UCC REVISED ARTICLE 9. SECURED TRANSACTIONS
Report and Recommendation of the Connecticut Law Revision Commission
to the Judiciary Committee
of the Connecticut General Assembly
Prepared by David L. Hemond
Chief Attorney
December 21, 2000
UCC REVISED ARTICLE 9. SECURED TRANSACTIONS
Report and Recommendation of the Connecticut Law Revision Commission
to the Judiciary Committee
of the Connecticut General Assembly
The Connecticut Law Revision Commission, at a meeting on March 21, 2000, pursuant to a request of the Cochairs of the Judiciary Committee, undertook a review of the revisions to Article 9, Secured Transactions, of the Uniform Commercial Code that were promulgated by the National Conference of Commissioners on Uniform State Laws at its July 1998 Annual Conference. After review, the Commission voted, at a meeting on December 19, 2000, to recommend enactment of Revised Article 9 in accordance with the attached Commission draft which contains discrete changes to facilitate enactment in Connecticut. We are also forwarding the Official Draft as it was prepared by the National Conference because it contains additional commentary and revision information.
The Commission review was conducted by a Commission subcommittee chaired by Mary Anne O’Neill and including Commission members Robert W. Grant and Joseph J. Selinger. The committee met regularly with a group of advisors to prepare recommendations concerning the proposed revisions. A list of those advisors is attached. The committee reviewed the proposal line by line together with available commentary and nonuniform amendments that have been enacted in other states. The committee found, and the Commission concurs, that Revised Article 9 is a largely uncontroversial extension and clarification of existing law. Because of strong interests in uniformity in this commercial area and because most states are expected to have the act in place as of July 1, 2001, the Commission recommends enactment of Revised Article 9.
In the course of its deliberations, the committee prepared the attached draft adapted for enactment in Connecticut. The draft includes (and indicates by brackets and underlining) necessary amendments to conform the Uniform proposal to existing Connecticut laws and practices. The changes, in particular, reflect filing concerns raised by the Secretary of the State. The draft also includes discrete language changes intended to address concerns raised by our consumer advisor. Article 9 is largely concerned with commercial, not consumer, matters and those changes, which are peripheral to the act, are intended to ensure that commercial policies are not inappropriately applied in consumer contexts that are largely governed by other law.
As noted in the revision commentary to the Official draft, Article 9 provides a comprehensive scheme for the regulation of security interests in personal property and fixtures. That law is complex and intricate. Because the proposed revisions are to existing Article 9, which Connecticut has substantially enacted, the summary of the proposed revision that is set out in the commentary to the Official draft applies to the Connecticut draft except with respect to the limited nonuniform amendments noted below. The introductory commentary to the Official draft provides an overview of the revisions. With respect to proposed revisions to particular sections, resort should be made to the official comments to those sections in the Official draft.
The proposed Connecticut draft includes commentary after each section to explain the Commission’s nonuniform amendments. Those changes can briefly be summarized as follows:
1. Public financing transactions. In accordance with existing Connecticut law, the Commission draft deletes public financing transactions from Article 9. This is a change from the Official draft but not from current law. Concerns were raised by the Office of the Treasurer over language in the Official draft that expanded its scope to include public financing transactions. The Official draft proposal is intended to facilitate codification of Article 9 principles for those transactions. However, the proposed language is controversial and only peripheral to the focus of the act and was deleted to avoid enactment concerns. Enactment of those provisions may be appropriate in a future legislative session.
2. Nonassignment. Existing Connecticut law restricts the assignment of lottery winnings, workers’ compensation benefits, and structured settlement payment rights. Because Article 9 generally prohibits restrictions on assignments, language was added to the draft to protect the existing legislative policy restricting assignment in those specified areas.
3. Uniform Commercial Code Article 2A - Leases. Connecticut is one of only two states that has not enacted Article 2A of the Uniform Commercial Code. Article 2A provides a commercial legal structure for the numerous transactions that create a lease. The proposed Official draft of Revised Article 9 assumes that Article 2A is enacted and references that Article freely. The proposed Connecticut draft deletes the numerous Article 2A references that are in the Official draft because the references do not have a clear meaning in the Connecticut context. While those references must be deleted for enactment of Article 9 in this session, the better solution to this anomaly in the long term may be enactment of Article 2A in a subsequent legislative session.
4. Filing issues. The Official draft recognizes that the law and practice concerning filing varies considerably among the states. The draft therefore provides considerable latitude to accommodate state practices. Existing Connecticut law requires enactment of some nonuniform language to reflect the practice in this state with respect to local and state filings. In particular, changes are made to allow local filing offices to continue to file by "book and page" and to accommodate concerns expressed by the Secretary of the State concerning required forms and a provision for the adoption of regulations. The Connecticut draft also deletes a provision in the Official draft that would require some unspecified government official or agency to report on the operation of the filing office. None of these changes affect core substantive Article 9 issues such as how Article 9 interests are created or what rules govern perfection and priority.
5. Consumer issues. The Official draft contains provisions that ensure that the commercial policies applied by Article 9 do not inappropriately leak over into consumer transaction areas. Those provisions reflect a bargained compromise entered into at the Uniform Laws deliberative sessions. However, they are notable at times for their lack of specificity. For example, section 9-626 of the Official draft sets out rules concerning deficiencies, but explicitly states that those rules do not necessarily apply to consumer transactions. The draft intends "to leave to the court the determination of the proper rules in consumer transactions" and indicates that courts "may continue to apply established approaches". In the Connecticut context, many, but not all, of those consumer transactions will be expressly governed by the Retail Instalment Sales Financing Act, sections 36a-770 et seq. The Commission draft includes language that provides more explicit guidance to the court when it determines the proper rule for such a consumer case.
6. Retention of the policy reflected in existing section 42a-9-209. Existing section 42a-9-209 contains a Connecticut non-uniform amendment to existing Article 9 concerning an agreement for a security in household furniture. It reflects a policy that the Commission determined should be continued. However, because revised Article 9 uses that section number for a provision containing an unrelated subject matter (repealing the section as it applies to securities for household furniture), retaining the policy of old section 42a-9-209 requires reenactment of the provision as a new section. The proposed draft reenacts old section 42a-9-209 as a new bill section 178. The provision should be appropriately codified by the Legislative Commissioners’ Office within revised Article 9, perhaps as a new "section 42a-9-206a" within the subpart concerning effectiveness and attachment. (Because of interests in uniformity, the provision should not be assigned a section number that displaces a uniform provision. That is, this provision should not be assigned the section 42a-9-207 because, within the universe of the Uniform Commercial Code, section 42a-9-207 will be understood to contain the substantive provisions of the Uniform Draft Section 9-207.)
Finally, the Commission acknowledges the difficulties of accessibility that Article 9, and particularly Revised Article 9, presents for a layperson or even an attorney who lacks experience in the field of secured transactions. Unfortunately, the subject matter is inherently complex. However, the Commission’s advisory committee includes a number of attorneys who are highly articulate with respect to the nuances. Commission advisors, not coincidently, provided the faculty for a recent bar association seminar on Revised Article 9. Moreover, at the national level, drafters of the revised act have been active in addressing concerns. Should concerns arise that are not addressed by the material, the Commission can provide expertise as necessary to provide articulate answers.