Report on Legal Opinions in Personal Property Secured Transactions
3. The UCC Scope Limitation

It is typically appropriate for the opinion giver to limit the scope of the Security Interest Opinion to personal property subject to Division 9.47 Section 9109(a) specifies the types of security interests48 and liens to which Division 9 applies, and sections 9109(c) and (d) specify transactions, security interests and liens to which Division 9 does not apply.

Depending on the breadth of the collateral grant and other circumstances, it may not be readily apparent to the opinion giver whether collateral exists that is not subject to Division 9. In any event, it is not customary for an opinion giver to cover collateral that is not subject to Division 9 (in the absence of special circumstances warranting the incurrence of the additional cost these special opinions typically entail). To avoid providing a Security Interest Opinion as to such collateral, the customary practice is for the opinion giver to include language in the opinion letter that limits the scope of the Security Interest Opinion to various types of property and transactions to the extent covered by Division 9 (the "UCC Scope Limitation").49

The UCC Scope Limitation excludes: (1) the effects of laws of jurisdictions other than California; (2) laws of California other than Division 9 and other divisions of the Code, such as Division 8 ("Division 8"), except to the extent Division 9 looks to those other divisions for definitions, rules or procedures;50 and (3) collateral not subject to Division 9.

The following is a sample formulation of a UCC Scope Limitation:

We express no opinion as to the [creation or perfection] [creation, perfection or priority] of any security interest except to the extent that Division 9 of the California Uniform Commercial Code governs [either] [any] such matter.51

Endnotes

47 In those instances where an exception to this rule is appropriate, it is customary practice for the opinion recipient to identify one or more particular items of collateral that are not governed by, or excluded from, Division 9 and specifically request an opinion as to such collateral. Back

48 See Cal. Com. Code § 1201(36)(a); UCC §§ 1-201(37), 1-201(b)(37)(revised) (definition of "security interest"). Back

49 With respect to certain types of property (for example, copyrights or titled vehicles), Division 9 may apply as to creation and enforcement of a security interest, but not as to perfection, which may be governed by Federal or other state law. See, e.g., Aerocon Eng'g, Inc. v. Silicon Valley Bank (In re World Auxiliary Power Co.), 303 F.3d 1120 (9th Cir. 2002) (in dicta: the perfection -- but not the creation -- of a security interest in a registered copyright appears to require a filing with the United States Copyright Office under Federal law). The customary practice is to draft a UCC Scope Limitation in a fashion that avoids over-excluding such property -- that is, improperly excluding it from the scope of the opinion for all purposes. Back

50 Limiting the Security Interest Opinion in this fashion eliminates consideration of the more unusual security interests created under Division 2, Cal. Com. Code §§ 2401, 2505, 2711(3), Division 4, Cal. Com. Code § 4210, Division 5, Cal. Com. Code § 5118, and Division 10, Cal. Com. Code § 10508(e).' Back

51 Another sample formulation of the UCC Scope Limitation that has the same meaning is as follows:

The law covered by the security interest opinions set forth in [refer to subject paragraphs] is limited to Division 9 of the California Uniform Commercial Code. Back


Section 4. Attachment Opinions. / Table of Contents