Center for Contract and Economic Organization
The Charles Evans Gerber Transactional Studies Center
Within the academic circles of commercial law, secured credit is about as hot as a topic can get. For a good fifteen years, leading scholars have argued contentiously about the most fundamental questions concerning secured credit: not just about the policies that might justify the law's protection of secured creditors, but more fundamentally about the seemingly obvious question of why businesses and their creditors choose to grant collateral to secure their payment obligations.' The extensive and inconclusive debate in the academic literature has not, however, undermined the confidence in secured credit exhibited by the law-reform institutions of the profession. Rather, The American Law Institute and the National Conference of Commissioners on Uniform State Laws are pressing ahead with a project that has as one of its avowed goals a significant broadening of the scope of secured credit and the rights of secured creditors.2 That approach has broad support from many of the most prominent scholars in the field. Jim White, for example, recently published a clarion call for a broad-ranging extension of the priority rights accorded to creditors that file under Article 9.3
Although the use of collateral in the real-estate context is even more important to the economy than its use in the personal-property context,4 the academic real-estate community has not entered into the debate about the value of the institution of secured credit. The lack of engagement with that debate is particularly surprising because the secured-credit debate has coincided with the ambitious undertaking by The American Law Institute to produce its first Restatement of Mortgages.5 In any event, the end result has been the same as in the secured-credit context. The proposed Restatement of Mortgages reflects the same approach as the revisions to Article 9 of the Uniform Commercial Code: a general confirmation and broadening of the priority of first-in-time consensual secured creditors. 6
Ronald J. Mann,
First Shall Be Last: A Contextual Argument for Abandoning Temporal Rules of Lien Priority,
Tex. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/459