UCC Article 9-303 Analysis and Commentary: Governing Law Regarding the Perfection and Priority for Certificate of Title in Goods
1. Introduction to UCC Article 9-303
UCC Article 9-303 is a provision of Article 9 that specifies which jurisdiction’s law governs the perfection and priority of security interests in goods covered by a certificate of title. It is one of Article 9’s choice-of-law rules, providing clarity when collateral such as vehicles or other titled goods is involved.
In essence, UCC 9-303 anchors the governing law to the jurisdiction that issued the certificate of title. This article analyzes UCC 9-303’s text and its three subsections—(a), (b), and (c). Within Article 9’s broader framework, the default choice-of-law rule for most collateral looks to the law of the debtor’s location. UCC 9-303, by contrast, carves out a targeted exception for goods with certificates of title.
2. Applicability of UCC Article 9-303 (Subsection (a))
Text of Subsection (a): “This section applies to goods covered by a certificate of title, even if there is no other relationship between the jurisdiction under whose certificate of title the goods are covered and the goods or the debtor.”
Subsection (a) establishes the scope of UCC 9-303. It provides that whenever goods are “covered by a certificate of title,” this special choice-of-law rule applies.
The phrasing “even if there is no other relationship” indicates that the mere existence of a certificate of title issued by a jurisdiction is enough to invoke UCC 9-303, regardless of other connections (or lack of connections) between that jurisdiction and the debtor or the goods.
In short, if collateral is titled in State X, then State X’s law will govern perfection and priority for that collateral under UCC 9-303 by virtue of the title alone.
This broad applicability highlights the importance of the certificate of title itself in secured transactions involving titled goods.
A certificate of title (such as for an automobile, boat, or manufactured home) is a state-issued document recording ownership and any liens on the property.
Subsection (a) ensures that if such a title exists for the collateral, UCC 9-303 applies without any additional jurisdictional link. The rationale is to promote certainty: the state that issued the title is the decisive source of law for perfection and priority, so parties can rely on one predictable legal framework tied to that title’s public record.
3. When Goods Are “Covered” by a Certificate of Title (Subsection (b))
Text of Subsection (b): “Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority. Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.”
Subsection (b) defines when goods are considered “covered by” a certificate of title, providing both a starting point and an ending point for that status.
3.1 When Coverage Begins
Goods become covered by a certificate of title at the moment a valid application for the title (with the required fee) is delivered to the appropriate authority (typically the state agency, such as a motor vehicle department, that issues titles).
Notably, the statute does not require the title to be issued; submitting the application and fee is sufficient to trigger coverage. Thus, as soon as the paperwork is submitted, the goods are considered covered under that jurisdiction’s certificate-of-title law.
This prevents any gap in choosing the governing law: once the titling process is initiated in a state, that state’s law immediately applies for purposes of perfection and priority.
3.2 When Coverage Ends
Goods cease to be covered by a certificate of title at the earlier of two events:
- The certificate of title ceases to be effective under the law of the issuing jurisdiction.
- The goods become covered by a certificate of title issued by another jurisdiction.
The first event refers to termination of the original title’s effectiveness under its own state’s law (for example, if the title is canceled or voided due to the goods’ destruction or an administrative action).
The second event covers retitling in a different jurisdiction—once a new title is effectively obtained in another state, the old title’s coverage ends.
Using the “earlier of” standard means whichever of these events happens first will cut off the original coverage, preventing any overlap where two states’ certificates of title might otherwise cover the same goods simultaneously.
By specifying both the commencement and cessation of coverage, subsection (b) creates a clear timeframe during which the special rule of UCC 9-303 applies for a given jurisdiction. At any given moment, one can determine if, and in which jurisdiction, the goods are titled.
For instance, once a title application is filed in State X, State X’s law governs until a new title is obtained in State Y; at that point, State Y’s law takes over and State X’s law no longer applies.
Subsection (b)’s bright-line definition ensures there is no ambiguity about which state’s law governs as the collateral’s titling status changes.
4. Governing Law for Perfection and Priority (Subsection (c))
Text of Subsection (c): “The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.”
Subsection (c) is the core directive of UCC 9-303. It provides that the law of the jurisdiction under whose certificate of title the goods are covered governs three key aspects of the security interest during the period of coverage:
- Perfection: How the security interest is perfected (the required steps to put third parties on notice, such as noting a lien on the title).
- Effect of perfection or nonperfection: The legal consequences of the interest being perfected or not. For example, an unperfected interest may be subordinate to certain creditors or a bankruptcy trustee, whereas a perfected interest has stronger priority rights.
- Priority: The rules for resolving conflicts between competing claims on the same collateral (e.g., determining which interest has priority if two secured parties have interests in the same vehicle).
All of these issues are determined by the law of the state that issued the title. This rule applies from the moment the goods become covered by that title until they cease to be covered, exactly as defined by subsection (b).
In effect, for as long as a particular jurisdiction’s certificate of title is in force for the goods, that jurisdiction’s law exclusively governs how to perfect the security interest and how priorities are resolved.
The rationale behind subsection (c) is practical. For titled goods like vehicles, perfection is typically accomplished through the title system—by having the lien noted on the title—rather than by filing a financing statement. Because the title-issuing state controls that process, it makes sense for its law to dictate the outcome.
Thus, if a secured party follows the titling state’s procedure to perfect (for example, by properly recording its lien on the title), the security interest is perfected and remains perfected as long as that title is in effect.
Conversely, if the secured party fails to perfect under that system, any loss of perfection or priority is determined by that same state’s law.
Implicitly, once the goods are no longer covered by that certificate of title, UCC 9-303 ceases to apply. At that point, either a new jurisdiction’s law will govern (if the goods become covered by a different state’s title) or the general default rules of Article 9 will apply (if no title covers the goods).
In this way, UCC 9-303 serves as a self-contained choice-of-law rule during the life of a given certificate of title, handing off to the appropriate law once that title’s coverage ends.
5. Conclusion
UCC Article 9-303, through its three subsections, provides a clear and predictable choice-of-law framework for security interests in titled goods under Article 9.
Subsection (a) brings the provision into play whenever a certificate of title covers the collateral. Subsection (b) delineates precisely when that coverage begins and ends, defining the period in which the rule operates. Subsection (c) then dictates that the law of the certificate’s jurisdiction governs perfection and priority for that period.
Together, these rules ensure that all parties can readily ascertain which state’s law governs their rights in the collateral at any time. By tying the governing law to the title’s public record, UCC 9-303 promotes certainty and consistency, avoiding conflicts and confusion when titled goods move across state lines or undergo retitling.
Secured parties dealing with vehicles and similar assets need not guess which state’s law applies; they can simply look to the state named on the title for guidance on perfection and priority issues.
