2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 2 - Sales › Part 4 - TITLE, CREDITORS AND GOOD FAITH › Section 55-2-403 - Power to transfer; good faith purchase of goods; "entrusting".

(1) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though:
(a) the transferor was deceived as to the identity of the purchaser, or
(b) the delivery was in exchange for a check which is later dishonored, or
(c) it was agreed that the transaction was to be a "cash sale", or
(d) the delivery was procured through fraud punishable as larcenous under the criminal law.
(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.
(3) "Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.
(4) The rights of other purchasers of goods and of lien creditors are governed by the articles on Secured Transactions (Article 9) and Documents of Title (Article 7).
History:
1953 Comp., § 50A-2-403, enacted by Laws 1961, ch. 96, § 2-403; 1992, ch. 114, § 6.
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.
— Sections 20(4), 23, 24 and 25, Uniform Sales Act; Section 9, especially 9(2), Uniform Trust Receipts Act; Section 9, Uniform Conditional Sales Act.
Changes.
— Consolidated and rewritten.
Purposes of changes.
— To gather together a series of prior uniform statutory provisions and the case law thereunder and to state a unified and simplified policy on good faith purchase of goods.
1. The basic policy of our law allowing transfer of such title as the transferor has is generally continued and expanded under Subsection (1). In this respect the provisions of the section are applicable to a person taking by any form of "purchase" as defined by this act. Moreover the policy of this act expressly providing for the application of supplementary general principles of law to sales transactions wherever appropriate joins with the present section to continue unimpaired all rights acquired under the law of agency or of apparent agency or ownership or other estoppel, whether based on statutory provisions or on case law principles. The section also leaves unimpaired the powers given to selling factors under the earlier factors acts. In addition Subsection (1) provides specifically for the protection of the good faith purchaser for value in a number of specific situations which have been troublesome under prior law.
On the other hand, the contract of purchase is of course limited by its own terms as in a case of pledge for a limited amount or of sale of a fractional interest in goods.
2. The many particular situations in which a buyer in ordinary course of business from a dealer has been protected against reservation of property or other hidden interest are gathered by subsections (2)-(4) into a single principle protecting persons who buy in ordinary course out of inventory. Consignors have no reason to complain, nor have lenders who hold a security interest in the inventory, since the very purpose of goods in inventory is to be turned into cash by sale.
The principle is extended in subsection (3) to fit with the abolition of the old law of "cash sale" by subsection (1)(c). It is also freed from any technicalities depending on the extended law of larceny; such extension of the concept of theft to include trick, particular types of fraud, and the like is for the purpose of helping conviction of the offender; it has no proper application to the long-standing policy of civil protection of buyers from persons guilty of such trick or fraud. Finally, the policy is extended, in the interest of simplicity and sense, to any entrusting by a bailor; this is in consonance with the explicit provisions of Section 7-205 [55-7-205 NMSA 1978] on the powers of a warehouse who is also in the business of buying and selling fungible goods of the kind he stores. As to entrusting by a secured party, subsection (2) is limited by the more specific provisions of Section 9-320 [55-9-320 NMSA 1978], which deny protection to a person buying farm products from a person engaged in farming operations.
3. The definition of "buyer in ordinary course of business" (Section 1-201 [55-1-201 NMSA 1978]) applies here and preserves the essence of the healthy limitations engrafted by the case-law on the older statutes. The older loose concept of good faith and wide definition of value combined to create apparent good faith purchasers in many situations in which the result outraged common sense; the court's solution was to protect the original title especially by use of "cash sale" or of over-technical construction of the enabling clauses of the statutes. But such rulings then turned into limitations on the proper protection of buyers in the ordinary market. Section 1-201(b)(9) cuts down the category of buyer in ordinary course in such fashion as to take care of the results of the cases, but with no price either in confusion or in injustice to proper dealings in the normal market.
4. Except as provided in Subsection (1), the rights of purchasers other than buyers in ordinary course are left to the articles on secured transactions, documents of title, and bulk sales.
Point 1: Sections 1-103 and 1-201.
Point 2: Sections 1-201, 2-402, 7-205 and 9-307(1).
Points 3 and 4: Sections 1-102, 1-201, 2-104, 2-707 and Articles 6, 7 and 9.
"Buyer in ordinary course of business". Section 1-201.
"Good faith". Sections 1-201 and 2-103.
"Goods". Section 2-105.
"Person". Section 1-201.
"Purchaser". Section 1-201.
"Signed". Section 1-201.
"Term". Section 1-201.
"Value". Section 1-201.
ANNOTATIONS
The 1992 amendment,
effective July 1, 1992, deleted a reference to the article on bulk transfers in Subsection (4).
Status of "bona fide purchaser" does not automatically pass.
— After property has passed into the hands of a bona fide purchaser, every subsequent purchaser does not automatically stand in the shoes of such a bona fide purchaser, irrespective of the subpurchaser's notice of any other claimed interests in the property.
Hunick v. Orona
, 1983-NMSC-009, 99 N.M. 306, 657 P.2d 633.
The significance of being a buyer in the ordinary course of business
is the acquisition of goods free of any outstanding claims from those who may be the true owners. Therefore, a buyer in the ordinary course of business is a privileged status that is conferred upon a purchaser, even against the true owners, if he meets the requirements of Subsections (9) and (19) of Section 55-1-201 NMSA 1978.
Hunick v. Orona
, 1983-NMSC-009, 99 N.M. 306, 657 P.2d 633.
Statute is not intended as cure for false misrepresentation or breach of warranty of title
and does not preclude buyers of automobiles from repudiating transaction on the ground of used car dealer's material misrepresentation and breach of warranty.
State v. DeBaca
, 1971-NMCA-092, 82 N.M. 727, 487 P.2d 155.
Power to transfer upheld.
— Upon delivery of cattle pursuant to seller's agreement with buyer, buyer had the power to transfer good title to a good faith purchaser for value, notwithstanding seller's contention that the cattle had been shipped to buyer under a title-retention contract.
O'Brien v. Chandler
, 1988-NMSC-094, 107 N.M. 797, 765 P.2d 1165.
Law reviews.
— For article, "Special Property Under the Uniform Commercial Code: A New Concept in Sales," see 4 Nat. Resources J. 98 (1964).
For article, "Buyers and Sellers of Goods in Bankruptcy," see 1 N.M. L. Rev. 435 (1971).
Am. Jur. 2d, A.L.R. and C.J.S. references.
— 15A Am. Jur. 2d Commercial Code §§ 67 to 69; 68A Am. Jur. 2d Secured Transactions § 117 et seq.; 788.
Right of purchaser of stolen bonds, 1 A.L.R. 717, 85 A.L.R. 357, 102 A.L.R. 28.
Delivery of key as satisfying condition of immediate delivery and actual or continued change of possession to uphold sale of personal property against subsequent purchaser or third persons generally, 56 A.L.R. 518.
Right of purchaser from agent or dealer in possession of article for purpose of demonstration or solicitation, without actual authority to sell, 57 A.L.R. 393.
Right of purchaser from party to conditional sale as affected by actual or apparent authority in party to sell property, 88 A.L.R. 109.
Estoppel of owner of tangible personal property who permits another to have possession of evidences of title, endorsed in blank, or otherwise showing ownership in possessor, to deny latter's authority to sell, mortgage, pledge or otherwise deal with, the property, 151 A.L.R. 690.
Relative rights as between purchase of chattel from one who had previously bought it with stolen money, and victim of the theft, 62 A.L.R.2d 537.
Measures of damages in action for breach of warranty of title to personal property under U.C.C. § 2-714, 94 A.L.R.3d 583.
Sales: what is "entrusting" goods to merchant dealer under UCC § 2-403, 59 A.L.R.4th 567.
31 C.J.S. Estoppel §§ 118, 119; 77A C.J.S. Sales § 230 et seq.