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.230Second, and perhaps more important, there are as discussed below, a numberof plausible substantive rationales for requiring public recordation of securityinterests.It is difficult to imagine that legislatures are able to enact covertrevenue regimes without any supporting principle.These rationales may havemore and less force, but they suggest that raising revenue alone cannot explainwhy public notice is adjunct to certain types of property transfers.2.Rational Apathy Charlie Don t SurfA second argument against notice-filing focuses on the benefit side of theequation, and argues that few actually care about notice-filing especially those22813 ELIZ., CH.5 (1570).229See Mooney, Myth, supra note 68, at 726, n 162 (citing 1 G.GLENN, FRAUDULENTCONVEYANCES AND PREFERENCES §§ 61b, 61c, at 89-93 (rev.ed.1940)).230As discussed above, prior law including earlier iterations of Article 9 -- were generallyviewed as having required more filings in more offices than revised Article 9.This is partlybecause former Article 9 s choice of law rules were organized around the physical location of thedebtor, rather than the state in which the debtor was incorporated.Under former Article 9, asecurity interest could be perfected by filing in [the debtor s principal place of business, whichwas often a difficult factual determination to make].The prudent course of action under prior lawwas therefore to file everywhere the debtor might have been doing business.Revised §§ 9-301 &307, by contrast, provide that, for debtors that are registered organizations corporations, LLCs,etc the only place to file is the state in which the debtor was formed (e.g., the state of formationunder applicable corporate law) Similarly, former law occasionally required that financingstatements be filed not only at the state level, but also by county.See U.C.C.§ 9-401 (2000).C:\inetpub wwwroot\results\4381-text.native.1091721321.doc; 8/5/2004 11:50 AM\Hosted by The Berkeley Electronic Press ExpressO Preprint SeriesThe End of Notice Page 48 of 74historically characterized as its principal beneficiaries: unsecured trade creditors.Except for actual or potential secured creditors those who formally rely on thedebtor s property -- the general population of creditors is apathetic to theinformation provided by the notice-filing system and rationally so.Professor White, for example, has argued that the presumed audience forfinancing-statement information could, in fact, care less:Neither the plumber, carpenter, accountant, Commonwealth Edison nor anyother thousands of general creditors check the files to determine who has afinancing statement on file before it decides whether it will extend unsecuredcredit in the form of the sale of goods or services.In the words of the trade,these are "non- reliance creditors" and are not entitled to protection of a lackof filing because they would not rely on it in any case.231Baird similarly claims that the notice-filing system of Article 9 provides virtuallyno assistance to unsecured creditors.Parties without ownership interests in thedebtor s property rarely check the filing system, and if they do, they rarely learnanything. 232Lynn LoPucki has offered a slightly more systemic gloss, arguing thatunsecured creditors often do little more than cash-flow surf. 233 Cash-flowsurfing happens when unsecured creditors make small, short-term extensions ofcredit, hoping against hope that the debtor will be able to pay the debt from cashflow in the ordinary course.234 These creditors may reason that the debtor s assetsare already fully encumbered, or that they are worth nothing, or that it is simplynot worth making a credit decision based on such complex analyses.Apathy tothe information produced by the system is rational, because learning about what isout there costs more than it s worth.The unsecured creditor expects to be repaidnot because it relies on the value of any particular assets, but as the result of acombination of nonlegal pressures on the debtor. 235 And the involuntary creditor231See White, Wasteful Litigation, at 827.Baird makes a similar claim.See Baird, OstensibleOwnership, supra note 19, at 66-67 ( the Code s notice-filing system addresses principally onlyone kind of ostensible ownership problem the one arising from competition between securedcreditors. ).232See Baird, Ostensible Ownership, supra note 19, at 55.233See Lynn M.LoPucki, The Unsecured Creditor's Bargain, 80 VA.L.REV.1887, 1923 &1938-39 (1994) [hereinafter, LoPucki, Creditor s Bargain].234Id.at 1924.235LoPucki, Creditor s Bargain, supra note [], at 1941.This is not to say that verification has norole in the world of cash-flow surfing.LoPucki argues, however, that monitoring will occur notby virtue of the UCC financing statement system, but instead through informal communicationsabout the debtor s financial condition:[I]f the debtor does not seasonably pay its unsecured creditors, that fact will be transmittedthrough credit reporting and other information channels to the debtor's secured creditors,employees, suppliers, customers and other trading partners.If the reports get bad enough,others will refuse to deal and the debtor will be unable to remain in business.In thisconception, unsecured debt is likely to be short term and restricted to amounts that are smallin relation to the creditor's portfolio.The unsecured creditor monitors the debtor throughC:\inetpub wwwroot\results\4381-text.native.1091721321.doc; 8/5/2004 11:50 AM\http://law.bepress.com/expresso/eps/314 ExpressO Preprint SeriesThe End of Notice Page 49 of 74 the tort claimant or terminated employee is certainly not going to care much,ex ante, about what the public record says about nonpossessory interests in thedebtor s property.Having not chosen to extend credit, involuntary ( non-adjusting ) creditors can hardly be said to have relied on a debtor s assets.236Those who assert a general indifference to filed notice are often quick todistinguish between two hypothetical audiences
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