copy is more stringent than necessary for the purpose of the quasi-negotiability of chattel paper and is more consistent with a possessory analogue for electronic negotiable instrument and documents. The 2010 revision to the definition of control introduced a more flexible standard that requires a system that “reliably establishes” the secured party as the assignee. This new definition will permit the development of methods of control that are less complicated than current methods and more consistent with the limited nature and purpose of the quasi-negotiability of chattel paper. The new definition may even permit the development of a system that eschews the possessory analogue and that resembles the non-possessory assignment of intangible receivables like accounts and payment intangibles.

This article responds to a recent critique that the securitization of receivables is a legally shaky financial product that survives only because it is too big to fail. This critique argues that securitization's success in avoiding the costs that the Code imposes on secured credit, including a bankruptcy trustee's ability to use the cash collateral from the receivables, is a type of fraud that hinders or delays the creditors of the originators of receivables. The critique, however, fails. The cases cited for the author's fraud analysis do not support its thesis. Further, the critique fails to demonstrate that securitization's avoidance of the Bankruptcy Tax on secured credit harms the creditors of an originator. The critique also does not refute the strong doctrinal foundation of securitization that combines the form and substance of two long recognized legal devices-(1) a true sale of property to a buyer (2) that is a separate legal entity.

Article 9 is a comprehensive and remarkable statute regulating the granting of a security interest in goods and other collateral owned by a debtor to secure a debt. Article 9 also governs both an assignment of receivables to secure a debt and a sale of the receivables. Unfortunately, Article 9’s treatment of the assignment of receivables has produced a variety of calamities for both the drafters and the users of Article 9. First, Article 9 incorporates an absolute assignment of receivables, which transfers ownership, into a logically incompatible lien statute that inherently assumes that the grantor retains ownership. Second, Article 9 compounds this structural incoherence by defining the transfer of ownership through the use of misleading defined terms of security. Third, Article 9 mistakenly requires the filing of a financing statement to perfect an assignment. This requirement reflects the faulty assumption that the reasons for requiring notice filing to perfect a security interest in goods, which are tangible, apply equally to the assignment of receivables. The filing requirement imposes costs that are not justified by the putative benefits. This Article describes the calamities that these errors have created and makes a general proposal for a new Article 9A that would govern solely the assignment of receivables using a conveyancing paradigm. In addition, this Article examines the costs and benefits of a notice filing system for the assignment of receivables and proposes the abolition of the filing requirement.

The purpose of this article is to show how the Bankruptcy Code authorizes the creation of the trust as a legal person. The filing of a petition under the Bankruptcy Code creates an consisting of enumerated property interests. The Code also provides for the appointment of a trustee-a separate trustee or, in chapter 11 or chapter 12 cases, the debtor in possession-with broad powers to act as the representative of the estate. The Code does not, however, expressly define the status of the estate as a legal entity. Although the Code occasionally speaks of the estate as though it were a legal person, it explicitly defines the estate as a corpus of property interests. Nevertheless, many courts and scholars have characterized the estate as a separate entity or legal person. Other courts and one scholar, however, have rejected the characterization of the estate as a separate entity or legal person. The conflict about the status of the estate is unnecessary. The treatment by courts and scholars of the estate as a separate entity reflects what is implicit in the Code: The Code provides for the creation of a separate entity-the bankruptcy trust-upon the entry of an order for relief. This entity has the essential attributes of an artificial legal person, such as a corporation or a partnership. More particularly, the trust has all of the attributes-and more-of a business trust. American law recognizes the business trust as a legal person. Accordingly, the trust should be recognized as a legal person. Understanding that the trust is a legal person answers important questions. Specifically, the trust is a sufficient federal entity to provide a constitutional basis, as explained by Professor Ralph Brubaker, for giving federal courts jurisdiction over to the same extent that federal courts may constitutionally have jurisdiction over cases involving national banks. This understanding will also bring greater coherence to resolving many other questions. It will focus the court's attention on the most relevant issues and prevent courts from misconstruing the Code. It will also help clarify the confusion of many courts about the status of the debtor in possession as the same entity as the debtor or as a different entity. The debtor in possession is the same person as the debtor, but it serves as, and fully qualifies as, a trustee of the trust.