Priorities in Accounts: The Crazy Quilt of Current Law and a Proposal for Reform

Moe Promisee has a right under a contract to receive monetary payments from Mae Promisor. Moe assigns his right first to Faye and then to Clay. Whom must Mae pay, Faye or Clay? For more than a century, judges have struggled with successive assignments to different persons of the same contract right. These cases which typically involve rights to monetary payments called accounts have generated subtleties of doctrine and disagreements among courts. Today, as a general rule, the Uniform Commercial Code controls these cases. Ambiguities, however, lurk in the code. Cryptic common-law doctrines also continue to govern many successive-assignment problems. As a result, the law of successive-assignment priorities remains fraught with complexity and confusion. Against this backdrop it is surprising that no comprehensive treatment of this subject exists in the modern legal literature. This Article intends to fill this gap in the legal literature. it explores in detail the modern law governing successive account transfers. It then considers broader jurisprudential and economic issues raised by these cases and proposes a new framework for assessing successive-assignment problems. Part II sketches the commercial realities of account transfers. Part III outlines the evolution of the legal principles that govern priorities in successively-assigned contract rights. Part IV then lays out the present-day law of successive-account assignments. In particular, Part IV seeks to impose a structure on this disjointed body of doctrine by describing it in terms of a general rule subject to exceptions. The general rule is that the first assignee to file a U.C.C. financing statement takes priority. The exceptions to this rule, as we shall see, are numerous and complex. In examining these exceptions, Part IV explores important interpretive issues under U.C.C. Section 9-104, 9-301(1)(d), 9-302(1)(e), and 9-312, as well as the proper framing of non-Code law in the many cases to which it continues to apply. Part V steps away from these discrete issues and looks at account priorities with a broader focus. It posits that a unifying theme in this field is judicial protection of the nonprofessional assignee at the expense of banks and other professional financers. Part V defends this orientation as consistent with efficiency and fairness, but also criticizes courts for often pursuing these values in the teeth of clear statutory text. Responding to difficulties highlighted in earlier sections of the Article--as well as the U.C.C. Permanent Editorial Board\u27s recent initiation of a major reevaluation of Article Nine--Part VI offers a program for reform. That program would amend Article Nine to cover all assignments of contractual rights to any form of monetary payment. In addition, it recommends simplifying and clarifying those Code provisions that govern account assignments. Finally, the program proposed here calls for rewriting the Code\u27s perfection and priority rules to legitimize judicial efforts to protect nonprofessional recipients of limited account assignments. Part IV suggests that adopting these reforms would produce a sound, intelligible, and genuinely uniform body of law to cover the problems created by successive assignments