2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 3 - Negotiable Instruments › Part 1 - GENERAL PROVISIONS AND DEFINITIONS › Section 55-3-109 - Payable to bearer or to order.

(a) A promise or order is payable to bearer if it:
(1) states that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
(2) does not state a payee; or
(3) states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
(b) A promise or order that is not payable to bearer is payable to order if it is payable (i) to the order of an identified person or (ii) to an identified person or order. A promise or order that is payable to order is payable to the identified person.
(c) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to Section 55-3-205(a) NMSA 1978. An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to Section 55-3-205(b) NMSA 1978.
History:
1978 Comp., § 55-3-109, enacted by Laws 1992, ch. 114, § 96.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1. Under Section 3-104(a) [55-3-104 NMSA 1978], a promise or order cannot be an instrument unless the instrument is payable to bearer or to order when it is issued or unless Section 3-104(c) [55-3-104 NMSA 1978] applies. The terms "payable to bearer" and "payable to order" are defined in Section 3-109 [55-3-109 NMSA 1978]. The quoted terms are also relevant in determining how an instrument is negotiated. If the instrument is payable to bearer it can be negotiated by delivery alone. Section 3-201(b) [55-3-201 NMSA 1978]. An instrument that is payable to an identified person cannot be negotiated without the indorsement of the identified person. Section 3-201(b) [55-3-201 NMSA 1978]. An instrument payable to order is payable to an identified person. Section 3-109(b) [55-3-109 NMSA 1978]. Thus, an instrument payable to order requires the indorsement of the person to whose order the instrument is payable.
2. Subsection (a) states when an instrument is payable to bearer. An instrument is payable to bearer if it states that it is payable to bearer, but some instruments use ambiguous terms. For example, check forms usually have the words "to the order of" printed at the beginning of the line to be filled in for the name of the payee. If the drawer writes in the word "bearer" or "cash," the check reads "to the order of bearer" or "to the order of cash." In each case the check is payable to bearer. Sometimes the drawer will write the name of the payee "John Doe" but will add the words "or bearer." In that case the check is payable to bearer. Subsection (a). Under Subsection (b), if an instrument is payable to bearer it can't be payable to order. This is different from former Section 3-110(3) [
see now
55-3-109 NMSA 1978]. An instrument that purports to be payable both to order and bearer states contradictory terms. A transferee of the instrument should be able to rely on the bearer term and acquire rights as a holder without obtaining the indorsement of the identified payee. An instrument is also payable to the bearer if it does not state a payee. Instruments that do not state a payee are in most cases incomplete instruments. In some cases the drawer of a check may deliver or mail it to the person to be paid without filling in the line for the name of the payee. Under Subsection (a) the check is payable to bearer when it is sent or delivered. It is also an incomplete instrument. This case is discussed in Comment 2 to Section 3-115 [55-3-115 NMSA 1978]. Subsection (a)(3) contains the words "otherwise indicates that it is not payable to an identified person." The quoted words are meant to cover uncommon cases in which an instrument indicates that it is not meant to be payable to a specific person. Such an instrument is treated like a check payable to "cash." The quoted words are not meant to apply to an instrument stating that it is payable to an identified person such as "ABC Corporation" if ABC Corporation is a nonexistent company. Although the holder of the check cannot be the nonexistent company, the instrument is not payable to bearer. Negotiation of such an instrument is governed by Section 3-404(b) [55-3-404 NMSA 1978].
ANNOTATIONS
Repeals.
— Laws 1992, ch. 114, § 237 repealed former 55-3-109 NMSA 1978, as enacted by Laws 1961, ch. 96, § 3-109, relating to definite time, effective July 1, 1992. Laws 1992, ch. 114, § 96, enacted a new section, effective July 1, 1992. For provisions of former section,
see
the 1991 NMSA 1978 on
NMOneSource.com
. For present comparable provisions,
see
55-3-108 NMSA 1978.
Liability on check drawn to fictitious payee.
— A check drawn to a fictitious payee is the same as if it were made payable to bearer; and, since an endorsement on such paper is not necessary to its validity or negotiability, a bank is not liable for paying on a forged endorsement on bearer paper.
Airco Supply Co. v. Albuquerque Nat'l Bank
, 1961-NMSC-031, 68 N.M. 195, 360 P.2d 386.
Law reviews.
— For article, "Essential Attributes of Commercial Paper - Part I," see 1 N.M. L. Rev. 479 (1971).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
11 Am. Jur. 2d Bills and Notes §§ 105, 107, 113, 116 to 118, 124 to 127, 322, 328.
Liability of bank for diversion to benefit of presenter or third party of proceeds of check drawn to bank's order by drawer not indebted to bank, 69 A.L.R.4th 778.
When is instrument "payable to bearer or to order" as required to constitute negotiable instrument under Article 3 of the Uniform Commercial Code [rev] §§ 3-104(a)(1) and 3-109, 77 A.L.R.5th 523.
10 C.J.S. Bills and Notes §§ 13, 128.