This article provides a careful analysis of the proper scope of the term “proceeds” under Section 9-306. Parts II and III develop a coherent conception of the term “proceeds” by focusing upon the proper interpretation of Section 9-306 in its current form. Part II evaluates the passage of title conception of proceeds in light of the 1972 and 1987 amendments to Article 9 and demonstrates that this conception is fundamentally inconsistent with the economic, value-based conception of proceeds that emerges from those amendments. Using this emerging conception of proceeds, which focuses upon the occurrence of an event that exhausts or consumes the collateral's economic value or productive capacity, Part II demonstrates the correct interpretation of Section 9-306(1) in cases involving casualty insurance proceeds, lease rentals, stock dividends, and tort settlements. In Part III, the Article examines the nonexistent collateral problem and demonstrates that it is a formalistic, outmoded concept that both frustrates the ex ante bargain of the reasonable debtor and secured party and fails to give effect to the emerging value-based conception of the term “proceeds.” Part III further demonstrates the correct interpretation of the current Section 9-306(1) in cases involving government agricultural subsidy payments and business interruption insurance payments.
R. Wilson Freyermuth, Rethinking Proceeds: The History, Misinterpretation and Revision of U.C.C. Section 9-306, 69 Tul. L. Rev. 645 (1995)