This Note examines the ruling of the Bankruptcy Appellate Panel (B.A.P.) of the Ninth Circuit in Commercial Money Center.  The panel held that rental payment streams stripped off of a lease should be classified as payment intangibles instead of chattel paper, as had been found by the trial court.  This ruling was significant for the securitization industry because classifying these rental payment streams as payment intangibles meant that the streams automatically perfect under state law.

This removes the obligation of owners of marketable securities consisting of securitized or pooled rental streams to perfect by filing or possession under Article 9 of the Uniform Commercial Code (U.C.C.).  While the ruling was welcomed by participants in the lease-securitization industry, the ruling and its rationale present many problems for those concerned with the secret-lien ramifications of this classification (i.e., the lack of public notice of ownership) or with the consistency of legal doctrine.  This Note argues that the ruling of Commercial Money Center was in error.  A careful examination of the classification scheme of payment intangibles, chattel paper, and accounts in Article 9 of the U.C.C. reveals how each category covers a different bundle of rights.  Thus, a functional rights-based approach to this question strongly compels the conclusion that the rental streams at issue in Commercial Money Center should have been classified as chattel paper or, in the alternative, as accounts.