Prior Uniform Statutory Provision: Section 5, Uniform Conditional Sales Act; Section 8, Uniform Trust Receipts Act.

Purposes of Changes: Modified to conform to the scheme of this Article.

1. Subsection (1) states the general rule that to perfect a security interest under this Article a financing statement must be filed. Subsections (1)(a) through (1)(f) exempt from the filing requirement the transactions described. Subsection (3) further sets out certain transactions to which the filing provisions of this Article do not apply: these are cases where alternative systems for giving public notice of a security interest are available. Section 9-303 states the time when a security interest is perfected by filing or otherwise. Part 4 of the Article deals with the mechanics of filing: place of filing, form of financing statement and so on.

2. As at common law, there is no requirement of filing when the secured party has possession of the collateral in a pledge transaction (subsection (1)(a)). Section 9-305 should be consulted on what collateral may be pledged and on the requirements of possession.

3. Under this Article, as under the Uniform Trust Receipts Act, filing is not effective to perfect a security interest in instruments. See Section 9-304(1).

4. Where goods subject to a security interest are left in the debtor's possession, the only exceptions from the general filing requirement are those stated in subsections (1)(c) and (1)(d): purchase money security interests in consumer goods and in certain farm equipment, other than fixtures and motor vehicles. In many jurisdictions under prior law security interests in consumer goods under conditional sale or bailment lease have not been subject to filing requirements. Subsections (1)(c) and (1)(d) follow the policy of those jurisdictions. The subsections change prior law in jurisdictions where all conditional sales and bailment leases have been subject to filing requirements.

Although the security interests described in subsections (1)(c) and (1)(d) are perfected without filing, Section 9-307(2) provides that unless a financing statement is filed certain buyers may take free of the security interest even though perfected. See that Section and the Comment thereto.

On filing for security interests in motor vehicles, see subsection (3)(b) of this Section.

5. A financing statement must be filed to perfect a security interest in accounts or contract rights, except for the transactions described in subsection (1)(e). It should be noted that this Article applies to sales of accounts, contract rights or chattel paper as well as to transfers of such intangibles for security (Section 9-102(1)(b)); the filing requirement of this Section applies both to sales and to transfers for security. In this respect this Article follows many of the state statutes regulating assignments of accounts receivable.

Over forty jurisdictions have enacted accounts receivable statutes. About half of these statutes require filing to protect or perfect assignments; of the remainder, one is a so-called "book-marking" statute and the others validate assignments without filing. This Article adopts the filing requirement, on the theory that there is no valid reason why public notice is less appropriate for assignments of accounts and contract rights than for any other type of non-possessory interest. Section 9-305, furthermore, excludes accounts and contract rights from the types of collateral which may be the subject of a possessory security interest:filing is thus the only means of perfection contemplated by this Article.

The purpose of the subsection (1)(e) exemptions is to save from ex post facto invalidation casual or isolated assignments: some accounts receivable statutes have been so broadly drafted that all assignments, whatever their character or purpose, fall within their filing provisions. Under such statutes many assignments which no one would think of filing may be subject to invalidation. The subsection (1)(e) exemptions go to that type of assignment. Any person who regularly takes assignments of any debtor's accounts should file. In this connection Section 9-104(f) which excludes certain transfers of accounts and contract rights from the Article should be consulted.

6. With respect to the subsection (1)(f) exemptions, see the sections referred to and Comments thereto.

7. The following example will explain the operation of subsection (2): Buyer buys goods from seller who retains a security interest in them which he perfects. Seller assigns the perfected security interest to X. The security interest, in X's hands and without further steps on his part, continues perfected against Buyer's transferees and creditors. If, however, the assignment from Seller to X was itself intended for security (or was a sale of accounts, contract rights or chattel paper), X must take whatever steps may be required for perfection in order to be protected against Seller's transferees and creditors.

8. Subsection (3) exempts from the filing provisions of this Article transactions as to which an adequate system of filing, state or federal, has been set up outside this Article and subsection (4) makes clear that when such a system exists perfection of a relevant security interest can be had only through compliance with that system (i.e., filing under this Article is not a permissible alternative).

Examples of the type of federal statute referred to in subsection (3)(a) are the provisions of 17 U.S.C. §§28, 30 (copyrights), 49 U.S.C. §523 (aircraft), 49 U.S.C. §20(c) (railroads). The Assignment of Claims Act of 1940, as amended, provides for notice to contracting and disbursing officers and to sureties on bonds but does not establish a national filing system and therefore is not within the scope of subsection (3)(a). An assignee of a claim against the United States, who must of course comply with the Assignment of Claims Act, must also file under this Article in order to perfect his security interest against creditors and transferees of his assignor.

Some states have enacted central filing statutes with respect to security transactions in kinds of property which are of special importance in the local economy. Subsection (3)(b) adopts such statutes as the appropriate filing system for such property.

In addition to such central filing statutes many states have enacted certificate of title laws covering motor vehicles and the like. If a certificate of title law requires the indication of all security interests on the certificate, subsection (3)(b) exempts transactions covered by the law from the filing requirements of this Article. (Alternative A.) If a certificate of title law requires a certificate to be issued and a notation of all security interests affecting the property can be indicated on the certificate by a public official (even though the law does not require the indication to be made), subsection (3)(b) exempts transactions covered by the law from the filing requirements of this Article (Alternative B).

9. Perfection of a security interest under a state or federal statute of the type referred to in subsection (3) has all the consequences of perfection under the provisions of this Article.

Cross References:

Point 1: Section 9-303 and Part 4.

Point 2: Section 9-305.

Point 3: Section 9-304(1).

Point 4: Section 9-307(2).

Point 5: Sections 9-102(1)(b), 9-104(f) and 9-305.

Point 6: Sections 4-208 and 9-113.

Definitional Cross References:

"Account". Section 9-106.

"Collateral". Section 9-105.

"Consumer goods". Section 9-109.

"Contract right". Section 9-106.

"Creditor". Section 1-201.

"Debtor". Section 9-105.

"Delivery". Section 1-201.

"Document". Section 9-105.

"Equipment". Section 9-109.

"Instrument". Section 9-105.

"Inventory". Section 9-109.

"Proceeds". Section 9-306.

"Purchase". Section 1-201.

"Purchase money security interest". Section 9-107.

"Sale". Sections 2-106 and 9-105.

"Secured party". Section 9-105.

"Security interest". Section 1-201.