2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 3 - Negotiable Instruments › Part 1 - GENERAL PROVISIONS AND DEFINITIONS › Section 55-3-118 - Statute of limitations.

(a) Except as provided in Subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.
(b) Except as provided in Subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten years.
(c) Except as provided in Subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three years after dishonor of the draft or ten years after the date of the draft, whichever period expires first.
(d) An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller's check, cashier's check, or traveler's check must be commenced within three years after demand for payment is made to the acceptor or issuer, as the case may be.
(e) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six-year period begins when a demand for payment is in effect and the due date has passed.
(f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced (i) within six years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (ii) within six years after the date of the acceptance if the obligation of the acceptor is payable on demand.
(g) Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this article and not governed by this section must be commenced within three years after the cause of action accrues.
History:
1978 Comp., § 55-3-118, enacted by Laws 1992, ch. 114, § 105.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1. Section 3-118 [55-3-118 NMSA 1978] differs from former Section 3-122 [repealed], which states when a cause of action accrues on an instrument. Section 3-118 [55-3-118 NMSA 1978] does not define when a cause of action accrues. Accrual of a cause of action is stated in other sections of Article 3 such as those that state the various obligations of parties to an instrument. The only purpose of Section 3-118 [55-3-118 NMSA 1978] is to define the time within which an action to enforce an obligation, duty, or right arising under Article 3 must be commenced. Section 3-118 [55-3-118 NMSA 1978] does not attempt to state all rules with respect to a statute of limitations. For example, the circumstances under which the running of a limitations period may be tolled is left to other law pursuant to Section 1-103 [55-1-103 NMSA 1978].
2. The first six subsections apply to actions to enforce an obligation of any party to an instrument to pay the instrument. This changes present law in that indorsers who may become liable on an instrument after issue are subject to a period of limitations running from the same date as that of the maker or drawer. Subsections (a) and (b) apply to notes. If the note is payable at a definite time, a six-year limitations period starts at the due date of the note, subject to prior acceleration. If the note is payable on demand, there are two limitations periods. Although a note payable on demand could theoretically be called a day after it was issued, the normal expectation of the parties is that the note will remain outstanding until there is some reason to call it. If the law provides that the limitations period does not start until demand is made, the cause of action to enforce it may never be barred. On the other hand, if the limitations period starts when demand for payment may be made,
i.e.
, at any time after the note was issued, the payee of a note on which interest or portions of principle are being paid could lose the right to enforce the note even though it was treated as a continuing obligation by the parties. Some demand notes are not enforced because the payee has forgiven the debt. This is particularly true in family and other noncommercial transactions. A demand note found after death of the payee may be presented for payment many years after it was issued. The maker may be a relative and it may be difficult to determine whether the note represents a real or forgiven debt. Subsection (b) is designed to bar notes that no longer represent a claim to payment and to require reasonably prompt action to enforce notes on which there is default. If a demand for payment is made to the maker, a six-year limitations period starts to run when demand is made. The second sentence of Subsection (b) bars an action to enforce a demand note if no demand has been made on the note and no payment of interest or principal has been made for a continuous period of 10 years. This covers the case of a note that does not bear interest or a case in which interest due on the note has not been paid. This kind of case is likely to be a family transaction in which a failure to demand payment may indicate that the holder did not intend to enforce the obligation but neglected to destroy the note. A limitation period that bars stale claims in this kind of case is appropriate if the period is relatively long.
3. Subsection (c) applies primarily to personal uncertified checks. Checks are payment instruments rather than credit instruments. The limitations period expires three years after the date of dishonor or 10 years after the date of the check, whichever is earlier. Teller's checks, cashier's checks, certified checks, and traveler's checks are treated differently under subsection (d) because they are commonly treated as cash equivalents. A great delay in presenting a cashier's check for payment in most cases will occur because the check was mislaid during that period. The person to whom traveler's checks are issued may hold them indefinitely as a safe form of cash for use in an emergency. There is no compelling reason for barring the claim of the owner of the cashier's check or traveler's check. Under Subsection (d) the claim is never barred because the three-year limitations period does not start to run until demand for payment is made. The limitations period in Subsection (d) in effect applies only to cases in which there is a dispute about the legitimacy of the claim of the person demanding payment.
4. Subsection (e) covers certificates of deposit. The limitations period of six years doesn't start to run until the depositor demands payment. Most certificates of deposit are payable on demand even if they state a due date. The effect of a demand for payment before maturity is usually that the bank will pay, but that a penalty will be assessed against the depositor in the form of a reduction in the amount of interest that is paid. Subsection (e) also provides for cases in which the bank has no obligation to pay until the due date. In that case the limitations period doesn't start to run until there is a demand for payment in effect and the due date has passed.
5. Subsection (f) applies to accepted drafts other than certified checks. When a draft is accepted it is in effect turned into a note of the acceptor. In almost all cases the acceptor will agree to pay at a definite time. Subsection (f) states that in that case the six-year limitations periods starts to run on the due date. In the rare case in which the obligation of the acceptor is payable on demand, the six-year limitations period starts to run at the date of the acceptance.
6. Subsection (g) covers warranty and conversion cases and other actions to enforce obligations or rights arising under Article 3. A three-year period is stated and Subsection (g) follows general law in stating that the period runs from the time the cause of action accrues. Since the traditional term "cause of action" may have been replaced in some states by "claim for relief" or some equivalent term, the words "cause of action" have been bracketed to indicate that the words may be replaced by an appropriate substitute to conform to local practice.
7. One of the most significant differences between this Article and the Convention on International Bills of Exchange and International Promissory Notes is that the statute of limitation under the Convention generally is only four years, rather than the six years provided by this section.
See
Convention Article 84.
ANNOTATIONS
Repeals.
— Laws 1992, ch. 114, § 237 repealed former 55-3-118 NMSA 1978, as enacted by Laws 1961, ch. 96, § 3-118, relating to ambiguous terms and rules of construction, effective July 1, 1992. Laws 1992, ch. 114, § 105, enacted a new section, effective July 1, 1992. For provisions of former section,
see
the 1991 NMSA 1978 on
NMOneSource.com
.
Cross references.
— For limitations of actions generally,
see
37-1-1 to 37-1-29 NMSA 1978.
For limitations of actions for contracts,
see
37-1-23 NMSA 1978.
Conversion.
— Conversion claim against credit union for payment on forged indorsement is governed by the limitation in Subsection (g).
Gallagher v. Santa Fe Fed. Employees Fed. Credit Union
, 2002-NMCA-088, 132 N.M. 552, 52 P.3d 412, cert. denied, 132 N.M. 551, 52 P.3d 411.
Common law claims.
— Subsection (g) displaces statutes of limitations outside the UCC that may otherwise apply to common law claims of negligence, breach of fiduciary duty, money had and received or in implied contract.
Gallagher v. Santa Fe Fed. Employees Fed. Credit Union
, 2002-NMCA-088, 132 N.M. 552, 52 P.3d 412, cert. denied, 132 N.M. 551, 52 P.3d 411.
Law reviews.
— For article, "Essential Attributes of Commercial Paper - Part I," see 1 N.M. L. Rev. 479 (1971).
For comment, "Negotiable Instruments - A Cause of Action on a Cashier's Check Accrues from the Date of Issuance," see 4 N.M. L. Rev. 253 (1974).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
10 Am. Jur. 2d Banks §§ 466, 602; 11 Am. Jur. 2d Bills and Notes § 286; 12 Am. Jur. 2d Bills and Notes §§ 1032, 1044, 1048, 1050, 1055, 1056.
Rate of interest after maturity of obligation which fixes rate of interest expressly until maturity, 16 A.L.R.2d 902.
Time for which interest is recoverable on demand note or like demand instrument containing no provision as to interest, 45 A.L.R.2d 1202.
10 C.J.S. Bills and Notes §§ 86 et seq., 257.