Connecticut Revisions to the Official Text of Revised Article 9 of the Uniform Commercial Code
| Publication year | 2021 |
| Pages | 294 |
75 CBJ 294. Connecticut revisions to the official text of revised article 9 of the uniform commercial code
Article 9 of the Uniform Commercial Code (the "U.C.C.") governs the manner and method of creating, perfecting, and enforcing security interests in tangible and intangible personal property and fixtures, including the sale of accounts, general intangibles, and chattel paper. It also establishes priority rules intended to resolve conflicts among security interests and other competing claims to such property. In 1990, nearly two decades after Article 9's last comprehensive revision, the Permanent Editorial Board for the U.C.C., with the support of its sponsors, The American Law Institute ("ALI") and the National Conference of Commissioners on Uniform State Laws ("NCCUSL"), commissioned a study to determine the extent to which Article 9 was in need of reform to, among other things, adapt to changes that have occurred in technology and business practices. This study and the resulting revision process culminated in a complete amendment and restatement of Article 9, which was approved by ALI and NCCUSL in 1998 and originally compiled in the 1999 Official Text.(fn1) Revised Article 9 provided for a uniform delayed effective date of July 1, 2001, in order to give each state sufficient time to enact its provisions and therefore avoid the "horrendous complications"(fn2) that could arise from non-uniform adoption.
At the request of the Judiciary Committee of the Connecticut General Assembly, in March of 2000 the Connecticut Law Revision Commission undertook a study of Revised Article 9. The Commission formed an advisory committee, comprised of interested governmental agencies, consumer and business representatives, and experienced attorneys, to review Revised Article 9 and to recommend modifications to the uniform or "official" text to conform to other Connecticut laws and practice and to address concerns raised in the review by the advisory committee. The result of the Commission's effort was a report and proposed text for enactment in Connecticut with commentary titled UCC 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, as supplemented by a memorandum from David L. Hemond to the Judiciary Committee and the Connecticut Law Revision Commission, dated January 11, 2001, setting forth additional recommended changes to Revised Article 9 (collectively, the "CLRC Report").(fn3)
Revised Article 9 was enacted in the State of Connecticut on June 28, 2000 as Public Act No. 01-132, with a non-uniform effective date of October 1, 2001.(fn4) Although uniform in all material respects, Connecticut's version of Revised Article 9 ("CT Revised Article 9") contains non-uniform provisions that were made to reflect local Connecticut laws and practices, as well as last-minute changes proposed by the General Assembly Judiciary Committee as the result of additional comments during the hearing process from the Office of the Connecticut Secretary of the State and others.(fn5) The purpose of this article is to summarize the material non-uniform provisions contained in CT Revised Article 9.(fn6) It is imperative that every lawyer practicing secured transactions law have a thorough understanding of Connecticut's non-uniform provisions and, for that matter, the non-uniform provisions of each other jurisdiction, especially since Revised Article 9's choice of law rules will make it even more likely that an Article 9 transaction will be, in one or more respects, subject to more than one jurisdiction's version of Revised Article 9.(fn7)
I. Non-Uniform Changes in Scope
Revised Article 9 brings within its scope additional types of tangible and intangible personal property and transactions not formerly governed by Article 9. For example, Revised Article 9's expanded scope now covers commercial deposit accounts,(fn8) commercial tort claims, and health-care insurance receivables. In addition, in direct contrast to its exclusion from the scope of former Article 9, Revised Article 9 brought within its scope security interests created by a state government, foreign government or state or foreign governmental unit to the extent not covered by another state statute or foreign government statute.(fn9)
CT Revised Article 9 made several non-uniform changes to Revised Article 9's scope rules. Among the more material changes, Connecticut was one of many states that specifically preserved the governmental debtor exclusion. Thus, "transfers by a government or government subdivision or agency" of Connecticut are excluded from the scope of CT Revised Article 9, whether or not another state statute expressly governs the transaction.(fn10) Connecticut also excluded from the scope of CT Revised Article 9 assignments of workers' compensation benefits governed by Connecticut General Statutes § 31-320(fn11) and security interests in commercial deposit accounts that are payroll accounts or trust accounts and which are titled or otherwise clearly identifiable as such.(fn12) Although the Connecticut Legislature also considered excluding assignments of lottery winnings and structured settlement payment streams from the scope of CT Revised Article 9, it chose instead to address its concerns about these types of transactions through the adoption of non-uniform provisions to the anti-assignment override rules of Revised §§ 9-406 and 9-408, thereby effectively accomplishing a similar result.(fn13)
II. Non-Uniform Changes to Anti-Assignment Rules
The anti-assignment override rules set forth in Revised §§ 9-406 and 9-408 expand and illuminate the circumstances under which contractual or legal restrictions on the ability of a party to an agreement to assign or create a security interest in its rights under that agreement are rendered ineffective. Revised § 9-406 deals primarily with assignments and security interests in payment rights, while § 9-408 deals primarily with assignments and security interests in rights other than payment rights that arise under the contract or other general intangible (including a license, permit, or franchise) itself. Both of these sections attempt to strike a balance between two diametrically opposed principles: the principle of "free assignability" which underscores Revised Article 9's scope and anti-assignment override rules, on the one hand; and the principle that Revised Article 9 ought not to unduly interfere with the bargained-for rights of the non-assigning party or with a rule of law designed to promote a legitimate public policy, on the other.(fn14)
CT Revised Article 9's non-uniform changes to Revised Article 9's anti-assignment override rules reflect the General Assembly's desire not to override statutes designed to protect persons from making misguided or foolhardy decisions regarding assignments of certain types of payment rights. Thus, CT Revised Article 9's anti-assignment rules do not apply to the following:
1. an assignment or transfer of, or creation of a security interest in, a claim or right to receive (a) compensation for injuries or sickness as described in 26 U.S.C. § 104(a)(1) or (2), as amended from time to time;(fn15) or (b) benefits under a special needs trust as described in 42 U.S.C. § 1396p(d)(4), as amended from time to time;(fn16) and
2. an assignment or transfer of, or creation of a security interest in (a) lottery winnings in violation of Conn. Gen. Stat. § 12-831;(fn17) (b) Worker's Compensation Act payments in violation of Conn. Gen. Stat. § 31-320;(fn18) and (c) structured settlement payment streams in violation of Conn. Gen. Stat. § 52-225f;(fn19) each of which statutes currently require a court order permitting any such assignment, transfer or security interest.(fn20)
Connecticut adopted an additional non-uniform provision to Revised § 9-408 which states that the anti-assignment override rules of CT Revised § 9-408(d) will prevail over any anti-assignment term of any existing or future Connecticut statute (other than the statutes referred to in CT Revised § 9-408(f)) unless the statute expressly refers to CT Revised § 9-408(d) and provides that its anti-assignment term prevails over CT Revised § 9-408(d).(fn21)
Finally, in 2002 Connecticut adopted Article 2A of the U.C.C., effective October 1, 2002, as Public Act No. 02-131.(fn22) Unfortunately, this act, in restoring provisions deleted from the earlier enactment of Revised Article 9, amended CT Revised § 9-407(b) and (c) (which relate to invalidation of anti-assignment provisions in leases) to refer to the incorrect subsections of section 2A-303.(fn23) These issues will have to be addressed by the General Assembly in a later session.
III. Non-Uniform Changes to Filing Rules
Connecticut's non-uniform changes to the filing rules of Revised Article 9 were relatively few. The Office of the Secretary...
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