Revised Article 9 (P.L. 2001, Ch. 117), which became effective July 1, is based upon the "official text" of the statute drafted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws.

All 50 states have adopted revised Article 9 and many have enacted non-uniform provisions to reflect local practice, customs and procedures.  Some states have enacted non-uniform effective dates.  These non-uniform provisions are important to practitioners who conduct multistate transactions as well as those who practice in a particular state.  The non-uniform provisions also are important to the extent they impact the implementing transition rules found in Part 7 of revised Article 9. 

New Jersey recently adopted further revisions in P.L. 2001, Ch. 386, which became effective Jan. 8.  These revisions are intended to enact uniform interim amendments to revised Article 9, to implement technical corrections to the initial statute and to more fully render New Jersey's statute consistent with the "Official Text."

Despite the two-step enactment of revised Article 9, New Jersey's statute continues to contain significant non-uniform provisions and non-uniform conforming revisions to other law.  It is important for New Jersey practitioners to be aware of these provisions.

Noteworthy changes here were made in the basic scope of transactions included and excluded from coverage.  First, New Jersey excludes security interests created by the state, other states, foreign countries or their governmental units.  Second, New Jersey introduces the concept of "bondable transition property" and categorizes it as a type of "account." Bondable transition property is defined by reference to N.J.S.A. 48:3-51 (part of the Public Utility Law) and essentially is a property right (i.e., it consists, inter alia, of the irrevocable right to "charge, collect and receive, and be paid from collections of, transition bond charges in the amount necessary to provide for the full recovery of bondable stranded costs which are determined to be recoverable in a bondable stranded costs rate order").

Conforming changes also are made to N.J.S.A. 48:3-76 to confirm that the validity, perfection or priority of any security interest in bondable transition property under revised Article 9 is recognized by a description that refers to the bondable stranded costs rate order establishing the bondable transition property.  The conforming revisions also mandate sequestration and payment to the secured party of all collections made following default.

Assignments

New Jersey enacted several important changes to the sections relating to restrictions on assignability.  Official Text 9-406(f) provides that laws that (i) prohibit assignments of accounts or chattel paper, (ii) require the consent of a governmental unit or account debtor to such an assignment, or (iii) provide that such an assignment may give rise to a default, breach, right of termination, etc. are generally ineffective.  Official Text 9-408(c) similarly provides that laws that (i) impair the creation, attachment or perfection of a security interest in promissory notes, health care insurance receivables or general intangibles, or (ii) provide that such an assignment, creation, attachment or perfection may give rise to a default, breach, right of termination, etc. are generally ineffective.

New Jersey makes both these rules inapplicable to the following three statutes (to the extent they are inconsistent with either of these above-cited sections): N.J.S.A. 34:15-29 (workers compensation claims and payments); N.J.S.A. 5:9-13 (state lottery winnings); and N.J.S.A. 2A:16-63 et seq. (payments under structured settlement agreements).  The state's revised Article 9 contains a further non-uniform provision that specifies that, except to the extent otherwise provided, 9-406 and 9-408 prevail over any other inconsistent provisions of an existing or future New Jersey statute, rule or regulation unless the provision is contained in a statute, refers expressly to either 9-406 or 9-408, and states that the provision prevails either over 9-406 or 9-408.

Due to the foregoing non-uniform provisions and particularly the cross-reference to other statutes regulating the assignability of claims or rights, the proponents of the technical revisions to revised Article 9 (P.L. 2001, Ch. 386) included an amendment to N.J.S.A. 2A:25-1.  That statute (permitting the assignability of judgments and choses in action arising on contract), which had been construed as barring an assignment of tort claims, was amended to specifically permit the creation of security interests in "commercial tort claims" consistent with revised Article 9 and to render that statute consistent with New Jersey's non-uniform amendments to revised Article 9's rules on assignability.
 

Perfection methods

New Jersey specifies in 9-311(a)(2) that filing a financing statement is not necessary to perfect a security interest in property subject to the motor vehicle certificate of ownership law, the boat ownership certificate act and any successor statutes or laws.

In New Jersey, the requirements that filing offices (i) use a particular form of filing number and (ii) record all filings within two business days after having received the record are inapplicable to recorders of deeds with respect to fixture filings (9-519).  Otherwise, New Jersey law is consistent with the official text.  However, comparable provisions to exclude recorders of deeds from the two-day communication and acknowledgement requirements of 9-523 were not enacted.

New Jersey also chose not to enact Official Text 9-527, which would have required filing offices to periodically report their compliance or non-compliance with the rules governing filing financing statements and the rules governing reports.

New Jersey revised 9-626 by deleting Official Text (e) and amending 9-626(a) to include consumer transactions.  This has the effect of requiring secured parties to prove, in consumer transactions, the reasonableness of all actions taken to enforce and collect upon security interests.  If a secured party fails to meet this burden, the liability of a consumer debtor is limited.  The adoption by New Jersey of a non-uniform rebuttable-presumption rule in consumer transactions is actually consistent with New Jersey case law.

New Jersey's decision to adopt the technical amendments and other revisions found in P.L. 2001, Ch. 386, required the adoption of new 9-710.  This non-uniform section makes the stated amendments effective retroactive to July 1, 2001.  It also provides that action taken between then and Jan. 8 to attach or perfect a security interest (rendered effective by P.L. 2001, Ch. 386) is retroactively effective to the time when taken.  Conversely, action within that time (no longer effective because of P.L. 2001, Ch. 386) may be "cured" by complying action within 60 days of the effective date of P.L. 2001, Ch. 386, except as against a bona fide purchaser for value.

New Jersey's non-uniform revisions to revised Article 9 are significant. They should be considered by practitioners in the context of the expansion of commercial and financial transactions within and beyond New Jersey.  The impact of the cumulative enactment of both uniform and non-uniform revisions to the Uniform Commercial Code in New Jersey will merit further observation.