2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 3 - Negotiable Instruments › Part 3 - ENFORCEMENT OF INSTRUMENTS › Section 55-3-309 - Enforcement of lost, destroyed, or stolen instrument.

(a) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(b) A person seeking enforcement of an instrument under Subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, Section 55-3-308 NMSA 1978 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
History:
1978 Comp., § 55-3-309, enacted by Laws 1992, ch. 114, § 122.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1. Section 3-309 [55-3-309 NMSA 1978] is a modification of former Section 3-804 [repealed]. The rights stated are those of "a person entitled to enforce the instrument" at the time of loss rather than those of an "owner" as in former Section 3-804 [repealed]. Under Subsection (b), judgment to enforce the instrument cannot be given unless the court finds that the defendant will be adequately protected against a claim to the instrument by a holder that may appear at some later time. The court is given discretion in determining how adequate protection is to be assured. Former Section 3-804 [repealed] allowed the court to "require security indemnifying the defendant against loss." Under Section 3-309 [55-3-309 NMSA 1978] adequate protection is a flexible concept. For example, there is substantial risk that a holder in due course may make a demand for payment if the instrument was payable to bearer when it was lost or stolen. On the other hand if the instrument was payable to the person who lost the instrument and that person did not indorse the instrument, no other person could be a holder of the instrument. In some cases there is risk of loss only if there is doubt about whether the facts alleged by the person who lost the instrument are true. Thus, the type of adequate protection that is reasonable in the circumstances may depend on the degree of certainty about the facts in the case.
2. Subsection (a) is intended to reject the result in
Dennis Joslin Co. v. Robinson Broadcasting Corp.
, 977 F. Supp. 491 (D.D.C. 1997). A transferee of a lost instrument need prove only that its transferor was entitled to enforce, not that the transferee was in possession at the time the instrument was lost. The protections of subsection (a) should also be available when instruments are lost during transit, because whatever the precise status of ownership at the point of loss, either the sender or the receiver ordinarily would have been entitled to enforce the instrument during the course of transit. The amendments to subsection (a) are not intended to alter in any way the rules that apply to the preservation of checks in connection with truncation or any other expedited method of check collection or processing.
3. A security interest may attach to the right of a person not in possession of an instrument to enforce the instrument. Although the secured party may not be the owner of the instrument, the secured party may nevertheless be entitled to exercise its debtor's right to enforce the instrument by resorting to its collection rights under the circumstances described in Section 9-607. This section does not address whether the person required to pay the instrument owes any duty to a secured party that is not itself the owner of the instrument.
4. The destruction of a check in connection with a truncation process in which information is extracted from the check and an image of the check is made, and then such information and image are transmitted for payment does not, by itself, prevent application of this section.
See
Section 3 604, Comment 2.
Example:
The payee of a check creates an image of the check, destroys the check, and transmits the image and information derived from the check for payment. Due to an error in transmission, the depositary bank never receives the transmission. The payee may be able to enforce the check if the payee can prove the terms of the check and otherwise satisfy the requirements of this section. The result would be different if there were no error in the transmission and the payor discharged its obligation on the check.
ANNOTATIONS
Effective dates.
— Laws 1992, ch. 114, § 238 made the act effective July 1, 1992.
Assignment of the right to enforce a lost instrument.
— In a foreclosure case, where plaintiff, the assignee of a lost negotiable instrument, sought to enforce that instrument by virtue of the assignment, and where defendant moved for summary judgment, contending that she had established an affirmative defense to enforce the note, and thus to foreclosure of the mortgage, because it was undisputed that the note was lost and that plaintiff did not have the rights of a holder in due course, and where the district court rejected plaintiff's argument, but concluded that plaintiff lacked standing to enforce the note because plaintiff had not been in possession of the instrument and entitled to enforce it when loss of possession occurred, the district court erred in granting defendant's motion for summary judgment, because the assignment of a lost instrument by a person entitled to enforce it transfers the right of enforcement under NMSA 1978, § 55-3-309 to the assignee if the court ensures that the borrower is adequately protected as required by § 55-3-309(b).
Citimortgage, Inc. v. Garcia
, 2023-NMCA-081.