The Corporate Mortgage Under Article 9 of the Uniform Commercial Code and the New York Solution

A corporate mortgage has been defined as “an indenture intended to convey property, real and personal, tangible and intangible, to a trustee for bondholders, as security for the bonds issued and to be issued thereunder” by a corporation. This financing device, utilized by many large corporate organizations, has grown to be of paramount importance in the field of corporate financing, and the lack of attention given by the Code to the long-term debts of corporations has raised serious questions of filing procedures. Discussion of the novel treatment accorded by New York to the problem of perfecting security interests in corporate mortgages will constitute the main part of this comment. That state’s treatment deserves scrutiny both because of the magnitude of effort expended by New York on the study of the Code before its adoption and because of its traditional role as a commercial and financial leader. The New York statutory provisions relevant to the problems of perfecting the indenture will be reviewed and an attempt will be made to explain their practical effect on mortgages executed subsequent to the Code. The problems associated with the transition to the Code from the conglomerate pre-Code New York lien law for indentures existing at the effective date of the Code will be discussed, and methods concerning the alleviation of these difficulties suggested. However, before dealing with the various ramifications of the New York version, it may prove helpful to explore the broad background of the relationship generally between Article 9 and the corporate mortgage.