II—
The Axe:
The Positive Version of the Masculine Phallic Metaphor

[O]ne must discard the prejudice that truth must be something tangible.^[10]

A—
Waldron and the Embrace of the Masculine Phallic Metaphor

1—
Defining Property

Jeremy Waldron is one of the few contemporary theorists who have tried to defend the institution of private property from attacks by progressives within the rights tradition without adopting the predominant "right wing" rights position—libertarian absolutism.^[11] In his insightful book The Right to Private Property,^[12] Waldron specifically examines a modified Lockean natural-law liberal philosophy or liberty justification, as well as a Hegelian speculative philosophy or freedom justification.^[13]

Unfortunately, Waldron unwittingly adopts the affirmative masculine phallic metaphor—property as axe. His definition of property reduces property to the single element of possession and envisions possession as the sensuous grasp of a tangible thing. Other rights with respect to other things are not property per se, although they might be analogized to property.

Waldron's analysis is particularly illuminating because, on the one hand, he avoids the error that many defenders of property make in assuming

that the core concept of property is self-evident and not in need of explication.^[14] Rather, he takes seriously the literature questioning the coherence of the concept of property and acknowledges that he cannot purport to justify property without first defining it:

Many writers have argued that it is, in fact, impossible to define private property—that the concept itself defies definition. . . . If private property is indefinable, it cannot serve as a useful concept in political and economic thought: nor can it be a point of interesting debate in political philosophy. Instead of talking about property systems, we should focus perhaps on the detailed rights that particular people have to do certain things with certain objects, rights which vary considerably from case to case, from object to object, and from legal system to legal system.^[15]

On the other hand, Waldron does not fall into the error committed by many leftist critics who adopt the bundle-of-sticks imagery. As we shall see, these critics assume that if a simple, sharp-edged analytic definition of property is not possible, then no definition of property is possible. On this view property ceases to exist as a meaningful legal and economic institution.

A term which cannot be given a watertight definition in analytic jurisprudence may nevertheless be useful and important for social and political theory; we must not assume in advance that the imprecision or indeterminacy which frustrates the legal technician is fatal to the concept in every context in which it is deployed.^[16]

Waldron makes reference to modern and postmodern theories of fuzzy definitions:

I want to consider whether any of the more interesting recent accounts of the nature and meaning of political concepts—such as Wittgenstein's idea of family resemblance, the idea of persuasive definition, the distinction between concept and conception, or the idea of "essential contestability"—casts any light on the question of the definition of private property.^[17]

Waldron argues that "private property is a concept of which many different conceptions are possible, and that in each society the detailed incidents of ownership amount to a particular concrete conception of this abstract concept."^[18] Waldron defines the "concept" of property as follows:

The concept of property is the concept of a system of rules governing access to and control of material resources . Something is to be regarded as a material resource if it is a material object capable of satisfying some human need or want. . . . Scarcity, as philosophers from Hume to Rawls have pointed out, is a presupposition of all sensible talk about property.^[19]

He continues:

The concept of property does not cover all rules governing the use of material resources, only those concerned with their allocation. Otherwise the concept would include almost all general rules of behaviour. . . . As Nozick puts it, the rules of property determine for each object at any time which individuals are entitled to realize which of the constrained set of options socially available with respect to that object at that time.^[20]

I concur with Waldron's conclusions as to both the need for and the possibility of defining property and distinguishing it from other legal relations. In particular, Waldron's approach toward definitions, his recognition that property is and will probably remain a flourishing legal and economic institution in spite of—or because of—its open-ended and fluid nature, and his realization that the institution of private property seems intuitively related to liberty and freedom considerations are much more successful than the analysis offered by critics such as Grey which I discuss

in section III.A. Unfortunately, at the next stage Waldron's analysis devolves into precisely the unsophisticated thinking that Grey and Vandevelde associate with—and criticize as—the rigid, unworkable, traditional model of property. That is, Waldron adopts the paradigm of sensuous grasping as the norm or epitome of property against which all other forms of property must be analogized. Indeed, it is not even clear that he considers legal rights with respect to intangibles to be true property at all.

2—
The Physicality of Property

As we have seen, Waldron first defines property as the regime for the allocation of material resources. That is, he reduces property to the single masculine element of possession—the identification of an object to a subject—and represses the elements of enjoyment and alienation. In turn, he defines the term material resources as those things that are possible objects of human wants and needs. In the following passage, however, he limits material objects to physical things, which he contrasts with noncorporeal things:

I have defined property in terms of material resources, that is, resources like minerals, forests, water, land, as well as manufactured objects of all sorts. But sometimes we talk about objects of property which are not corporeal: intellectual property in ideas and inventions, reputations, stocks and shares, choses in action, even positions of employment. . . . This proliferation of different kinds of property object is one of the main reasons why jurists have despaired of giving a precise definition of ownership. I think there are good reasons for discussing property in material resources first before grappling with the complexities of incorporeal property.^[21]

Note that Waldron has already taken an unacknowledged step toward the identification of property with physicality that will color the rest of his argument. He defines human wants and needs, and therefore property, in terms of purely animal satisfaction of physical limitations. This is an odd choice from a philosopher like Waldron who wishes to explore justifications of property from a Lockean and a Hegelian perspective. Neither Locke nor Hegel justifies property in terms of the satisfaction of animalistic physical needs. Rather, both justify property by reference to the most sublime and abstract notions of what makes humans truly human—liberty and freedom, respectively.

Waldron locates property in the uninterpreted, preimaginary, prelinguistic realm of the real in which humans experience "need." But, as we

have seen, property does not belong in the animalistic, physical realm we identify with the real, or the imagistic realm of the imaginary, in which Waldron immures it. Property is the object of human desire . Waldron, however, presumes that property relates to physical want—what Lacan calls "needs." He wants to find an object in the imaginary to take the place of the objet petit a that he can identify with some physical object to stand in for the symbolically prohibited real object of desire and function as the cause of desire. Consequently, Waldron wants to presume that property is originally a physical relationship.

This may explain why Waldron cannot—as he refreshingly admits^[22] —follow Hegel's argument as to the necessary role of property in the development of human personhood. Hegelian property has nothing to do with physical requirements.^[23] As I have discussed, property is the means by which the abstract person as self-consciousness attains subjectivity. This purely logical construct does not yet even have a body, let alone physical needs.

In other words, Waldron makes precisely the phallic metaphoric conflation that Lacan locates as the identification of gender roles—or sexuated positions—with anatomy. Waldron conflates the Phallic with the phallic and desire with need in an imaginary attempt to collapse the symbolic and the real.

3—
Waldron's State of Nature

Waldron defends his emphasis on corporeal objects by an appeal to something like a state of nature. Waldron argues:

First, we should recall that the question of how material resources are to be controlled and their use allocated is one that arises in every society. . . . The question of rights in relation to in corporeal objects cannot be regarded

as primal and universal in the same way. In some societies, we may speculate, the question does not arise at all either because incorporeals do not figure in their ontology or, if they do, because human relations with them are not conceived in terms of access and control. That is a point about incorporeals in general. Turning to the incorporeal objects we are interested in, it is clear that questions about patents, reputations, positions of employment, etc. are far from being universal questions that confront every society. On the contrary, one suspects that these questions arise for us only because other and more elementary questions (including questions about the allocation of material objects) have been settled in certain complex ways.^[24]

In other words, Waldron tries to defend his analysis by hypothesizing an anthropology of societies without incorporeals.

Of course, liberal philosophers, including Locke, have traditionally started their analysis from a hypothetical state of nature. At first blush, therefore, Waldron's approach might seem worthwhile for the consideration of a Lockean natural-rights justification of property. On further reflection, however, Waldron's approach is inappropriate to an analysis of liberal philosophy. The state of nature posited by liberals such as Locke presupposes pre-social individuals. Waldron starts with a hypothesized second stage of human development in which social individuals are already living in societies. An analysis of property as it might exist in even such a primitive society is irrelevant to the Lockean search for a pre-social natural right of property.

More important, despite Waldron's assertions to the contrary, I believe that it is not possible to hypothesize a society of entities identifiable as human beings in which incorporeal property—such as status, religious objects, artistic creations, crafts, objects of beautification, and other symbolic and imaginary objects—does not play a central role. Creatures living together solely within the realm of physical needs and wants are not human subjects but only animals living in packs. The human subject is the speaking subject of language in the symbolic order. I can, on the other hand, hypothesize societies of human beings where incorporeals are the primary source of property. For example, such a society might exist on a hypothesized tropical island with abundant fruit, vegetables, water, and space obviating scarcity for basic human needs and wants. That is to say, Waldron believes that tangible property is more fundamental to human personality than incorporeal property. I argue that the opposite is true.

Waldron's approach poses even more difficulty when we move to the considerations of actual "primitive" or tribal societies. I am not an anthropologist, so I am wary of making empirical claims, but I nevertheless believe that no contemporary society exists solely in the world of physical needs without rich and complex symbolic objects of desire.^[25]

In the passage quoted above, Waldron tries to suggest that those primitive societies that do have symbolic objects—such as religious objects or status—do not allocate these objects through a recognizable property regime. This objection fails for at least two reasons.

First, Waldron's own definition of property—a regime of access and control of scarce resources—would apply on its face equally to incorporeals and corporeals. Even if we are squeamish about speaking of religious objects and worship in terms of property, any society that recognizes a priesthood with special access and passage to the divine, that recognizes the efficacy of ritual or taboo, or that requires initiation into religious mysteries or status—such as manhood—subjects incorporeals to a regime of access and control of the objects of human wants. This is Waldron's definition of property. Indeed, in his seminal anthropological study of archaic property relations, Marcel Mauss emphasized that in so-called primitive or premarket societies property, law, family, and religion were inextricably interconnected.^[26]

In contradistinction, the two philosophies on which Waldron supposedly relies—Hegelianism and Lockean liberalism—do not flinch from

identifying religion with property. Hegel expressly recognized that our beliefs, religious positions, and liturgical objects are every bit as much external symbolic objects of desire as food and clothing. Similarly, as I shall discuss later, the Framers of the U.S. Constitution, who were, of course, deeply influenced by Lockean liberalism, were not shy about analyzing religion in terms of property. They sought to justify constitutional freedoms of speech and religion precisely on the grounds that men have a natural property right in their opinions and beliefs.

Second, if Waldron wishes to assert that primitive regimes of access to religious or other symbolic objects significantly differ from the type of access and control that we associate with property, he has the burden of articulating that difference. Waldron recognizes that his stated project of justifying property requires that he be able to define property and distinguish it from other interests, and he starts from the proposition that a philosophic project requires careful definition. If he cannot identify the difference between the regime of access to religious and status objects and other regimes, his attempted definition of property fails on his own terms.

Most important, there is a practical problem with Waldron's specific choice of the limited concept of property that serves as the starting point for his analysis. When one chooses to argue from a simple hypothetical, the ultimate issue is not whether there is any empirical society that matches the hypothetical. Rather, the question is whether the hypothetical simplifies and epitomizes fundamental aspects of our society so as to serve as a useful analytical model. Indeed, Waldron is very sensitive to the idea that property exists not merely as an abstract philosophical concept but as a fundamental legal, economic, political, and social institution in our society. Unfortunately, I believe that Waldron's hypothetical is so alien as to be misleading.

As we have seen, Waldron has reduced the concepts of material resources and human wants to what I have referred to as seemingly real needs. The problem with this should be obvious. By reducing these concepts in this fashion, he has excluded from his starting analysis of property all interests beyond those necessary for subsistence. As a result, all property interests in the symbolic economy—including incorporeals and

luxury goods defined broadly as anything above the satisfaction of animal need—have already been identified as problematic. It is possible to take the position that no institution of property can be philosophically justified beyond the subsistence level.^[27] By definition, that position would always lead to the conclusion that the property regime of a relatively wealthy, nonsubsistence economy, such as contemporary American society, could never be justified. Waldron's goal, however, is not to take the radical neo-Proudhonian or Marxian position that property is theft. He wishes to justify at least a limited property regime in a modern society. His choice as a starting point, though, seems antithetical to his purpose.

4—
Waldron's Denial of Incorporeality

a—
Need or Desire?

In his analysis of property, Waldron's rhetoric quickly falls into the Phallic -phallic confusion of the physicalist metaphor for property. Waldron states, for example, that "it is often illuminating to characterize the solutions [to questions concerning the allocation of incorporeals] in terms which bring out analogies with the way in which questions about property have been answered."^[28] Waldron continues:

For example, once it is clear that individuals have rights not to be defamed, it may be helpful to describe that situation by drawing a parallel between the idea of owning a material object and the idea of having exclusive rights in a thing called one's "reputation." Such talk may take on a life of its own so that it becomes difficult to discuss the law of defamation except by using this analogy with property.^[29]

Let us recapitulate Waldron's reasoning. First, he argues that property is a regime relating to the access and control of the objects of human wants and needs. Insofar as this definition refers to "wants," one does not necessarily have to limit property to the allocation of physical things. The colloquial term "want" could be read expansively to include the technical psychoanalytical concept of desire. This would make the theory con-

sistent with the Hegelian-Lacanian concepts of objects of property as potentially being anything external to abstract personality and of property as the regime of intersubjective exchange of the object of desire.

Waldron rejects this interpretation in his second move. Although he purports merely to restate this definition, he in fact changes it by limiting the term "want" to the Lacanian concept of need for physical objects. That is, he tries to move property out of the symbolic regime of law, into the preconscious, prelinguistic realm of the real.

Waldron's third move is to argue that by analogy we can apply to incorporeal objects legal principles developed by considering corporeal objects. In his fourth and final move, Waldron comes full circle to Grey's denial of noncorporeal property. Only corporeal object relations are property relations. Waldron no longer purports to apply principles developed in connection with corporeal objects by analogy to develop the property law of noncorporeals. Rather, he purports to apply property law concepts—which by implicit definition relate only to corporeal objects—by analogy in order to develop a new law of noncorporeal object relations.

Waldron continues his argument by assertorially denying the noncorporeal nature of the objects of legal relations that are traditionally considered to epitomize property. It has often been noted that the most archetypical type of property—real property—is not a right to soil or other physical things but to estates in land. Real property is not real in the Lacanian sense.^[30]

Waldron attempts to counter this view:

We might accept the argument but insist that spatial regions can still be regarded as material resources. Although they differ ontologically from cars and rocks they also seem to be in quite a different category from the complexes of rights that constitute familiar incorporeals—patents, reputations, etc. It is philosophically naive to think that the fact that we have to regard regions as property objects adds anything to the case for regarding, say, choses in action in that way. The second response is more subtle. We may concede that land, as conceived in law, is too abstract to be described as a material resource. But we may still insist that the primary objects of real

property are the actual material resources like arable soil and solid surfaces which are located in the regions in question. Until recently, these resources have been effectively immovable and so there has been no reason to distinguish "land as material" from "land as site." But developments like modern earth-moving and high-rise building necessitate a more complex and sophisticated packaging of rights over these resources. Thus the concept of land as site has now had to be detached from its association with immovable resources and employed on its own as an abstract idea for characterizing these more complicated packages of rights. Still, in the last analysis, the system of property in land is a set of rules about material resources and nothing more.^[31]

These arguments evidence Waldron's deep ambivalence concerning corporeality and property. He provides these arguments to support his assertion that, first, we should start by analyzing corporeal objects because they are more basic and, second, that real property interests are corporeal. The statement just quoted, however, seems to be an unacknowledged shift in position. After saying that he will start with the property of material objects because they are most basic, he makes an implicit admission that even though the most basic property rights concern realty, and realty is not a physical object, he finds it useful to analogize land to physical objects. Because it is convenient to think of realty interests as physical objects, we will say that realty interests are physical objects without considering whether or not this is actually the case. In other words, Waldron all but admits that he starts with material objects not because they are the most basic objects of property but because they seem simpler to think about.

b—
Waldron's Empirical Arguments for the Phallic Metaphor

Waldron wants to suggest that only modern technology has made the identification of realty interests with the underlying land problematic. I question both the historical and empirical accuracy of his statement.

As any first-year law student knows, the concept of realty as a specific plot of land occupied and exploited by a single owner is a relatively modern development in Anglo-American culture. Historically, real property consisted of the system of estates.^[32] Estates did not consist merely in the

right to occupy, farm, mine, or otherwise physically exploit specific pieces of realty; they included a complex network of rights, responsibilities, and status. The estates granted to nobility, for example, were often tied to a title and were conditioned on the obligation to provide their liege with the military service (or its financial equivalent) of a specified number of men for a specified number of days. Numerous persons held different property rights with respect to a given piece of realty. Although some of these were merely temporal divisions of the right to occupy the land—such as life estates, reversions, and so on—many others were not. Not only social status but also what we would call governmental and ecclesiastical positions and functions were tied to estates. Other real property interests included, among others, banalities —which included the right to operate certain "utilities" in a village such as a mill, oil press, or bake oven located in a village—and advowsons —the right to name clerics to a specific church and income.^[33] Indeed, the traditional dichotomy between real and personal property may originally have been in large part jurisdictional rather than substantive. Real property rights referred not to property interests relating to land per se but to those causes of action for specific relief that could be brought in the king's court.^[34]

Although many of these medieval estates exist only as vestigial organs in late-twentieth-century America, other partial estates have taken their place. Let us look at a very simple example of residential real estate in New York City—my apartment. A corporation named Hudson Mews Apart-

ment Corporation owns the equity in the building and land where I live. A bank holds a mortgage on the building granted by the corporation. Various parties including Time-Warner Cable Television, Atlantic Bell, ConEdison, and the U.S. Postal Service have easements to enter and keep objects—such as coaxial cables and telephone and power lines—on the premises. The corporation owns rights of access to hook up to the water mains and pipelines that run under the street in front of the building. The use of the land and building is subject to extensive regulation by the City and State of New York. As the building is located in an unusual (for Manhattan) location behind a private courtyard, the corporation also owns a right-of-way across a narrow strip of land—owned in fee by someone else—which separates our garden from the street. I, as tenant in the entirety with my husband, own the equity in 625 common shares of the corporation, and we are lessees of a proprietary lease granted by the corporation for the apartment in which I live. A savings and loan association owns an Article 9 security interest in the shares and the lease. Although the terms of my lease are coterminous with my ownership of the shares, both my occupancy of the lease and my ownership of the shares are subject to my performance of certain obligations under the bylaws of the corporation—including paying an amount equivalent to my pro rata share of the corporation's mortgage debt and operating expenses—and under the terms of the agreement with my S and L. The corporation also has a security interest in my rights to secure my obligations and an intercreditor agreement with my S and L governing its respective property rights as a secured creditor. My right to alienate my shares and my lease is restricted by the terms of the bylaws of the cor-

poration and my security agreement with the S and L. Although shareholders occupy most of the other apartments in my building—sometimes individually and sometimes through various forms of joint tenancy—some shareholders sublet their apartments to unrelated tenants. The corporation has granted the shareholders and lessees limited rights to use the common areas of the building and the garden, as well as the right-of-way. Each tenant has the exclusive privilege to use a portion of the basement for storage. The corporation leases the basement apartment to our superintendent, whose lease is coterminous with his employment, and so on.

Commenting on modern-day estates in land, Waldron ends his argument with the following non sequitur:

Thus, the concept of land as site has now had to be detached from its association with immovable resources and employed on its own as an abstract idea for characterizing these more complicated packages of rights. Still, in the last analysis, the system of property in land is a set of rules about material resources and nothing more.^[35]

Thus, Waldron would conclude that ultimately all the interests concerning my apartment building are concerned with "material resources" in his definition of physical things. He might try to argue that my ownership interest primarily concerns my sensuous exploitation of physical walls, floors, ceilings, fixtures, and so on. But the interests of the financial institutions, the telephone company, the cable TV company, the electric company, the postal service, the laundry company, and Sal the Super are not primarily related to the physical location. Rather, they are rights to receive income and are not, as Waldron suggests, substantially different from the rights to income from the exploitation of any other form of noncorporeal property. Moreover, even my apartment's value to me is not primarily based on my physical needs. The value consists of a combination of its objective exchange value—the market price—and its subjective use value to me. The use value relates to a variety of symbolic and imaginary concerns, as well as my real needs. Examples include the apartment's physical attractiveness, its relative quietness, its proximity to both my office and a wide variety of restaurants and entertainment, the artsy population of the neighborhood, and so on. Indeed, when one compares the cramped quarters in which we New Yorkers tend to live with the housing occupied by people of comparable economic resources in other parts of the

country, it is obvious that we value our property despite its failure to meet our real physical wants.

Waldron admits that if ownership is defined in terms of wealth, then

we will certainly have to conjure up incorporeal things to correspond to the complex legal relations that in fact define their economic position. But if we say instead that property is a matter of rules about access to and control of material resources, but not necessarily about private ownership, then we may still say that a man's wealth is constituted for the most part by his property relations. He may not be the owner of very many resources; but the shares he holds, the funds he has claims on, and the options and goodwill he has acquired, together define his position so far as access and control of material resources is concerned.^[36]

Once again, Waldron distinguishes between relations concerning noncorporeals and "property"—that is, access to material (i.e., physical) resources. The only true property is what he sees and holds. His argument seems to be based on the agrarian myth that all wealth ultimately comes down to physical things—the land, gold, and so on. Everything else is merely an indirect interest in the physical. To Waldron, all our creations—art, music, medicine, technology, knowledge—ultimately relate to satisfaction of our physical, animal needs and wants. Like the infant, we remain preconscious in the domain of the real.

But even if one accepts Waldron's assertions as to the source of wealth, it does not follow from this that property relations are primarily or even archetypically relations affecting the access to and control of physical things. His very discussion indicates that access to and control of wealth—even if defined narrowly as physical things—are legal, symbolic relations, not the mere immediate sensuous contact with, and physical exploitation of, tangible things. Property, as a legal relation, is the way we as human beings move away from mere sensuous experience of the outside world to symbolic and social relations among human beings with respect to the outside world.

Indeed, as human beings, even our needs are not purely animalistic or natural. In the words of Renata Salecl:

For Lacan the concept of need is linked to the natural or biological requirements of human beings (food, for example). But for human beings it is essential that these needs are never manifest as purely natural needs. Needs are always defined by a symbolic context: if we are hungry, for ex-

ample, we do not simply grab the first available food, but rather we think about what we shall eat and then prepare food in a special way.

When put into words, a need becomes articulated in the symbolic order. . . . Desire arises as the excess of demand over need, as something in every demand that cannot be reduced to a need.^[37]

When I eat food, my property in the food is not the animal act of consumption and digestion but the legal recognition of my right to possess and use or alienate the food. In our society, property rights are these indirect, mediated relations among people through our relationship with the external world. It is meaningless to speak of property without speaking of our relation to these noncorporeal things, even if they ultimately indirectly lead to the access to and control of corporeal things. And yet, it is impossible to do so through the positive masculine phallic metaphor that Waldron unwittingly adopts.

B—
Some Realism about Legal Surrealism:
The Positive Phallic Metaphor and Ostensible Ownership

1—
Grasping at Straws

Much of commercial law doctrine—the private law of personal property—is firmly in the grasp of the masculine phallic metaphor of property as axe. The legal concept of possession is conflated with the sensuous experience of grasping a physical thing in one's fist. This metaphor is merely inept for the analysis of noncustodial property interests in tangible chattels which, at least theoretically, could be grasped. It is bizarre when applied to the property law of intangibles which is an increasingly important subject of commercial law. Rather than being simple and intuitive as its proponents claim, the metaphor of sensuous grasping can only be maintained through increasingly elaborate auxiliary metaphors and analogies. If legal realism was an attempt to make commercial law more nearly reflect actual economic practice, then the phallic metaphor is legal surrealism.

In this section, I explore the pernicious use of the physical metaphor in commercial law scholarship and doctrine with particular emphasis on the law of perfection of noncustodial security interests and security interests in intangible property. I will concentrate on the most extreme and

surrealistic example of the affirmative version of the physical paradigm in commercial law—the doctrine of "ostensible ownership." To the proponents of this doctrine, property should not merely be grasped, it must be wielded in the sense of being displayed for all to see. Not only does the sensuous grasp of a physical thing erect a legal presumption that the grasper is the owner, but property interests which do not, or cannot, take the form of sensuous grasping—such as when the object of the property interest is itself intangible—are deemed to be so problematic as to be presumptively fraudulent unless "cured." I will show that by enabling us to get beyond the masculine metaphor, the Hegelian theory of property offers a more satisfactory account of existing American property law and can serve as a paradigm for critiquing and revising existing law.

2—
Ostensible Ownership

a—
Introduction

The traditional doctrine of ostensible ownership holds that creditors assume that property "held" by another person actually belongs to that person. In other words, this doctrine posits that the archetypical form of ownership is immediate physical contact with, and custody of, a visible and tangible object. Like Waldron, proponents of this doctrine implicitly reduce property to the single masculine element of possession. I take this imagery to its logical extreme and call it "property as sensuous grasp." Property interests that cannot be so reduced—either because the interest is nonpossessory or because the object of the property interest is itself intangible—are considered "problems" that need to be explained. In other words, this doctrine holds that reasonable creditors presume that the person in physical custody of a tangible thing is ostensibly the owner free and clear of any competing claims. Consequently, in order to prevent actual or constructive fraud on creditors, all noncustodial property interests (such as hypothecations) should be "perfected."^[38] "Possession," in the sense of immediate physical custody or sensuous grasp

by the secured party, is the preferred mode of perfection because it supposedly eliminates the ostensible-ownership problems with respect to the debtor's creditors.^[39] Hypothecations of most forms of personalty are governed by Article 9 of the Uniform Commercial Code (the "U.C.C."). Article 9's primary alternate mode of perfection by filing is permitted as a substitute—a form of fictive custody—in those situations where custody is impossible or impractical.^[40] This notion is unquestioningly adopted by a large percentage of the academy and the courts—a computer search will produce literally dozens of articles and cases which parrot it as dogma.

The high priests of ostensible ownership are Douglas Baird and Thomas Jackson.^[41] Starting with their 1981 article, Possession and Owner -

ship: An Examination of the Scope of Article 9 ,^[42] and continuing up through Baird's Security Interests Reconsidered ,^[43] they have taken the doctrine of "ostensible ownership" to its logical extreme and beyond.^[44] As described by Baird and Jackson:

Since Twyne's Case , . . . possession has been viewed as the best available source of information concerning "ownership" of most types of personal property. Separation of ownership and possession has been viewed as a source of mischief toward third parties, and for that reason as fraudulent.^[45]

They identify a negative pregnant in the traditional assertion that physical custody implies ownership. They infer from this that lack of physical custody implies no ownership. That is, the doctrine holds that the archetype of property is the sole element of possession reduced to the specific example of physical custody—an immediate, binary relation of subject to object. As this is the masculine strategy of denial, all attempts to complicate this simplistic account by revealing the mediated nature of noncustodial property interests must be repressed. This is why such interests are declared constructively fraudulent and voidable unless they can somehow be restated within the metaphoric imagery of the binary archetype.

Proponents try to justify this doctrine with a combination of ethical and economic grounds.^[46] Both these justifications are based on the unexamined and unverifiable empirical presumption that reasonable creditors assume (absent actual notice to the contrary) that all assets in a debtor's custody are unencumbered. This presumption is supposed to be bolstered by a historical analysis which purports to show that American

law has traditionally held that noncustodial property interests are presumptively voidable on the grounds of constructive fraud. Baird and Jackson do not merely argue that this historical account explains the existing positive law of perfection of security interests. Rather they believe that rationality itself insists upon the doctrine of ostensible ownership. It, therefore, should be unloosed from the confines of its traditional jurisdiction. Accordingly, not merely noncustodial security interests but all noncustodial property interests should be subjected to a perfection regime.^[47] That is, although they purport to justify ostensible-ownership doctrine in part by historical precedent, they conclude by arguing that we should adopt and expand the doctrine despite historical precedent to the contrary.

Opponents of ostensible-ownership theory have argued for years—persuasively in my opinion—that there is strong empirical evidence that, whether or not its basic underlying assumptions were ever justified, they are now obsolete.^[48] In our modern economy, property interests commonly, or even typically, are not accompanied by physical custody of tangible objects, and the persons in custody of the objects of property are commonly not the owners. An excellent example of this, which I shall discuss later in this section, is one of the most important categories of personal property in the modern economy—investment securities (i.e., stocks and bonds). The vast majority of publicly traded securities are no

longer evidenced by physical certificates held by the owners but are held indirectly through tiers of intermediaries in the form of electronic book-keeping entries. Consequently, the marketplace is fully aware that physical custody standing by itself has no evidentiary value.^[49] In other words, creditors do not have to undertake expensive investigation to learn that encumbrances exist. They can assume, based on empirical data concerning debtors on the whole, that they do.^[50]

My main argument against Baird and Jackson's theory is not, however, based on empirical claims or historical interpretation.^[51] Rather, my complaint is that they attempt not only to analyze current law but also to make policy recommendations for future law on the basis of unprovable assertions of accidental and contingent empirical facts rather than a consideration of the logical functions of property.

b—
Custody as Evidence of Ownership

Baird and Jackson assert:

Possession of personal property is the best evidence of its ownership. The law of secured transactions has ordered itself around this principle for nearly four hundred years. . . . The drafters of the [Uniform Commercial] Code did not go far enough either in abolishing metaphysical and unobservable

distinctions based on concepts such as "title" or in adopting the more concrete concept of possession as their benchmark.^[52]

This is one of the clearest statements of property as sensuous grasping of physical things in contemporary legal scholarship. Those legal relationships which are not physically observable are slandered as mere "metaphysics." Their phrase echoes Karl Llewellyn's embrace of the physical metaphor in the Official Comment to U.C.C. § 2-101, which states that under the law of sales

[t]he legal consequences are stated as following directly from the contract and action taken under it without resorting to the idea of when property or title passed or was to pass as being the determining factor. The purpose is to avoid making practical issues between practical men turn upon the location of an intangible something the passing of which no man can prove by evidence and to substitute for such abstractions proof of words and actions of a tangible character.

As Llewellyn insisted, practical men need tangible things. Baird and Jackson seem never to use the word "title" without their intended pejorative, "metaphysical." Presumably, by "metaphysical" they intend connotations such as unreal, fictional, imperceptible, invisible, intangible, inaudible, too abstract, excessively subtle, "airy-fairy," supernatural, ambiguous, uncertain, and so on. Certainly it is not serious enough (or, dare I say, too feminine?) for real men who are only happy when grasping their tangible things. But, in context, Baird and Jackson use the term to mean the legal (symbolic) as opposed to that which physically exists (which we locate in the real).^[53] In other words, they have inadvertently limited the word "metaphysical" to a simpleminded, folk-etymological meaning—that which is other than the physical—and imply that only the physical is actual. This precisely reflects our psychoanalytic urge to achieve the impossible goal of unmediated relationships through the imaginary collapse of the symbolic into the real, as though property could be reduced to our animalistic, natural, physical relations with the material world.

Note, however, that Llewellyn's concern expressed in the Official

Comment is not the misleading nature of noncustodial interests but of nonobjective ones—that is, property interests which "no man can prove by evidence." Unfortunately, as I shall discuss in greater detail in section III.B of this chapter, his physicalist imagery already presupposes that "objective" means "physical" and that "intangible" means "subjective." This is exactly Baird and Jackson's error.

Like all proponents of the physical metaphor for property, Baird and Jackson do at some level recognize its impracticability, if not impossibility. And they offer one of the usual "solutions": denial through the adoption of the physical metaphor and attribution of the pejorative "metaphysical" to alternates. That is, certain forms of nonphysical possession are implicitly analogized as being equivalent to physical custody.

For example, they do not defend the filing regime on its own intrinsic utility. Rather, its utility is defended by metaphor—filing is just like sensuous contact:

Both public recording files and possession share one central feature: Information about competing property interests is concrete and trustworthy. It is trustworthy because the information is conveyed by events—making a filing or taking possession—that themselves determine legal systems.^[54]

This is despite the fact that Baird and Jackson also recognize that filing has distinct advantages over custody in that it allows the debtor to continue to use the collateral, thereby making it more likely that the secured party will eventually be paid.

A secured creditor need not take possession of the collateral, but if he does not, he must make a public filing in a designated place. . . . [A] filing system places fewer restrictions on the use of collateral yet it still provides information that allows a creditor to avoid the uncertainty caused by the possibility of debtor misbehavior.^[55]

At one moment Baird and Jackson do recognize that the requirement of perfection must relate to some requirement that property interests be objectively manifest as a condition of general enforceability, but do not understand its full implications:^[56]

The doctrine of ostensible ownership assumes that such contractual divisions [i.e., of property rights] are irrelevant insofar as third party rights are concerned. What matters is that third parties be able to observe the division easily and accurately.^[57]

Unfortunately, after this correct starting place, their argument gets lost. Based on historical, but unverified, empirical assumptions, they first assume that physical custody is clear and informative and can serve as an effective way of objectively evidencing a property interest. From this they draw the non sequitur that noncustodial property interests are so problematic that they must be voided unless they can be cured by analogy to custodial interests. This means that Baird and Jackson do not fully recognize that the question of objectification arises in all property claims. Because they conflate objectivity with physicality, they believe that the need for objectification (what they call the ostensible-ownership problem) is created not by the claim to property but by the separation of such claims and physicality. Consequently, the test of an enforceable property interest depends not on whether it is sufficiently objectified but on whether it is sufficiently physicalized:

A party who wishes to acquire or retain a nonpossessory interest in property that is effective against others must, as a general matter, make it possible for others to discover that interest.^[58]

Therefore, filing is judged by whether or not it can serve as a substitute for physical custody and thus become a form of fictive possession.^[59]

A similar conflation of objectification with physicality can be seen in Stephen Munzer's otherwise insightful property analysis. Munzer makes the quite remarkable statement that the only way that "embodied entities such as human persons can have property in nonmaterial things . . .

[is] through some physical manifestation."^[60] "It is, therefore, essential to property as it can exist for human beings that it involve, at some point, material objects. Without a physical manifestation people cannot have rights in nonmaterial things."^[61] He thinks that this is demonstrated by the fact that copyright and patent applications require a writing, drawing, or model.^[62] But in context, it becomes clear that his real concern is intersubjective communication. He refers to recent legislation as instituting "legal conventions that allow for more transitory physical manifestations."^[63] He gives as an example a California statute that recognizes property rights in "any original work of authorship that is not fixed in any tangible medium of expression."^[64] Music performed but not transcribed, or a mime performance seen but not filmed, is, to Munzer, a "fleeting" physical manifestation of property.^[65] Presumably, on this analysis, electronic records of property interests (such as uncertificated securities) and conveyances (such as wire transfers) are also "physical" manifestations.

Even if one buys (which I do not) their assertion that physical custody of goods is unproblematical in most cases, Baird and Jackson are presupposing an economy in which most (or at least the archetypical forms of) property interests involve tangibles. This means that the law of perfection of security interests in intangibles is developed by analogy to the presumed "norm" of tangibles. If the law of tangibles is based on the presence or absence of physical custody, the law of intangibles is developed by reference to the presence or absence of something that, by definition, cannot exist.^[66] This requires the development of ever more elaborate fictions and metaphors. This is precisely the same inverted logic which Waldron used to support the positive masculine phallic metaphor in property jurisprudence.

c—
Benedict v. Ratner

It is significant that Baird and Jackson include the infamous case of Benedict v. Ratner^[67] in the chapter of their casebook which covers the history of the ostensible-ownership principle.^[68] In this pre-U.C.C. case, the United States Supreme Court invalidated an assignment of accounts receivable—what we would today call a non-notification security interest in accounts.^[69] Specifically, the court voided a purported assignment by a corporation of all of its existing and future accounts receivable when the assignee not only lacked the right to collect the accounts but the assignor had no obligation to account to the assignee for the collected accounts. The assignee did not notify the account debtors that he was now the owner of the accounts, collect, ask for an accounting, or attempt to assert any rights whatsoever with respect to the accounts until after the corporate-assignor's bankruptcy. That is, the assignor retained the right to collect, settle, or otherwise deal in the accounts without either paying the proceeds over to the assignee or substituting new accounts. The Supreme Court found that this transaction was a fraud on the corporate-assignor's debtor as a matter of law (i.e., it is objectively fraudulent even if the corporate-assignor acted with subjective good faith as a matter of fact)^[70] because the assignor retained, and the assignee did not obtain, "dominion" over the accounts.

Baird and Jackson's inclusion of this case as an example (or, at least, a close relative) of ostensible-ownership theory follows from their custodial/

noncustodial distinction: if noncustodial interests are defined as problematical, then property interests in accounts which are, by definition, intangible must always raise the concerns which underlie ostensible-ownership theory.^[71]

Baird and Jackson take the position that, when one is analyzing the validity of the secured party's property interest, then the logic of ostensible-ownership doctrine demands that we ask not only whether the debtor retains physical custody but also whether the secured party ever obtained physical custody. That is, under the classic version of the ostensible-ownership theory, the debtor's creditors supposedly would be fooled into thinking that the debtor owned his property free and clear of liens if they looked at the debtor and saw the debtor in possession of the collateral. In the rewritten theory, creditors would also be fooled into thinking that a rival creditor did not have a lien on the debtor's property if they looked at the creditor and did not see it in possession. This seems to follow directly from the underlying presumption that property is possession and possession is physical custody.

This, of course, is the logical extension of the phallic metaphor. If a secured party is claiming a property interest, it is not enough to show that the debtor has been castrated from her phallic property. Rather, the secured party must show that he now wields the Phallus . For this analysis, it is irrelevant whether the reason why the secured party lacks physical custody is that the debtor retains physical custody (as in classic ostensible-ownership analysis) or that the nature of the collateral makes physical custody an impossibility (as in the case of assignments of accounts and other intangibles). This approach may be implicit in the rule announced in Benedict v. Ratner . Justice Brandeis might be read as analo-

gizing ownership of accounts to the sensuous grasp of goods and fixating on the lack of physical custody, or its analogue, in the secured party. In this reading the term "dominion" stands in for physical custody of intangibles.

Perhaps tellingly, the assignee in this case was the father of the assignor's president. Does his paternal status of the assignee explain, in part, why the Supreme Court was so concerned with the assignee's lack of dominion? For the father to function as a father he needs to appear to be holding the Phallus . But in Benedict v. Ratner , the father is castrated and it is the son who wields phallic property.

Modern lawyers love to sneer at this case as a relic of a financially unsophisticated era. The drafters of the U.C.C. claimed that they rejected the rule of Benedict v. Ratner with respect to accounts.^[72] By this they meant that they did not adopt the Supreme Court's specific solution to the secured party's lack. That is, they did not insist that the secured party take dominion and control over an assigned account. Instead, as I shall discuss below, Article 9 permits secured parties to perfect their interest through filing. Consequently, Article 9 makes it much easier for lenders to offer what is known as "nonnotification" accounts receivable financing.^[73]

In contradistinction, I agree with Baird and Jackson's intuition that Benedict v. Ratner remains relevant because it identifies a recurring problem of commercial law, albeit in a partial and imperfect manner. Although the drafters sought to assure a different outcome from that of Benedict v. Ratner , they implicitly embraced both its obvious general conceptual errors as well as its hidden insight. This can be seen in Article 9's rules for the perfection of security interests.

The principal effect of the Benedict rule has been, not to discourage or eliminate security transactions in inventory and accounts receivable—on the contrary such transactions have vastly increased in volume—but rather to force financing arrangements in this field toward a self-liquidating basis. Furthermore, several lower court cases drew implications from Justice Brandeis' opinion in Benedict v. Ratner which required lenders operating in this field to observe a number of needless and costly formalities: for example it was thought necessary for the debtor to make daily remittances to the lender of all collections received, even though the amount remitted is immediately returned to the debtor in order to keep the loan at an agreed level.

[a] security interest is not invalid or fraudulent against creditors by reason of liberty in the debtor . . . to collect or compromise accounts . . . or to use, commingle or dispose of proceeds or by reason of the failure of the secured party to require the debtor to account for proceeds or replace collateral.

3—
Objectification:
Hegelian Possession as an Alternative to the Paradigm of the Phallic Metaphor

The ostensible-ownership doctrine is supposed to explain the historical development of the positive law of security interests. Extremists, such as Baird and Jackson, argue that if one accepts the doctrine, then consistency and utilitarian considerations demand that we extend the concept of "perfection" beyond security interests to all noncustodial property interests. They cannot explain, however, why our supposedly efficient capitalist system has not yet done so. One is not required to "perfect" one's nonpossessory property interest in goods leased, coats left at the hatcheck in restaurants, clothes left with the dry cleaner, and so on. In the theory of Baird and Jackson, this remains an unexplained aberration. In this section, I suggest that a Hegelian analysis offers a much more convincing account of current law which avoids such embarrassments. To that end, it is helpful to review briefly the structure of Article 9 before moving on to my analysis.

a—
Attachment and Perfection

Article 9 security interests can only be created by contract.^[74] They are not merely contract interests, however, but property interests in specific identifiable collateral. This means, among other things, in the event of the debtor's bankruptcy, a secured party does not share in the estate pro rata with general creditors but is entitled to distribution out of earmarked assets. Consequently, Article 9 makes a distinction between what it calls "attachment" and "perfection" of security interests which reflects their contractual and property aspects, respectively.

Roughly speaking, when we say a security interest has attached, we mean that it has become enforceable against the debtor who created the security interest as well as against a discrete class of third parties: donees and knowledgeable buyers out of the ordinary course of business.^[75] Perfection means that the attached security interest is also enforceable against a much larger class of third parties, most significantly, subsequent lien cred-

itors, the debtor's bankruptcy trustee, most subsequent secured parties, and certain others.^[76] Consequently, one can have unperfected but attached security interests in many categories of collateral,^[77] but there is no such thing as a perfected but unattached security interest.

Why is this so? One answer is suggested by the Hegelian theory of the function of property.

b—
The Logic of Property

(1)—
Classical Liberalism and Autonomy

Elsewhere I have shown that the existing positive law of property under the U.C.C. can be explained in terms of the classical liberal policy of furthering autonomy.^[78] This analysis is powerful and appealing in that it probably reflects the underlying liberal jurisprudential theories actually (implicitly or explicitly) held by the drafters. It is limited, however, in that it depends on a liberal presupposition of human nature as atomistic individuality with a natural right of negative liberty as personal autonomy (and, to a lesser extent, a natural right to property). These presuppositions are, perhaps, not so universally shared in our society as they once were. As a sublation of liberalism, Hegelian property theory can preserve

the liberal values of individuality, autonomy, and negative liberty as one true moment in the actualization of freedom while negating and superseding its false claims to universality.

As I discussed in chapter 1, Hegelian possession is the identification of a specific object as being "owned" by a specific legal subject with the right and power to exclude others from the object. Because the logic of property is to make the owner recognizable by others, the claim to ownership which is possession cannot be totally "subjective" in the sense of private to the so-called owner. It must be somehow public and "objective" in the sense that it is intersubjectively recognizable by the relevant legal community.

Unfortunately, the U.C.C., and much contemporary legal scholarship, conflates the English term "possession" with its more narrow meaning of physical custody, preferably in the form of sensuous grasp. Consequently, the Supreme Court's terminology in Benedict v. Ratner —dominion (from dominus , lord)^[79] —may in fact be more appropriate since it does not carry the unfortunate modern physicalist connotation of "possession."

In our legal system, both the debtor and the secured party to a security interest are deemed to have property rights in the collateral, although neither has the most full and adequate manifestation of property known as unfettered ownership. In a hypothecation, the debtor has possession in the sense of the right to have physical custody of a tangible object, or is otherwise recognized as the owner of an intangible object. She has the right to enjoy the object in the sense of using it or collecting it. Article 9 gives her the power to alienate her equity interest and sometimes the secured party's interest in the collateral (despite contractual restrictions to the contrary).^[80] These rights are all immediate, but they are also contingent in that their continued existence is subject to the condition that she satisfy the secured obligation. The secured party's rights of possession (through "repossession"),^[81] enjoyment (through collection or strict foreclosure),^[82] and alienation (through foreclosure sale)^[83] are inchoate because they are all contingent upon a future default by the debtor which may never occur. Consequently, the secured party's rights remain contractual in nature unless they are somehow immediately objectified. An unperfected security interest is objective only to a very small class of people: the

debtor and parties with actual notice. Consequently, attached but unperfected security interests are enforceable against certain knowledgeable buyers^[84] and against the debtors' donees, who do not act as independent legal subjects but inherit the status of their donor.^[85] The logic of property is recognition by others. In order to be a property right enforceable against a third party, it is necessary that it become objective in the sense of recognizable by that third party. It is the necessity for objectification which explains the requirement known as perfection. This is another way of saying that possession is the most primitive element of property, required for the other two.

(2)—
Hegelianism and Pragmatism.

While the Hegelian dialectic is a powerful tool for analyzing the structures of society, it cannot answer specific questions of legal policy or daily life.^[86] This is why pragmatism is a necessary correlate of Hegelian idealism. The actual form of possession for any given property claim in any given society falls outside logic and within the province of positive law. In this interpretation, perfection of a security interest through filing of a financing statement would be a form of Hegelian possession through marking recognized by the positive law of the U.C.C. That is, filing is not a second-best substitution for possession as exemplified in the norm of sensuous grasping; through positive law, filing itself becomes a form of possession.

The Hegelian concept of possession can be used both to explain and to

critique some areas of property law which seem anomalous when considered within ostensible-ownership doctrine. Probably the most obvious of such apparent anomalies, as raised by Baird and Jackson, is the lack of any perfection requirement for leases and certain other arrangements where a noncustodial party has enforceable property rights. From a Hegelian viewpoint, the continued existence of this apparent anomaly can be explained if the lessor's noncustodial interest is otherwise objectively manifest in the sense of being observable, or at least discoverable, by a third-party creditor of the custodial lessee from evidence other than the self-serving subjective statements of the custodial party.^[87] This turns out to be the case.

If a creditor wishes to take a security interest on equipment or other goods in the custody of a debtor, it can investigate the equipment's provenance or chain of title.^[88] That is, it can demand from the debtor some evidence of the origin of the equipment—such as a bill of sale or other receipt. The creditor can then question the source of the equipment about the nature of the transaction by which the debtor obtained custody. In this way, the creditor has some ability to ascertain the existence of an adverse interest that is not totally dependent on the subjective statements of the debtor.^[89] The same reasoning could in part explain the traditional solicitude for purchase money financers—at least when the financer is also

the seller of the collateral.^[90] It cannot, however, justify the nonperfection of other forms of noncustodial security interests. That is, an investigation of the past chain of title of an object will not reveal the existence of a non–purchase money hypothecation.

I am not arguing that Hegelian property analysis shows that perfection of leases by filing is neither necessary nor a good idea. It merely argues that any given society may decide that different forms of objectification might be appropriate for different property interests for historic or pragmatic reasons. In my example, one might decide on abstract logical grounds that the unperfected interests of lessors are theoretically objective (i.e., possessory) and, therefore, property. Nevertheless, society could also pragmatically decide that investigation of provenance is too difficult, too time-consuming, and too subject to fraud by dishonest debtors who can forge fake receipts or collude with dishonest suppliers, to be considered sufficiently objective to justify enforcement of all leases against all competing interests. In other words, leases which can be discovered through investigation of provenance might be minimally objective and "possessory" in a Hegelian sense, but they are not necessarily the most adequate or full form of possessory interests.

Moreover, if lease financing is a significant rival for secured financing

in some industries, it might also make pragmatic sense to require the same form of objectification for all property interests. We might, therefore, pragmatically decide that with respect to some industries, or some types of collateral, creditors should have to engage in only one form of search to discover all potentially rival interests. Why make creditors search both the secured financing records and investigate provenance if it would not impose significant hardships on lessors to record their interests on a certificate of title?

For example, we have decided to require perfection formalities for all property interests—ownership, leasehold, and security interests, custodial as well as noncustodial—in aircraft and airplane engines and equipment which are frequently financed by sale-leasebacks and secured credit.^[91] Similarly, although the U.C.C. does not require that leases in automobiles be perfected as a condition of enforceability against creditors, both the interests in lessors (as owners) and secured parties (as lienholders) must be noted on the certificate of title on automobiles under state certificate-of-title statutes.^[92] Contrarily, in other industries we may decide that the expense imposed on the noncustodial party would not justify the investigative cost savings to third parties.

Of course, these pragmatic decisions depend on precisely the type of difficult-to-verify empirical questions which I have been seeking to avoid. But this is an inevitable characteristic of all pragmatic decisions. All we can do is develop a logical structure to help frame the type of pragmatic questions we need to ask, and develop a theory of political legitimacy for the process by which the pragmatic decision will be reached. Traditionally, in our political system, such decisions are considered to be within the competency of the legislature. My criticism of Baird and Jackson, then, is not so much that they raise a hypothesis which requires empirical investigation but that they assume the very empirical data on which a demonstration of their hypothesis depends.

(3)—
Perfection, Filing, and Control.

An example of a pragmatic recognition that different forms of objectification may be more or less adequate is the priority regime for security interests in investment securities contained in the 1994 revisions to Articles 8 and 9 of the U.C.C. As revised, Articles 8 and 9 permit a variety of liberalized perfection alternatives for security interests in investment securities. In perhaps the most radical change from traditional law, the revisions provide for automatic perfection of security interests granted by broker-dealers and other securities intermediaries. Filing will be permitted in the case of other types of debtors. Both of these are examples of a minimum form of Hegelian possession through positive law—intersubjectively recognizable identification of object to subject.

In the case of automatic perfection, objectification consists of the general knowledge of the lending industry that securities held by broker-dealers are customarily subject to multiple competing noncustodial property claims. Based on their investigation of the actual practices of lenders in the securities industry, the drafters of the 1994 revisions to Articles 8 and 9 rejected the assumptions of the ostensible-ownership theory in light of a new ostensible-nonownership analysis: in the absence of actual notice to the contrary, reasonable creditors assume that all investment property held by securities professionals is encumbered. But note, the intersubjective knowledge which is "objectively" known by the lenders goes only to the existence of competing interests, generally, rather than of any specific property interests of any identified party. Consequently, revised Articles 8 and 9 only make these interests generally, but not specifically, enforceable. By this I mean all secured parties who rely only on automatic perfection and do not take one of the other objectifying acts permitted by the statute have priority over general creditors but share pro rata among themselves.^[93]

Perhaps more interestingly, the revisions further provide that secured parties who take "control" of investment securities have priority over security interests perfected by alternate means (such as automatic perfection).^[94] "Control" is a newly coined term of art defined as a variety of devices which give the secured party power to dispose of the property

without the further cooperation of the debtor. As we have seen, although physical custody can be a form of Hegelian possession, it is not the archetype of possession. Similarly, although actual physical custody of a securities certificate can be an element of control, it is not the archetypical form of control. Indeed, when a certificate is registered in the name of a specific person, mere physical custody does not even constitute control unless it is accompanied by all appropriate indorsements.

It is also significant that the forms of "control" defined by the revisions are all intersubjectively recognizable. For example, one form of investment property governed by the revisions is a new property interest known as a security entitlement.^[95] For my limited purposes it suffices to say that this is what an investor has when she owns her securities indirectly through her broker or other securities intermediary. This is now the most common form of securities holding in this country. If "control" by a secured party is thought of only as the power to dispose of the collateral without the further act of the debtor,^[96] then, theoretically, a debtor could give a secured party control by signing an irrevocable power of attorney to give instructions to the broker or other securities intermediary.^[97] But such an arrangement could be kept entirely private between the debtor and the secured party until such time as the secured party chose to exercise its power. Consequently, such private arrangements do not fall within the defined term "control" for the purposes of the revisions. In order for a secured party to obtain "control" over a security entitlement, the securities intermediary with whom the security entitlement is maintained must agree to obey such instructions.^[98] That is, there must be at least one third party who knows of the arrangement and can answer questions from other third parties.^[99]

The drafters, in effect, made a pragmatic judgment that security in-

terests perfected by "control" are more public and unambiguous than those perfected by automatic perfection and, therefore, should be given priority. Similarly, although public filing is given the status of perfection by positive law, it does not as adequately serve the possessory function of excluding others as does "control"; consequently, secured parties who perfect by filing are subordinate to perfection by "control." In other words, although security interests in investment securities may be minimally objectified through notoriety or filing, "control" prevails because it is a more adequate form of objectification.

(4)—
Benedict v. Ratner Redux

A Hegelian analysis might also offer an aphysicalist reinterpretation, and partial rehabilitation, of some aspects of the apparently physicalist legal doctrines such as ostensible ownership and the Benedict v. Ratner rule. The doctrine of ostensible ownership is both archaic and based on insupportable empirical presumptions. Nevertheless, just "as the toad, ugly and venomous, wears yet a precious jewel in its head,"^[100] this incoherent doctrine hides a valuable germ of Hegelian property analysis buried deep within it. Such an analysis would ask: What does it mean to say that a hypothecation or assignment has created a property interest in the underlying collateral in favor of the secured party/assignee? Under contemporary commercial law theory, substance is supposed to control over form.^[101] Because property rights always implicate third parties (such as creditors), courts are not supposed to look solely to the parties' self-serving characterization of their legal relationship. Consequently, we need to identify the minimum substantive requirements of property. This is another way of saying that property interests need to be at least minimally objective.

The principle that substance prevails over form usually arises when it is clear that the parties intended to create a property interest, but there is

a dispute as to how the interest is to be characterized. The classic example is the security interest disguised as a lease.^[102] But it is another example of the form/substance dichotomy which raises the concerns underlying ostensible-ownership analysis. Certain transactions which are structured in the form of present conveyances of property may, in substance, be mere options to acquire, or other forms of executory contracts to purchase property in the future. That is, when two parties to a contract self-servingly characterize the transaction as "hypothecation" or an "assignment" or another form of property interest, it does not necessarily make it so. It could just be a promise to prefer a creditor, to assign an asset, or to grant a call option on the asset exercisable in the future. Since property rights affect third parties directly, the characterization should be objectively determinable by third parties.

This means that we need to define the essential elements of property in order to identify when a bona fide, enforceable transfer of a property interest has occurred. My Hegelian approach argues that there must be an element of possession (objectification), as well as the elements of enjoyment and alienation, for a legal interest to be considered a full property. What the court labeled "dominion" in Benedict v. Ratner might be reinterpreted as an attempt to identify what it means to have a property interest in an intangible. Did the purported assignee have any publicly recognizable right to possess, enjoy, or alienate the accounts? It may be that an effective assignment of the accounts had not been made because the assignee's rights to the account were not "possessory" in the Hegelian sense: they were totally subjective, in the sense of private, and not objective, in the sense of publicly recognizable. Possession is the logically first, most primitive element of property. Since there was no "possession," the creation of a property interest was never completed. As the arrangement was private between two persons, and was not recognizable by third persons, any rights which the assignee had should be considered contractual in nature. Under this reasoning, one does not need to invent theories of constructive "fraud" in order to refuse to enforce an inchoate transfer which was never consummated.^[103]

The drafters of the U.C.C. claim to have rejected the rule of Benedict

v. Ratner .^[104] In my reinterpretation, this is an overstatement. The drafters contradict Benedict v. Ratner in the sense that the Supreme Court voided nonnotification assignments of accounts which are not sufficiently policed by the assignee, while the U.C.C. expressly provides that they can be valid and enforceable as Article 9 security interests. The U.C.C. does not, however, reject the underlying concept that to be an enforceable present property interest in accounts, rather than a mere contract right to future assignment of accounts, an assignment must be possessory in the Hegelian sense. They merely require a different form of objectification. The Benedict v. Ratner court required the assignee to objectify his property interest by notifying the account debtors and otherwise to obtain the direct power to deal with the collateral. In contradistinction, Article 9 provides that most assignments of accounts fall within the defined term "security interest" whether or not the assignment is an outright sale or only an assignment as security.^[105] Security interests are not enforceable against most third parties (i.e., are not legally recognizable as full property interests) unless they are perfected.^[106] The formality^[107] required for perfection of assignments of accounts is public filing.^[108]

In other words, even as the U.C.C. rejected the specific holding of Benedict v. Ratner , Article 9 also arguably adopted its inchoate general principle—security interests should not be enforceable against third parties (i.e., be recognized as property) unless they are made objectively recognizable by third parties. The proposed revisions to Articles 8 and 9 adopt a variation of dominion as the most adequate mode of objectifying a security interest when the collateral consists of investment property. That is, the highest priority is granted by the secured who obtains "control"—the power to deal in the collateral.

The ostensible-ownership doctrine dimly recognizes that property interests need to be possessory, in the Hegelian sense, but confuses the general concept with a specific example—physical custody of tangible things. Lacanian theory reveals why this doctrine is both erroneous and seductive. Hegelian theory enables us to identify the function which ostensible-ownership doctrine unsuccessfully tries to address. Used together, they enable us to get beyond the phallic metaphor to rewrite property doctrine.