Castricone, Dena M.

Daly, Michael J.

Pupecki, Stan

DOCS@RWU

Roger Williams University Law ReviewVolume 7 | Issue 2 Article 27Spring 20022001 Survey of Rhode Law: Legislation: BusinessLaw: An Act Relating to the Uniform CommercialCode - Revised Article 9Dena M. CastriconeRoger Williams University School of LawMichael J. DalyRoger Williams University School of LawStan PupeckiRoger Williams University School of LawFollow this and additional works at: http://docs.rwu.edu/rwu_LRThis Survey of Rhode Island Law is brought to you for free and open access by the Journals at DOCS@RWU. It has been accepted for inclusion inRoger Williams University Law Review by an authorized administrator of DOCS@RWU. For more information, please contact mwu@rwu.edu.Recommended CitationCastricone, Dena M.; Daly, Michael J.; and Pupecki, Stan (2002) "2001 Survey of Rhode Law: Legislation: Business Law: An ActRelating to the Uniform Commercial Code - Revised Article 9," Roger Williams University Law Review: Vol. 7: Iss. 2, Article 27.Available at: http://docs.rwu.edu/rwu_LR/vol7/iss2/27SURVEY SECTIONBusiness Law. An Act Relating to the Uniform Commercial Code.On July 1, 2001, the Revised Article 9 became effective in RhodeIsland. The revisions broaden the types of secured transactionscovered, accommodate modem electronic technology, address someof the issues with the previous Article 9 and provide guidance for asmooth transition between the previous and revised articles. Ef-fective July 1, 2001. 2000 R.I. Pub. Laws ch. 420.BACKGROUNDArticle 9 of the Uniform Commercial Code provides a "compre-hensive scheme for the regulation of security interests in personalproperty and fixtures."' In 1990, the American Law Institute andthe National Conference of Commissioners on Uniform State Lawsestablished a committee to review Article 9.2 In 1992, the commit-tee recommended that the article be revised and six years later,the sponsors approved the Revised Article 9.3 All 50 states havesince adopted the Revised Article 9; it became effective in 46states, including Rhode Island on July 1, 2001, in Connecticut onOctober 1, 2001 and in Alabama, Florida and Mississippi on Janu-ary 1, 2002.4 The purpose of this survey piece is to highlight someof the major changes to Article 9. 5HIGHLIGHTED CHANGESScopeThe scope of Article 9 has been expanded to include previouslyexcluded types of transactions. The transactions that have beenadded to coverage include security interests in an agricultural lien;sales of accounts, payment intangibles, 6 or promissory notes; andconsignments. 7 Moreover, Revised Article 9 places limitations onsome of the previous exclusions.8 The new limits are that the ex-1. R.I. Gen. Law § 6A-9-101 cmt 1. (2001)2. Id. § 6A-9-101 cmt. 2.3. Id.4. See www.intercountyclearance.com/whats-new/jurisdictional news.html(last visited April 13, 2002)5. See § 6A-9-101 cmt. 4.6. Id. § 6A-9-102(61) (defining the new term 'payment intangibles' as a typeof general intangible).7. Id. § 6A-9-109(a).8. Id. § 6A-9-109(c), (d).2002] 583584 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 7:403clusion assignment of a deposit account applies only in a consumertransaction; the exclusion of the assignment of interest or claim inan insurance policy does not apply to an assignment by or to ahealth care provider of a health care insurance receivable 9 and anysubsequent right to payment; the exclusion of the assignment ofinterest in tort claims only applies if it is not a commercial tortclaim; and the exclusion for the assignment of lien services andmaterials does not apply to agricultural liens.' 0The expanded definition of "account" also serves to extend thearticle's scope."" "Account" now includes, in addition to its formermeaning, the right to payment for an insurance policy, a secondaryobligation, energy provided, use or hire of vessel under charter orother contract, lottery payments, insurance receivables and theright to payment arising out of the use of credit card. 12FilingThe filing requirements laid out in Article 9 provided criticalinformation to a secured creditor who wished to insure that he orshe will have priority in the debtor's payment obligations. RevisedArticle 9 made changes to rules governing: where to file, how tofile, and exactly what must be included on a filed financing state-ment. The law of the jurisdiction of the debtor's location will gov-em perfection.' 3 The debtor's location is either the individual'sstate of residence or, for a registered organization, 14 the state inwhich the organization was registered or incorporated. 15 Rhode Is-land's centralized filing location continues to be the Secretary ofState's Office.' 69. Id. § 6A-9-102(46) (new definition).10. Id. § 6A-9-109(d).11. See § 6A-9-102(a)(2) (the old definition of account encompassed only theright to payment for the sale or lease of good or services rendered which are notevidence by an instrument or chattel paper).12. Id. Insurance receivables is also a new term meaning "an interest in orclaim under a policy of insurance which is a right of payment of a monetary obliga-tion for health-care goods or services provided." R.I. Gen. Laws § 6A-9-102(46)(2001).13. Id. § 6A-9-501. Formerly, Article 9 provided 3 alternatives for filing: localfiling, central filing or both. Id. at cmt. 2.14. Id. § 6A-9-102(a)(70) (defining the new term "registered organization" as acorporation under the laws of the state in which it was incorporated).15. Id. § 6A-9-307.16. Id. § 6A-9-501.SURVEY SECTIONThe drafters of the revisions recognized the technological ad-vances in business transactions and the increased usage of elec-tronic transactions. In response, a financing statement no longerrequires a signature. 17 Rather, Revised Article 9 requires that thedebtor authorize the filing in an "authenticated record." i8 Thus,the drafters shifted the focus from the actual signature to the au-thorization of filing. Although the filing office may implement cer-tain authentication procedures, authorization is a question for thecourts, not the filing office.The following information must appear on the initial financingstatement: (1) the name of the debtor, (2) the name of the securedparty or its representative, and (3) the collateral covered by thefinancing statement.19 The debtor's name must be identical to thedebtor's name on the public record of the state of organization; atrade name will not suffice. 20 The filing office may refuse to acceptthe financing statement if it is filed in a method not authorized bythe office, if the full filing fee is not tendered, or for lack of informa-tion.21 To be helpful in meeting these requirements, Revised Arti-cle 9 provides "safe harbor" written forms that must be accepted inevery filing office as long as written communication is accepted.22Four forms are provided: (1) the initial financing statement, (2) theinitial financing statement addendum, (3) the amendment, and (4)the amendment addendum. 23Effective Date and Transition PeriodPart Seven of Revised Article 9 provides guidance on the tran-sition between the former and revised articles. The revisions applyto all transactions within its scope entered into or created beforeJuly 1, 2001 if the former Article 9 did not govern those transac-tions.24 In other words, those transactions that are included solelybecause of the newly expanded scope of the article are covered re-gardless of the transaction date. In addition to not being governedunder the former article, the transaction or lien must be validly17. Id. § 6A-9-502 cmt. 3.18. Id. § 6A-9-509.19. Id. § 6A-9-502.20. Id. § 6A-9-503(a)(1), (c).21. Id. § 6A-9-516(b).22. Id. § 6A-9-521 cmt 2.23. Id.24. Id. § 6A-9-702.20021 585586 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 7:403entered into or created and would be subject to Revised Article 9 ifentered into after July 1, 2001, and the rights, duties and interestsflowing from these transactions or liens remain valid after July 1,2001.25If the security interest was perfected under the former articleand would be perfected under Revised Article 9 as well, then thesecurity interest remains perfected. 26 That security interest re-mains perfected for one year after the effective date as a grace pe-riod and is only enforceable thereafter if the Revised Article 9enforcement and attachment requirements are met prior to the ex-piration of the grace period.27 Likewise, the security interest isonly perfected after July 1, 2002 if the Revised Article 9 perfectionrequirements are complied with during that year.28An unperfected security interest prior to the effective date re-mains enforceable for one year after July 1, 2001, and then contin-ues to be enforceable only if the Revised Article 9 enforcement andattachment requirements are satisfied within that year.29 The un-perfected interest becomes perfected in one of two ways: withoutany action if Revised Article 9 perfection requirements were satis-fied prior to July 2002, or upon satisfaction of thoserequirements. 30For action not including a filing, taken prior to the effectivedate that is enforceable after the effective date, the statute pro-vides a one-year grace period for compliance with Revised Article 9requirements. A pre-effective date filing is sufficient to perfect ifRevised Article 9 requirements are satisfied.31 If not, perfectioncontinues until the earlier of (1) the time the financing statementexpired under the law of the jurisdiction in which it was filed or (2)June 30, 2006. A continuation statement is effective for a pre-ef-fective date filed financing statement if the original filing office isthe same office and jurisdiction as required under Revised Article9.3225. Id.26. Id. § 6A-9-703(a).27. Id.28. Id. § 6A-9-704.29. Id.30. Id. § 6A-9-705.31. Id.32. Id. § 6A-9705(d).SURVEY SECTIONIf Revised Article 9 requires a different filing office or jurisdic-tion, then the initial financing statement must be used to continuea pre-effective date filed financing statement, commonly referredto as "in lieu financing statement."33 The debtor need not author-ize this in lieu financing statement.34 The in lieu financing state-ment must indicate certain information regarding the effectivenessof the pre-effective date financing statement.35 This in lieu financ-ing statement may be filed prior to the effective date or at any timeduring the effective period.36 If the statement is filed prior to July1, 2001, it will retain the effectiveness period of the related pre-effective date financing statement.37 If it is filed on or after July 1,2001, the effectiveness period will be calculated using the date thatthe in lieu financing statement was filed. 38Pre-effective date filed financing statements may only beamended if (1) the amendment is filed in the same office as the pre-effective date financing statement, (2) the amendment is filed atthe same time or later than the in lieu financing statement, or (3)the amendment is in the in lieu financing statement.39 The state-ment may be terminated in the office that the pre-effective datefinancing statement was filed unless an in lieu financing state-ment has been filed.40The secured party may file the necessary statement under thispart in order to continue the effectiveness of the original financingstatement filed prior to July 1, 2001.4 1 Because the debtor alreadyauthorized the original financing statement, his or her authoriza-tion is not required. 42As for priority, if priority was established before Revised Arti-cle 9 took effect, then former Article 9 governs priority.43 If a filingoccurred before July 1, 2001 and did not serve to perfect the secur-ity interest under former Article 9 but would under Revised Article33. Id. § 6A-9-706.34. Id. § 6A-9-706(c)(i).35. Id. § 6A-9-706(c)(2).36, Id. § 6A-9-706.37. Id. § 6A-9-706(b)(1).38. Id. § 6A-9-706(b)(2).39. Id. § 6A-9-707.40. Id. § 6A-9-707(e).41. Id. § 6A-9-708.42. Id. at cmt.43. Id. § 6A-9-709(a).2002]588 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 7:4039, then the priority of the security interest is perfected from thetime that Revised Article 9 took effect.44CONCLUSIONThe revisions to Article 9 of the Uniform Commercial Code in-crease the scope of transactions included, accommodate moderntechnology and address some of the obvious problems with the for-mer Article 9. Now that all states, including Rhode Island, haveadopted the revisions, the focus has shifted to a smooth transitionfrom the old to the new.Dena M. CastriconeMichael J. DalyStan Pupecki44. Id. § 6A-9-709(b).

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