Relates to making certain technical corrections

-makes some necessary technical amendments in several sections of law, -improves certain filing processes under Article 9 of the UCC, which governs security interests in personal property; and -clarifies the applicability of the amendments to Article 9 to transactions which were entered into on or after the effective date of the 2014 law (i.e. December 17, 2014).

SUMMARY and JUSTIFICATION:

Sections 1 through 14 of the bill: these amendments make technical corrections in several state laws by renumbering several cross-references to the Uniform Commercial Code. Chapter 505 of 2014 had renumbered some sections of the UCC. As a result, technical amendments are needed in several other state laws to update and fix these cross-references.

Sections 15 and 16 of the bill: These sections amend Sections 9-406 and 9-408 of the Uniform Commercial Code to resolve an incongruity between these two sections and clarify the law.

Currently, section 9-406(d) allows assignment of a payment intangible or promissory note to secure an obligation, even if such payment intangible or promissory note contains an anti-assignment provision. Current section 9-406(e) specifies that this provision does not apply to certain sales of a payment intangible or a promissory note, although the intent was that the provision should apply to an enforcement sale of the collateral. By way of contrast, current section 9-408 permits a sale of a payment intangible or promissory note notwithstanding an anti-assignment term but does not require the account debtor or maker to enforce or otherwise recognize the buyer. The failure to resolve the conflict between sections 9-406 and 9-408 results in uncertainty as to legal rights in contracts governed by New York law.

The amendments in sections 15 and 16 clarify this matter by keeping in place a policy that has been part of New York's enactment of Article 9 for a half-century while resolving the tension between old and new provisions. The bill clarifies that effectiveness of an anti-assignment term of a payment intangible or promissory note in the

case of an enforcement of the security interest (e.g., sale or retention of the collateral in strict foreclosure) is governed by section 9-406 and not by section 9-408 It should be noted that the new language will not adversely affect the rights of consumers inasmuch as anti-assignment clauses (the subject of sections 9-406 and 9-408) do not exist in mortgage notes and other negotiable instruments, and are not used in consumer debt.

Section 17 of the bill: This section updates the filing rules in Part 5 of Article 9 of the UCC in order to allow use of the new uniform form of initial financing statement and amendment. Section 9-516 is amended so that it no longer requires the debtor's type of organization or jurisdiction on the face of its current financing statement forms.

The Uniform Law Commission had polled offices of the secretaries of state (among other parties) regarding this information. They learned that not only was the information not useful, but that requiring such information had the negative effect of adding cost and delay to the filing process.

Section 18 of the bill: This section updates Section 9-518 of the UCC. It provides that a statement may, but need not, be filed by a secured party of record who believes that an amendment or other record relating to the financing statement of the secured party of record was filed by a person not entitled to do so. Under the current version of New York's 9-518, such statement may be filed only by the debtor. This amendment would allow any aggrieved person to make filings on the record should such person believe an unauthorized filing was made against him or her.

Section 19 of the bill: This section amends Section 9-521 of the UCC to provide for use of the New UCC Financing Statements being used nationwide In addition to the fact the current NY forms have fields for information that is not useful, the New York UCCs do not contain fields for the new information required by the amendments enacted by Chapter 505 of 2014 to be included on the face of the form (e g., indication of collateral being held in a trust or administered by a decedent's personal representative, indication that the financing statement is subject to the transmitting utility rules.) Using this nationwide standard will help simplify the filing process and make it more cost-efficient.

Section 20 of the bill: This section amends the effective date of Chapter 505 of 2014 to clarify the applicability of the 2014 amendments to Article 9 of the UCC as they relate to certain transactions which were entered into after the effective date of such 2014 law (i.e. December 17, 2014).

Chapter 505 did not include a definition for "transaction" to help parties understand when its amendments would apply. Because secured transactions often have a lifespan of many years, transactions entered into before the effective date of new legal rules can continue in existence for many years after that effective date. This bill contains a definition for "transaction" to provide clarification and certainty. It provides that a transaction can include any amendment, modification, supplement or restatement, if such action contains an

express provision that the parties intend it to be a "transaction" under the Chapter 505 amendments. This will allow parties to avail themselves of the benefits of the new legislation immediately.

Legislative history

New bill.

Fiscal implications

None

Effective date

This act shall take effect on the same date as Chapter 505 of 2014 took effect, and shall apply to transactions entered into on or after December 17, 2014