2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 7 - Documents of Title › Part 2 - WAREHOUSE RECEIPTS; SPECIAL PROVISIONS › Section 55-7-205 - Title under warehouse receipt defeated in certain cases.

A buyer in ordinary course of business of fungible goods sold and delivered by a warehouse that is also in the business of buying and selling such goods takes the goods free of any claim under a warehouse receipt even if the receipt is negotiable and has been duly negotiated.
History:
1953 Comp., § 50A-7-205, enacted by Laws 1961, ch. 96, § 7-205; 2005, ch. 144, § 61.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
Prior Uniform Statutory Provision.
— Former Section 7-205 [55-7-205 NMSA 1978].
Changes.
— Changes for style only.
1. The typical case covered by this section is that of the warehouse-dealer in grain, and the substantive question at issue is whether in case the warehouse becomes insolvent the receipt holders shall be able to trace and recover grain shipped to farmers and other purchasers from the elevator. This was possible under the old acts, although courts were eager to find estoppels to prevent it. The practical difficulty of tracing fungible grain means that the preservation of this theoretical right adds little to the commercial acceptability of negotiable grain receipts, which really circulate on the credit of the warehouse. Moreover, on default of the warehouse, the receipt holders at least share in what grain remains, whereas retaking the grain from a good faith cash purchaser reduces the purchaser completely to the status of general creditor in a situation where there was very little the purchaser could do to guard against the loss.
Compare
15 U.S.C. Section 714p enacted in 1955.
2. This provision applies to both negotiable and nonnegotiable warehouse receipts. The concept of due negotiation is provided for in 7-501. The definition of "buyer in ordinary course" is in Article 1 and provides, among other things, that a buyer must either have possession or a right to obtain the goods under Article 2 in order to be a buyer in ordinary course. This section requires actual delivery of the fungible goods to the buyer in ordinary course. Delivery requires voluntary transfer of possession of the fungible goods to the buyer. See amended Section 2-103 [55-2-103 NMSA 1978]. This section is not satisfied by the delivery of the document of title to the buyer in ordinary course.
Cross References.
— Sections 2-403 [55-2-403 NMSA 1978] and 9-320 [55-9-320 NMSA 1978].
"Buyer in ordinary course of business". Section 1-201 [55-1-201 NMSA 1978].
"Delivery". Section 1-201.
"Duly negotiate". Section 7-501 [55-7-501 NMSA 1978].
"Fungible" goods. Section 1-201.
"Goods". Section 7-102 [55-7-102 NMSA 1978].
"Value". Section 1-204 [55-1-204 NMSA 1978].
"Warehouse receipt". Section 1-201.
"Warehouse". Section 7-102.
ANNOTATIONS
Repeals and reenactments.
— Laws 2005, ch. 144, § 61, effective January 1, 2006, repealed former 55-7-205 NMSA 1978 as enacted by Laws 1961, ch. 96, § 7-205, and enacted a new section. Pursuant to 12-2A-14 NMSA 1978, the 2005 revision is considered an amendment rather than a new enactment.
Am. Jur. 2d, A.L.R. and C.J.S. references.
— 15A Am. Jur. 2d Commercial Code § 63; 67 Am. Jur. 2d Sales §§ 387 et seq., 448 et seq.; 78 Am. Jur. 2d Warehouses § 76.
Replevin for an undivided share in or undivided quantity of a larger mass, 26 A.L.R. 1015.
15A C.J.S. Confusion of Goods § 1; 93 C.J.S. Warehousemen and Safe Depositaries §§ 14, 39.