Prior Uniform Statutory Provision: Sections 13(3), 13(4), Uniform Trust Receipts Act.

Purposes:

1. Subsection (1) sets out the simple formal requisites of a financing statement under this Article. These requirements are: (1) signatures and addresses of both parties; (2) a description of the collateral by type or item. Where the collateral is growing crops or fixtures, the financing statement must also contain a description of the land concerned. Section 9-110 provides that "any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described". Subsection (3) suggests a form which complies with the statutory requirements. A copy of the security agreement may be filed in place of a separate financing statement, if it is signed by both parties and contains the required information.

2. This Section adopts the system of "notice filing" which has proved successful under the Uniform Trust Receipts Act. What is required to be filed is not, as under chattel mortgage and conditional sales acts, the security agreement itself, but only a simple notice which may be filed before the security interest attaches or thereafter. The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs. Section 9-208 provides a statutory procedure under which the secured party, at the debtor's request, may be required to make disclosure. Notice filing has proved to be of great use in financing transactions involving inventory, accounts and chattel paper, since it obviates the necessity of refiling on each of a series of transactions in a continuing arrangement where the collateral changes from day to day. Where other types of collateral are involved, the alternative procedure of filing a signed copy of the security agreement may prove to be the simplest solution.

3. This Section departs from the requirements of many chattel mortgage statutes that the instrument filed be acknowledged or witnessed or accompanied by affidavits of good faith. Those requirements do not seem to have been successful as a deterrent to fraud; their principal effect has been to penalize good faith mortgagees who have inadvertently failed to comply with the statutory niceties. They are here abandoned in the interest of a simplified and workable filing system.

4. Subsection (2) allows the secured party to file a financing statement signed only by himself where the filing is with reference to collateral already subject to a security interest in another jurisdiction when brought into this State or with reference to proceeds when his security interest in the original collateral was perfected. (Section 9-103 states when a financing statement must be filed when collateral is brought into this State; Section 9-306 defines proceeds and states when refiling is necessary to continue a perfected security interest in them.) Section 9-401(3), alternative provision, contains similar permission on removal between counties in this State. The reason for dispensing with the debtor's signature in the two cases covered by subsection (2) and in the case covered by Section 9-401(3), is that the necessity for refiling arises from actions of the debtor (in moving his place of business or residence, or the collateral, or disposing of it), which may have been unauthorized or fraudulent. The secured party should not be penalized for failure to make a timely filing by reason of difficulty in procuring the signature of a possibly reluctant or hostile debtor. Financing statements filed under this subsection must explain the circumstances under which they are filed (e.g., that the collateral was brought here from another state where a security interest attached, or has been moved from one county to another in this state, or, in the case of proceeds, describing the original collateral).

5. Subsection (5) is in line with the policy of this Article to simplify formal requisites and filing requirements and is designed to discourage the fanatical and impossibly refined reading of such statutory requirements in which courts have occasionally indulged themselves. As an example of the sort of reasoning which this subsection rejects, see General Motors Acceptance Corporation v. Haley, 329 Mass. 559, 109 N.E.2d 143 (1952).

Cross References:

Point 1: Section 9-110.

Point 2: Section 9-208.

Point 4: Sections 9-103, 9-306 and 9-401(3).

Definitional Cross References:

"Collateral". Section 9-105.

"Debtor". Section 9-105.

"Goods". Section 9-105.

"Party". Section 1-201.

"Proceeds". Section 9-306.

"Secured party". Section 9-105.

"Security agreement". Section 9-105.

"Security interest". Section 1-201.

"Signed". Section 1-201.

As stated in Senate Standing Committee Report No. 676-78, the following material is added to the official Code Commentary:

Exceptions in Section 9-402 provide for simplified fixture filings for transmitting public utilities. Where the debtor is a transmitting public utility the fixture filing does not have to meet the requirements of subsection (5), including the requirement that it contain a description of the real estate and the name of a record owner or record lessee. It is sufficient if it otherwise meets the requirements of Section 9-402, Subsections (1) and (2).