2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 9 - Secured Transactions › Part 1 - GENERAL PROVISIONS › Subpart 1 - SHORT TITLE, DEFINITIONS, ANDGENERAL CONCEPTS › Section 55-9-101 - Short title.

Chapter 55, Article 9 NMSA 1978 may be cited as the "Uniform Commercial Code-Secured Transactions".
History:
1978 Comp., § 55-9-101, enacted by Laws 2001, ch. 139, § 1.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1.
Source, Background, and History.
In 1990, the Permanent Editorial Board for the UCC with the support of its sponsors, The American Law Institute and the National Conference of Commissioners on Uniform State Laws, established a committee to study Uniform Commercial Code (UCC) Article 9. The study committee issued its report as of December 1, 1992, recommending the creation of a drafting committee for the revision of Article 9 and also recommending numerous specific changes to Article 9. Organized in 1993, a drafting committee met fifteen times from 1993 to 1998. Extensive revisions of this Article were approved by its sponsors in 1998 (1998 Revisions). The Article was conformed to revised Article 1 in 2001 and to amendments to Article 7 in 2003. The sponsors approved amendments to selected sections of this Article in 2010.
The 1998 Revisions superseded former Article 9 (pre-1998 Article 9) and, as did their predecessor, provided a comprehensive scheme for the regulation of security interests in personal property and fixtures. For the most part the 1998 Article 9 followed the general approach and retains much of the terminology of pre-1998 Article 9. Comment 3 describes the material changes made by the 1998 Revisions. Pre-1998 Article 9 superseded the wide variety of pre-UCC security devices. Unlike the Comments to pre-1998 Article 9, however, these Comments dwell very little on the pre-UCC state of the law. For that reason, the Comments to pre-1998 Article 9 will remain of substantial historical value and interest. They also will remain useful in understanding the background and general conceptual approach of this Article.
Article 9 was again extensively revised in 2022 (2022 Article 9 Revisions) pursuant to the Uniform Commercial Code Amendments (2022) (2022 Amendments). In particular, the 2022 Article 9 Revisions conform and adapt Article 9 to Article 12, covering controllable electronic records and rights to payment that are tethered to controllable electronic records—controllable accounts and controllable payment intangibles. For a brief summary of the 2022 Article 9 Revisions,
see
Comment 4, below. Except as noted in Comments 3 and 4 below, the 1998 Article 9 remains substantially unchanged following the 2022 Article 9 Revisions.
Note also that citations to "Bankruptcy Code Section" in these Comments are to Title 11 of the United States Code as in effect on July 1, 2022.
2.
1998 Revisions: Reorganization and Renumbering; Captions; Style.
The 1998 Revisions embraced a substantial reorganization of former Article 9 and renumbering of most sections of Article 9, including a new Part 4 dealing with several aspects of third-party rights and duties that are unrelated to perfection and priority. Some of these were covered by Part 3 of pre-1998 Article 9. Also added was a new Part 5, dealing with filing (formerly covered by pre-1998 Part 4), and Part 6, dealing with default and enforcement (formerly covered by pre-1998 Part 5). The 1998 Revisions also include headings for the subsections as an aid to readers. Unlike section captions, which are part of the UCC, see Section 1-107, subsection headings are not a part of the official text itself and have not been approved by the sponsors.
3.
Summary of 1998 Revisions.
Following is a brief summary of some of the more significant features of the 1998 Revisions of Article 9.
a.
Scope of Article 9.
The 1998 Revisions expanded the scope of Article 9 in several respects.
Deposit accounts.
Section 9-109 includes within this Article's scope deposit accounts as original collateral, except in consumer transactions. Pre-1998 Article 9 dealt with deposit accounts only as proceeds of other collateral.
Sales of payment intangibles and promissory notes.
Section 9-109 also includes within the scope of this Article most sales of "payment intangibles" (defined in Section 9-102 as general intangibles under which an account debtor's principal obligation is monetary) and "promissory notes" (also defined in Section 9-102). Pre-1998 Article 9 included sales of accounts and chattel paper, but not sales of payment intangibles or promissory notes. In its inclusion of sales of payment intangibles and promissory notes, this Article continues the drafting convention found in pre-1998 Article 9; the sale of accounts, chattel paper, payment intangibles, or promissory notes creates a "security interest." The definition of "account" in Section 9-102 also was expanded to include various rights to payment that were general intangibles under pre-1998 Article 9.
Health-care-insurance receivables.
Section 9-109 narrows article 9's exclusion of transfers of interests in insurance policies by carving out of the exclusion "health-care-insurance receivables" (defined in section 9-102). A health-care-insurance receivable is included within the definition of "account" in section 9-102.
Nonpossessory statutory agricultural liens.
Section 9-109 also brings nonpossessory statutory agricultural liens within the scope of article 9.
Consignments.
Section 9-109 added "true" consignments bailments for the purpose of sale by the bailee to the scope of Article 9, with certain exceptions. See Section 9-102 (defining "consignment"). Under the pre-1998 UCC, many consignments were subject to Article 9's filing requirements by operation of pre-1998 Section 2-326.
Supporting obligations and property securing rights to payment.
The 1998 Revisions also addressed explicitly (i) obligations, such as guaranties and letters of credit, that support payment or performance of collateral such as accounts, chattel paper, and payment intangibles, and (ii) any property (including real property) that secures a right to payment or performance that is subject to an Article 9 security interest. See Sections 9-203, 9-308.
Commercial tort claims.
Section 9-109 expands the scope of Article 9 to include the assignment of commercial tort claims by narrowing the exclusion of tort claims generally. However, Article 9 continues to exclude tort claims for bodily injury and other non-business tort claims of a natural person. See Section 9-102 (defining "commercial tort claim").
Transfers by States and governmental units of States.
Section 9-109 narrows the exclusion of transfers by States and their governmental units by excluding only transfers covered by another statute (other than a statute generally applicable to security interests) to the extent the statute governs the creation, perfection, priority, or enforcement of security interests.
Nonassignable general intangibles, promissory notes, health-care-insurance receivables, and letter-of-credit rights.
The 1998 Revisions enabled a security interest to attach to letter-of-credit rights, health-care-insurance receivables, promissory notes, and general intangibles, including contracts, permits, licenses, and franchises, notwithstanding a contractual or statutory prohibition against or limitation on assignment. The revised Article explicitly protects third parties against any adverse effect of the creation or attempted enforcement of the security interest. See Sections 9-408, 9-409.
Subject to sections 9-408 and 9-409 and two other exceptions (sections 9-406, concerning accounts, chattel paper, and payment intangibles, and 9-407, concerning interests in leased goods), section 9-401 establishes a baseline rule that the inclusion of transactions and collateral within the scope of article 9 has no effect on nonarticle 9 law dealing with the alienability or inalienability of property. For example, if a commercial tort claim is nonassignable under other applicable law, the fact that a security interest in the claim is within the scope of article 9 does not override the other applicable law's effective prohibition of assignment.
b.
Duties of Secured Party.
The 1998 Revisions provided for expanded duties of secured parties.
Release of control.
Section 9-208 imposes upon a secured party having control of a deposit account, investment property, or a letter-of-credit right the duty to release control when there is no secured obligation and no commitment to give value. Section 9-209 contains analogous provisions when an account debtor has been notified to pay a secured party.
Information.
Section 9-210 expands a secured party's duties to provide the debtor with information concerning collateral and the obligations that it secures.
Default and enforcement.
Part 6 also includes some additional duties of secured parties in connection with default and enforcement.
See, e.g.
, section 9-616 (duty to explain calculation of deficiency or surplus in a consumer-goods transaction).
c.
Choice of Law.
The choice-of-law rules included in the 1998 Revisions for the law governing perfection, the effect of perfection or nonperfection, and priority are found in Part 3, Subpart 1 (Sections 9-301 through 9-307). See also Section 9-316.
Where to file:
Location of debtor. The 1998 Revisions changed the choice-of-law rule governing perfection (i.e., where to file) for most collateral to the law of the jurisdiction where the debtor is located. See Section 9-301. Under pre-1998 Article 9, the jurisdiction of the debtor's location governed only perfection and priority of a security interest in accounts, general intangibles, mobile goods, and, for purposes of perfection by filing, chattel paper and investment property.
Determining debtor's location.
As a baseline rule, Section 9-307 follows pre-1998 Section 9-103, under which the location of the debtor is the debtor's place of business (or chief executive office, if the debtor has more than one place of business). Section 9-307 contains three major exceptions. First, a "registered organization," such as a corporation or limited liability company, is located in the State under whose law the debtor is organized, e.g., a corporate debtor's State of incorporation. Second, an individual debtor is located at his or her principal residence. Third, there are special rules for determining the location of the United States and registered organizations organized under the law of the United States.
Location of non-U.S. debtors.
If, applying the foregoing rules, a debtor is located in a jurisdiction whose law does not require public notice as a condition of perfection of a nonpossessory security interest, the entity is deemed located in the District of Columbia.
See
section 9-307. Thus, to the extent that this article applies to non-U.S. debtors, perfection could be accomplished in many cases by a domestic filing.
Priority.
For tangible collateral such as goods and instruments, Section 9-301 provides that the law applicable to priority and the effect of perfection or nonperfection will remain the law of the jurisdiction where the collateral is located, as under pre-1998 Section 9-103 (but without the confusing "last event" test). For intangible collateral, such as accounts, the applicable law for priority is that of the jurisdiction in which the debtor is located.
Possessory security interests; agricultural liens. Perfection, the effect of perfection or nonperfection, and priority of a possessory security interest or an agricultural lien are governed by the law of the jurisdiction where the collateral subject to the security interest or lien is located.
See
sections 9-301 and 9-302.
Goods covered by certificates of title; deposit accounts; letter-of-credit rights; investment property.
The 1998 Revisions to Article 9 included several refinements to the treatment of choice-of-law matters for goods covered by certificates of title. See Section 9-303. The revision also provided special choice-of-law rules, similar to those for investment property under Articles 8 and 9, for deposit accounts (Section 9-304), investment property (Section 9-305), and letter-of-credit rights (Section 9-306).
Change in applicable law. Section 9-316 addresses perfection following a change in applicable law.
d.
Perfection.
The 1998 revised rules governing perfection of security interests and agricultural liens are found in Part 3, Subpart 2 (Sections 9-308 through 9-316).
Deposit accounts; letter-of-credit rights.
With certain exceptions, the 1998 Revisions provided that a security interest in a deposit account or a letter-of-credit right may be perfected only by the secured party's acquiring "control" of the deposit account or letter-of-credit right. See Sections 9-312, 9-314. Under Section 9-104, a secured party has "control" of a deposit account when, with the consent of the debtor, the secured party obtains the depositary bank's agreement to act on the secured party's instructions (including when the secured party becomes the account holder) or when the secured party is itself the depositary bank. The control requirements are patterned on Section 8-106, which specifies the requirements for control of certain investment property. Under Section 9-107, "control" of a letter-of-credit right occurs when the issuer or nominated person consents to an assignment of proceeds under Section 5-114.
Electronic chattel paper and tangible chattel paper definitions deleted in 2022 Article 9 Revisions.
Section 9-102 of the 1998 Revisions included a new defined terms: "electronic chattel paper" and "tangible chattel paper." However, the 2022 Article 9 Revisions deleted those terms and modified the definition of "chattel paper" and the rules for chattel paper evidenced by electronic records, as discussed in Comment 4 and Section 9-102, Comment 5.b.
Investment property.
The 1998 Revisions left the perfection requirements for "investment property" (defined in Section 9-102), including perfection by control under Section 9-106, substantially unchanged. However, a new provision in Section 9-314 is designed to ensure that a secured party retains control in "repledge" transactions that are typical in the securities markets.
Instruments and commercial tort claims.
The 1998 Revisions expanded the types of collateral in which a security interest may be perfected by filing to include instruments. See Section 9-312. Under the revised Article security interests in commercial tort claims also are perfected by filing. See Sections 9-308, 9-310.
Sales of payment intangibles and promissory notes.
Although pre-1998 Article 9 covered the outright sale of accounts and chattel paper, under the revised Article sales of most other types of receivables also are financing transactions to which Article 9 should apply. Accordingly, Section 9-102 expanded the definition of "account" to include many types of receivables (including "health-care-insurance receivables," defined in Section 9-102) that pre-1998 Article 9 classified as "general intangibles." It thereby subjects to Article 9's filing system sales of more types of receivables than did pre-1998 Article 9. Certain sales of payment intangibles primarily bank loan participation transactions should not be subject to the Article 9 filing rules. These transactions are placed in a residual category of collateral, "payment intangibles" (general intangibles under which the account debtor's principal obligation is monetary), the sale of which is exempt from the filing requirements of Article 9. See Sections 9-102, 9-109, 9-309 (perfection upon attachment). The perfection rules for sales of promissory notes are the same as those for sales of payment intangibles.
Possessory security interests.
Several provisions of 1998 Article 9 address aspects of security interests involving a secured party or a third party who is in possession of collateral. In particular, Section 9-313 resolves a number of uncertainties under pre-1998 Section 9-305. It provides that a security interest in collateral in the possession of a third party is perfected when the third party acknowledges in a signed record that it holds for the secured party's benefit. Section 9-313 also provides that a third party need not so acknowledge and that its acknowledgment does not impose any duties on it, unless it otherwise agrees. A special rule in Section 9-313 provides that if a secured party already is in possession of collateral, its security interest remains perfected by possession if it delivers the collateral to a third party and the collateral is accompanied by instructions to hold it for the secured party or to redeliver it to the secured party. Section 9-313 also clarifies the limited circumstances under which a security interest in goods covered by a certificate of title may be perfected by the secured party's taking possession.
Automatic perfection.
The 1998 Revisions added Section 9-309, which lists various types of security interests as to which no public-notice step is required for perfection (e.g., purchase-money security interests in consumer goods other than automobiles). This automatic perfection also extends to a transfer of a health-care-insurance receivable to a health-care provider. Those transfers normally will be made by natural persons who receive health-care services; there is little value in requiring filing for perfection in that context. Automatic perfection also applies to security interests created by sales of payment intangibles and promissory notes. Section 9-308 provides that a perfected security interest in collateral supported by a "supporting obligation" (such as an account supported by a guaranty) also is a perfected security interest in the supporting obligation, and that a perfected security interest in an obligation secured by a security interest or lien on property (e.g., a real-property mortgage) also is a perfected security interest in the security interest or lien.
e.
Priority; Special Rules for Banks and Deposit Accounts.
The rules governing priority of security interests and agricultural liens under the 1998 Revisions are found in Part 3, Subpart 3 (Sections 9-317 through 9-342). The revised Article includes several new priority rules and some special rules relating to banks and deposit accounts (Sections 9-340 through 9-342).
Purchase-money security interests: General; consumer-goods transactions; inventory.
Section 9-103 substantially rewrites the definition of purchase-money security interest (PMSI) (although the term is not formally "defined"). The substantive changes, however, apply only to non-consumer-goods transactions. (Consumer transactions and consumer-goods transactions are discussed below in Comment 4.j.) For non-consumer-goods transactions, Section 9-103 makes clear that a security interest in collateral may be (to some extent) both a PMSI as well as a non-PMSI, in accord with the "dual status" rule applied by some courts under pre-1998 Article 9 (thereby rejecting the "transformation" rule). The revised definition provides an even broader conception of a PMSI in inventory, yielding a result that accords with private agreements entered into in response to the uncertainty under pre-1998 Article 9. It also treats consignments as purchase-money security interests in inventory. Section 9-324 clarifies the PMSI priority rules, but for the most part without material change in substance. Section 9-324 also clarifies the priority rules for competing PMSIs in the same collateral.
Purchase-money security interests in livestock; agricultural liens.
Section 9-324 provides a special PMSI priority, similar to the inventory PMSI priority rule, for livestock. Section 9-322 (the baseline first-to-file-or-perfect priority rule) also recognizes special non-Article 9 priority rules for agricultural liens, which can override the baseline first-in-time rule.
Purchase-money security interests in software.
Section 9-324 contains a new priority rule for a software purchase-money security interest. (Section 9-102 includes a definition of "software.") Under Section 9-103, a software PMSI includes a PMSI in software that is used in goods that are also subject to a PMSI.
Investment property.
The 1998 priority rules for investment property are substantially similar to the priority rules found in pre-1998 Section 9-115, which was added in conjunction with the 1994 revisions to UCC Article 8. Under Section 9-328, if a secured party has control of investment property (Sections 8-106, 9-106), its security interest is senior to a security interest perfected in another manner (e.g., by filing). Also under Section 9-328, security interests perfected by control generally rank according to the time that control is obtained or, in the case of a security entitlement or a commodity contract carried in a commodity account, the time when the control arrangement is entered into. That was a change from pre-1998 Section 9-115, under which the security interests ranked equally. However, as between a securities intermediary's security interest in a security entitlement that it maintains for the debtor and a security interest held by another secured party, the securities intermediary's security interest is senior.
Deposit accounts.
The 1998 priority rules applicable to deposit accounts are found in Section 9-327 and are patterned on and similar to those for investment property in pre-1998 Section 9-115 and Section 9-328. Under Section 9-327, if a secured party has control of a deposit account, its security interest is senior to a security interest perfected in another manner (i.e., as cash proceeds). Also under Section 9-327, security interests perfected by control rank according to the time that control is obtained, but as between a depositary bank's security interest and one held by another secured party, the depositary bank's security interest is senior. A corresponding rule in Section 9-340 makes a depositary bank's right of set-off generally senior to a security interest held by another secured party. However, if the other secured party becomes the depositary bank's customer with respect to the deposit account, then its security interest is senior to the depositary bank's security interest and right of set-off. Sections 9-327, 9-340.
Letter-of-credit rights.
The 1998 priority rules for security interests in letter-of-credit rights are set out in Section 9-329. They are somewhat analogous to those for deposit accounts. A security interest perfected by control has priority over one perfected in another manner (i.e., as a supporting obligation for the collateral in which a security interest is perfected). Security interests in a letter-of-credit right perfected by control rank according to the time that control is obtained. However, the rights of a transferee beneficiary or a nominated person are independent and superior to the extent provided in Section 5-114. See Section 9-109(c)(4).
Chattel paper and instruments.
Section 9-330 is the 1998 successor to pre-1998 Section 9-308. As under pre-1998 Section 9-308, under the 1998 Revisions differing priority rules apply to purchasers of chattel paper who give new value and take possession (or, in the case of electronic chattel paper, obtain control) of the collateral—depending on whether a conflicting security interest in the collateral is claimed merely as proceeds. The principal change related to the role of knowledge and the effect of an indication of a previous assignment of the collateral. 1998 Section 9-330 also afforded priority to purchasers of instruments who take possession in good faith and without knowledge that the purchase violates the rights of the competing secured party. In addition, to qualify for priority, purchasers of chattel paper, but not of instruments, must purchase in the ordinary course of business. The 2022 Article 9 Revisions eliminated the defined terms "electronic chattel paper" and "tangible chattel paper," revised the definition of "chattel paper" in Section 9-102 and modified the Section 9-330 priority rule accordingly. See Comment 4.b. and Section 9-102, Comment 5.b.
Proceeds.
1998 Section 9-322 contains new priority rules that clarify when a special priority of a security interest in collateral continues or does not continue with respect to proceeds of the collateral. Other 1998 refinements to the priority rules for proceeds are included in Sections 9-324 (purchase-money security interest priority) and 9-330 (priority of certain purchasers of chattel paper and instruments).
Miscellaneous priority provisions.
The 1998 Revisions to Article 9 also included (i) clarifications of selected good-faith-purchase and similar issues (Sections 9-317, 9-331); (ii) new priority rules to deal with the "double debtor" problem arising when a debtor creates a security interest in collateral acquired by the debtor subject to a security interest created by another person (Section 9-325); (iii) new priority rules to deal with the problems created when a change in corporate structure or the like results in a new entity that has become bound by the original debtor's after-acquired property agreement (Section 9-326); (iv) a provision enabling most transferees of funds from a deposit account or money to take free of a security interest (Section 9-332); (v) substantially rewritten and refined priority rules dealing with accessions and commingled goods (Sections 9-335, 9-336); (vi) revised priority rules for security interests in goods covered by a certificate of title (Section 9-337); and (vii) provisions designed to ensure that security interests in deposit accounts will not extend to most transferees of funds on deposit or payees from deposit accounts and will not otherwise "clog" the payments system (Sections 9-341, 9-342).
Model provisions relating to production-money security interests.
Appendix II to the 1998 Revisions contained model definitions and priority rules relating to "production-money security interests" held by secured parties who give new value used in the production of crops. Because no consensus emerged on the wisdom of these provisions during the drafting process, the sponsors made no recommendation on whether these model provisions should be enacted.
f.
Proceeds.
Revised Section 9-102 provides an expanded definition of "proceeds" of collateral, which includes additional rights and property that arise out of collateral, such as distributions on account of collateral and claims arising out of the loss or nonconformity of, defects in, or damage to collateral. The revised definition of "proceeds" also includes collections on account of "supporting obligations," such as guarantees.
g.
Part 4: Additional Provisions Relating to Third-Party Rights.
The 1998 Revisions added a new Part 4 that includes several provisions relating to the relationships between certain third parties and the parties to secured transactions. It Part 4 contains new Sections 9-401 (replacing pre-1998 Section 9-311) (alienability of debtor's rights), 9-402 (replacing pre-1998 Section 9-317) (secured party not obligated on debtor's contracts), 9-403 (replacing pre-1998 Section 9-206) (agreement not to assert defenses against assignee), 9-404, 9-405, and 9-406 (replacing pre-1998 Section 9-318) (rights acquired by assignee, modification of assigned contract, discharge of account debtor, restrictions on assignment of account, chattel paper, promissory note, or payment intangible ineffective), 9-407 (replacing some provisions of pre-1998 Section 2A-303) (restrictions on creation or enforcement of security interest in leasehold interest or lessor's residual interest ineffective). New Part 4 also added new Sections 9-408 (restrictions on assignment of promissory notes, health-care-insurance receivables ineffective, and certain general intangibles ineffective) and 9-409 (restrictions on assignment of letter-of-credit rights ineffective).
See
Comment 3.a.
h.
Filing.
New Part 5 (replacing pre-1998 Part 4) of Article 9 was substantially rewritten to simplify the statutory text and to deal with numerous problems of interpretation and implementation that have arisen over the years.
Medium-neutrality.
Part 5 is "medium-neutral"; that is, it makes clear that parties may file and otherwise communicate with a filing office by means of records communicated and stored in media other than on paper.
Identity of person who files a record; authorization.
Part 5 also is largely indifferent as to the person who effects a filing. Instead, it addresses whose authorization is necessary for a person to file a record with a filing office. The filing scheme does not contemplate that the identity of a "filer" will be a part of the searchable records. This approach is consistent with, and a necessary aspect of, eliminating signatures or other evidence of authorization from the system (except to the extent that filing offices may choose to employ authentication procedures in connection with electronic communications). As long as the appropriate person authorizes the filing, or, in the case of a termination statement, the debtor is entitled to the termination, it is largely insignificant whether the secured party or another person files any given record.
Section 9-509 collects in one place most of the rules that determine when a record may be filed. In general, the debtor's authorization is required for the filing of an initial financing statement or an amendment that adds collateral. With one further exception, a secured party of record's authorization is required for the filing of other amendments. The exception arises if a secured party has failed to provide a termination statement that is required because there is no outstanding secured obligation or commitment to give value. In that situation, a debtor is authorized to file a termination statement indicating that it has been filed by the debtor.
Financing statement formal requisites.
The formal requisites for a financing statement under the 1998 Revisions are set out in Section 9-502. A financing statement must provide the name of the debtor and the secured party and an indication of the collateral that it covers. Sections 9-503 and 9-506 address the sufficiency of a name provided on a financing statement and clarify when a debtor's name is correct and when an incorrect name is insufficient. Section 9-504 addresses the indication of collateral covered. Under Section 9-504, a super-generic description (e.g., "all assets" or "all personal property") in a financing statement is a sufficient indication of the collateral. (Note, however, that a super-generic description is inadequate for purposes of a security agreement. See Sections 9-108, 9-203.) To facilitate electronic filing, this Article does not require that the debtor's signature or other authorization appear on a financing statement. Instead, it prohibits the filing of unauthorized financing statements and imposes liability upon those who violate the prohibition. See Sections 9-509, 9-626.
Filing-office operations.
The 1998 Part 5 introduced several provisions governing filing operations. First, it prohibits the filing office from rejecting an initial financing statement or other record for a reason other than one of the few that are specified. See Sections 9-520, 9-516. Second, the filing office is obliged to link all subsequent records (e.g., assignments, continuation statements, etc.) to the initial financing statement to which they relate. See Section 9-519. Third, the filing office may delete a financing statement and related records from the files no earlier than one year after lapse (lapse normally is five years after the filing date), and then only if a continuation statement has not been filed. See Sections 9-515, 9-519, 9-522. Thus, a financing statement and related records would be discovered by a search of the files even after the filing of a termination statement. This approach helps eliminate filing-office discretion and also eases problems associated with multiple secured parties and multiple partial assignments. Fourth, Part 5 mandates performance standards for filing offices. See Sections 9-519, 9-520, 9-523. Fifth, it provides for the promulgation of filing-office rules to deal with details best left out of the statute and requires the filing office to submit periodic reports. See Sections 9-526, 9-527.
Defaulting or missing secured parties and fraudulent filings.
In some areas of the country, serious problems had arisen from fraudulent financing statements filed against public officials and other persons. The 1998 Article 9 addressed the fraud problem by providing the opportunity for a debtor to file a termination statement when a secured party wrongfully refuses or fails to provide a termination statement. See Section 9-509. This opportunity also addresses the problem of secured parties that simply disappear through mergers or liquidations. In addition, Section 9-518 provides a statutory method by which a debtor who believes that a filed record is inaccurate or was wrongfully filed may indicate that fact in the files, albeit without affecting the efficacy, if any, of the challenged record.
Correction of records:
Defaulting or missing secured parties and fraudulent filings. In some areas of the country, serious problems have arisen from fraudulent financing statements that are filed against public officials and other persons. This article addresses the fraud problem by providing the opportunity for a debtor to file a termination statement when a secured party wrongfully refuses or fails to provide a termination statement.
See
section 9-509. This opportunity also addresses the problem of secured parties that simply disappear through mergers or liquidations. In addition, section 9-518 affords a statutory method by which a debtor who believes that a filed record is inaccurate or was wrongfully filed may indicate that fact in the files by filing a correction statement, albeit without affecting the efficacy, if any, of the challenged record.
Extended period of effectiveness for certain financing statements. Section 9-515 contains an exception to the usual rule that financing statements are effective for five years unless a continuation statement is filed to continue the effectiveness for another five years. Under that section, an initial financing statement filed in connection with a "public-finance transaction" or a "manufactured-home transaction" (terms defined in section 9-102) is effective for 30 years.
National form of financing statement and related forms. Section 9-521 provides for uniform, national written forms of financing statements and related written records that must be accepted by a filing office that accepts written records.
i.
Default and Enforcement.
Part 6 of the 1998 Revisions to Article 9 extensively revised and replaced pre-1998 Part 5. Provisions relating to enforcement of consumer-goods transactions and consumer transactions are discussed in Comment 4.j.
Debtor, secondary obligor; waiver.
Section 9-602 clarifies the identity of persons who have rights and persons to whom a secured party owes specified duties under Part 6. Under that section, the rights and duties are enjoyed by and run to the "debtor," defined in Section 9-102 to mean any person with a non-lien property interest in collateral, and to any "obligor." However, with one exception (Section 9-616, as it relates to a consumer obligor), the rights and duties concerned affect non-debtor obligors only if they are "secondary obligors." "Secondary obligor" is defined in Section 9-102 to include one who is secondarily obligated on the secured obligation, e.g., a guarantor, or one who has a right of recourse against the debtor or another obligor with respect to an obligation secured by collateral. However, under Sections 9-605 and 9-628, the secured party is relieved from any duties and liabilities to any person unless the secured party knows that the person is a debtor or obligor. (The 2022 Article 9 Revisions have modified Sections 9-605 and 9-628. See 2022 Section 9-605, Comments 2 and 3.) Resolving an issue on which courts disagreed under pre-1998 Article 9, revised Article 9 generally prohibits waiver by a secondary obligor of its rights and a secured party's duties under Part 6. See Section 9-602. However, Section 9-624 permits a secondary obligor or debtor to waive the right to notification of disposition of collateral and, in a non-consumer transaction, the right to redeem collateral, if the secondary obligor or debtor agrees to do so after default.
Rights of collection and enforcement of collateral.
Section 9-607 explains in greater detail than pre-1998 Section 9-502 the rights of a secured party who seeks to collect or enforce collateral, including accounts, chattel paper, and payment intangibles. It also sets forth the enforcement rights of a depositary bank holding a security interest in a deposit account maintained with the depositary bank. Section 9-607 relates solely to the rights of a secured party vis-a-vis a debtor with respect to collections and enforcement. It does not affect the rights or duties of third parties, such as account debtors on collateral, which are addressed elsewhere (e.g., new Section 9-406). Section 9-608 clarifies the manner in which proceeds of collection or enforcement are to be applied.
Disposition of collateral: Warranties of title.
Section 9-610 imposes on a secured party who disposes of collateral the warranties of title, quiet possession, and the like that are otherwise applicable under other law. It also provides rules for the exclusion or modification of those warranties.
Disposition of collateral: Notification, application of proceeds, surplus and deficiency, other effects.
Section 9-611 requires a secured party to give notification of a disposition of collateral to other secured parties and lienholders who have filed financing statements against the debtor covering the collateral. (That duty was eliminated by the 1972 revisions to article 9.) However, that section relieves the secured party from that duty when the secured party undertakes a search of the records and a report of the results is unreasonably delayed. Section 9-613, which applies only to nonconsumer transactions, specifies the contents of a sufficient notification of disposition and provides that a notification sent 10 days or more before the earliest time for disposition is sent within a reasonable time. Section 9-615 addresses the application of proceeds of disposition, the entitlement of a debtor to any surplus, and the liability of an obligor for any deficiency. Section 9-619 clarifies the effects of a disposition by a secured party, including the rights of transferees of the collateral.
Rights and duties of secondary obligor.
Section 9-618 provides that a secondary obligor obtains the rights and assumes the duties of a secured party if the secondary obligor receives an assignment of a secured obligation, agrees to assume the secured party's rights and duties upon a transfer to it of collateral, or becomes subrogated to the rights of the secured party with respect to the collateral. The assumption, transfer, or subrogation is not a disposition of collateral under Section 9-610, but it does relieve the former secured party of further duties. Pre-1998 Section 9-504(5) did not address whether a secured party was relieved of its duties in this situation.
Transfer of record or legal title.
Section 9-619 contains a new provision making clear that a transfer of record or legal title to a secured party is not of itself a disposition under part 6. This rule applies regardless of the circumstances under which the transfer of title occurs.
Strict foreclosure.
Section 9-620, unlike pre-1998 Section 9-505, permits a secured party to accept collateral in partial satisfaction, as well as full satisfaction, of the obligations secured. This right of strict foreclosure extends to intangible as well as tangible property. Section 9-622 clarifies the effects of an acceptance of collateral on the rights of junior claimants. It rejects the approach taken by some courts deeming a secured party to have constructively retained collateral in satisfaction of the secured obligations in the case of a secured party's unreasonable delay in the disposition of collateral. Instead, unreasonable delay is relevant when determining whether a disposition under Section 9-610 is commercially reasonable.
Effect of noncompliance: "Rebuttable presumption" test. Section 9-626 adopts the "rebuttable presumption" test for the failure of a secured party to proceed in accordance with certain provisions of part 6. Under this approach, the deficiency claim of a noncomplying secured party is calculated by crediting the obligor with the greater of the actual net proceeds of a disposition and the amount of net proceeds that would have been realized if the disposition had been conducted in accordance with part 6 (
e.g.
, in a commercially reasonable manner). Section 9-626 rejects the "absolute bar" test that some courts have imposed; that approach bars a noncomplying secured party from recovering any deficiency, regardless of the loss (if any) the debtor suffered as a consequence of the noncompliance.
"Low-price" dispositions: Calculation of deficiency and surplus. Section 9-615(f) addresses the problem of procedurally regular dispositions that fetch a low price. Subsection (f) provides a special method for calculating a deficiency if the proceeds of a disposition of collateral to a secured party, a person related to the secured party, or a secondary obligor are "significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought." ("Person related to" is defined in section 9-102.) In these situations there is reason to suspect that there may be inadequate incentives to obtain a better price. Consequently, instead of calculating a deficiency (or surplus) based on the actual net proceeds, the deficiency (or surplus) would be calculated based on the proceeds that would have been received in a disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor.
j.
Consumer Goods, Consumer-Goods Transactions, and Consumer Transactions.
The 1998 Revisions (including the accompanying conforming revisions (see Appendix I)) included several special rules for "consumer goods," "consumer transactions," and "consumer-goods transactions." Each term is defined in Section 9-102.
(i) Revised Sections 2-502 and 2-716 provide a buyer of consumer goods with enhanced rights to possession of the goods, thereby accelerating and enhancing the opportunity to achieve "buyer in ordinary course of business" status under Section 1-201.
(ii) Section 9-103(e) (allocation of payments for determining extent of purchase-money status), (f) (purchase-money status not affected by cross-collateralization, refinancing, restructuring, or the like), and (g) (secured party has burden of establishing extent of purchase-money status) do not apply to consumer-goods transactions. Section 9-103 also provides that the limitation of those provisions to transactions other than consumer-goods transactions leaves to the courts the proper rules for consumer-goods transactions and prohibits the courts from drawing inferences from that limitation.
(iii) Section 9-108 provides that in a consumer transaction a description of consumer goods, a security entitlement, securities account, or commodity account "only by (UCC-defined) type of collateral" is not a sufficient collateral description in a security agreement.
(iv) Sections 9-403 and 9-404 make effective the Federal Trade Commission's antiholder-in-due-course rule (when applicable), 16 C.F.R. part 433, even in the absence of the required legend.
(v) The 10-day safe-harbor for notification of a disposition provided by section 9-612 does not apply in a consumer transaction.
(vi) Section 9-613 (contents and form of notice of disposition) does not apply to a consumer-goods transaction.
(vii) Section 9-614 contains special requirements for the contents of a notification of disposition and a safe-harbor, "plain English" form of notification, for consumer-goods transactions.
(viii) Section 9-616 requires a secured party in a consumer-goods transaction to provide a debtor with a notification of how it calculated a deficiency at the time it first undertakes to collect a deficiency.
(ix) Section 9-620 prohibits partial strict foreclosure with respect to consumer goods collateral and, unless the debtor agrees to waive the requirement in a signed record after default, in certain cases requires the secured party to dispose of consumer goods collateral which has been repossessed.
(x) Section 9-626 ("rebuttable presumption" rule) does not apply to a consumer transaction. Section 9-626 also provides that its limitation to transactions other than consumer transactions leaves to the courts the proper rules for consumer transactions and prohibits the courts from drawing inferences from that limitation.
k.
Good Faith.
The 1998 Revisions added in Section 9-102 a new definition of "good faith" that included not only "honesty in fact" but also "the observance of reasonable commercial standards of fair dealing." That definition was deleted by the conforming amendments to the 2001 revision of Article 1 as unnecessary, given the revised definition in Section 1-201(b)(20).
l.
[Reserved.]
m.
Conforming and Related Amendments to Other UCC Articles.
Appendix I to the 1998 Revisions contained several revisions to the provisions and Comments of other UCC articles. For the most part those revisions are explained in the Comments to the 1998 Revisions.
Article 1.
Revised Section 1-201 provides revisions to the definitions of "buyer in ordinary course of business," "purchaser," and "security interest."
Articles 2 and 2A.
Sections 2-210, 2-326, 2-502, 2-716, 2A-303, and 2A-307 are revised to address the intersection between Articles 2 and 2A and Article 9.
Article 5.
New section 5-118 is patterned on section 4-210. It provides for a security interest in documents presented under a letter of credit in favor of the issuer and a nominated person on the letter of credit.
Article 8.
Revisions to Section 8-106, which deals with "control" of securities and security entitlements, conform it to Section 8-302, which deals with "delivery." Revisions to Section 8-110, which deals with a "securities intermediary's jurisdiction," conform it to the revised treatment of a "commodity intermediary's jurisdiction" in Section 9-305. Sections 8-301 and 8-302 are revised for clarification. Section 8-510 is revised to conform it to the revised priority rules of Section 9-328. Several Comments in Article 8 also are revised.
4.
Summary of 2022 Article 9 Revisions.
Following is a brief summary of some of the more significant revisions that are included in the 2022 Article 9 Revisions. The 2022 amendments to Article 9 are extensive. Many of the amendments are necessary to conform Article 9 to new Article 12, which (along with its Comments) should be read along with the Article 9 amendments and Comments. Other material amendments include those relating to chattel paper and money, among other matters.
a.
Article 12-Related Revisions.
Article 12-related amendments to Article 9 include the addition of two new kinds of collateral under Article 9: controllable account (a subset of account) and controllable payment intangible (a subset of payment intangible, which is a subset of general intangible). A controllable account or controllable payment intangible is created when the account or payment intangible is evidenced by a controllable electronic record (defined in Section 12-102(a)(1), and a subset of general intangible), which results if the account debtor obligated on the account or payment intangible has agreed to pay the person in control of the controllable electronic record. Perfection of a security interest in a controllable electronic record, controllable account, or controllable payment intangible may be by control or by filing a financing statement. Control of a controllable electronic record is determined under Section 12-105. Control of a controllable account or controllable payment intangible is achieved by obtaining control of the controllable electronic record that evidences the account or payment intangible. Section 9-107A(b). A security interest in a controllable account, controllable electronic record, or controllable payment intangible which is perfected by control has priority over a security interest held by a secured party that does not have control. Section 9-326A.
As is the case for secured parties protected by take-free rules under other articles, the rights of a secured party that takes free of competing property interests under Section 12-104(e) or that is protected from certain actions under Section 12-104(g), as a qualifying purchaser of a controllable account, controllable electronic record, or controllable payment intangible, are respected under Article 9. Section 9-331.
The law of the controllable electronic record's jurisdiction under Section 12-107 governs perfection by control and priority of a security interest in a controllable account, controllable electronic record, or controllable payment intangible. Section 9-306B(a). The law of the jurisdiction in which a debtor is located governs perfection by filing (but not priority) for such collateral. Section 9-306B(b).
The 2022 Article 9 Revisions also contains several other Article 12-related conforming amendments to Article 9.
b.
Chattel Paper-Related Amendments.
These amendments primarily address two issues that have arisen under the pre-2022 Article 9 with respect to transactions in chattel paper.
First, the definition of "chattel paper" created uncertainty in "bundled" or "hybrid" transactions in which monetary obligations exist not only under a lease of goods but also with respect to other property and services relating to the leased goods. Frequently, the value of the non-goods aspect of a transaction is substantially greater than the value of the lessee's rights under the lease of goods. Uncertainty existed among those who finance chattel paper and other rights to payment as to whether these transactions give rise to chattel paper. The revisions resolve this issue by treating only those transactions whose predominant purpose was to give the obligor (lessee) the right to possession and use of the goods as giving rise to "chattel paper." Some similar issues arise in connection with chattel paper that includes a security interest securing specific goods. See Section 9-102, Comment 5.b.
Second, the pre-2022 statutory distinction between "tangible chattel paper" and "electronic chattel paper" caused practical problems. As to tangible chattel paper (i.e., evidenced by writings), problems arose in the case of multiple originals of writings and situations in which separate writings covered different components of chattel paper. Official comments issued in connection with the 1998 Revisions addressed, but did not entirely resolve, these issues. As to electronic chattel paper, the safe harbor for control was based on a "single authoritative copy" of the chattel paper. Moreover, in some situations tangible chattel paper is converted to electronic form and electronic chattel paper is converted to tangible form. Additional uncertainty existed when one or more records comprised one or more authoritative tangible copies of the records that evidenced the right to payment and rights in related property and one or more authoritative electronic copies of those records also existed.
The 2022 Article 9 Revisions provide a single rule, under which a security interest in chattel paper can be perfected by taking possession of the authoritative tangible copies, if any, and obtaining control of the electronic authoritative copies, if any. This single rule addresses cases where some records evidencing chattel paper are electronic and some are tangible or where a record in one medium is replaced by a record in another.
The 2022 Article 9 Revisions also define chattel paper more accurately, as the right to payment of a monetary obligation that is secured by a security interest in specific goods or owed under a lease of specific goods, if the right to payment and interest in the goods are evidenced by a record.
Finally, the 2022 Article 9 Revisions provide a new choice-of-law rule for perfection and priority of security interests in chattel paper that is evidenced by authoritative electronic copies of records or by such electronic copies and authoritative tangible copies. For such chattel paper, Section 9-306A provides that perfection by control and possession of authoritative copies and priority are governed by the law of the "chattel paper's jurisdiction," based loosely on Sections 8-110 and 9-305. For chattel paper evidenced only by authoritative tangible copies, Section 9-306A(d) provides that perfection by possession and priority are governed by the law of the location of the authoritative tangible copies. Perfection by filing continues to be governed by the law of the location of the debtor for all chattel paper.
c.
Money-Related Amendments.
Section 1-201(b)(24) defines "money" as including "a medium of exchange currently authorized or adopted by a domestic or foreign government . . . ." There is no way of knowing how money in an intangible form might develop, but there are indications that some countries might authorize or adopt intangible tokens as a medium of exchange and others might authorize or adopt deposit accounts with a central bank as money. (These tokens or accounts sometimes are referred to as central bank digital currency or CBDC.) For many purposes, there is no need for the UCC to distinguish among types of money. For Article 9 purposes, however, distinctions must be drawn. Only tangible money is susceptible of perfection by possession. And the steps needed for perfection by control with respect to intangible tokens, such as controllable electronic records, will not work for deposit accounts with a central bank, and vice versa. For this reason, the revisions provide an Article 9 definition of "money" that is narrower than the Article 1 definition. The Article 9 definition expressly excludes deposit accounts (but not CBDC that is a token). Thus, "electronic money," defined in Section 9-102 as "money in an electronic form," would not include deposit accounts. The Article 9 definition of "money" also excludes money in an electronic form that cannot be subjected to control under Section 9-105A.
The Article 9 provisions governing "deposit accounts" would remain suitable for accounts with a central bank, even if a government has adopted these accounts as money. The revisions leave Article 9's treatment of deposit accounts largely unchanged. Under the revisions, a security interest in electronic money as original collateral can be perfected only by control. The requirements for obtaining control of electronic money under Section 9-105A are essentially the same as those for obtaining control of a controllable electronic record under Article 12.
The 2022 Article 9 Revisions also make changes to Section 9-332, the take-free rules for transferees of money, including the addition of a new rule applicable to electronic money, and transferees of funds from deposit accounts.
d.
Transitional Rules.
Article A to the 2022 Amendments provides important transitional rules. These rules are designed to protect the expectations of parties to transactions entered into before the effective date of a state's enactment of the revisions. They also provide for an adequate period of time for parties to pre-effective date transactions to make adjustments so as to preserve certain pre-effective date priorities.
ANNOTATIONS
Repeals and reenactments.
— Laws 2001, ch. 139, § 1 repealed former 55-9-101 NMSA 1978, as enacted by Laws 1961, ch. 96, § 9-101, and enacted a new section, effective July 1, 2001.
Decisions under former Section 55-9-101 NMSA 1978.
— In light of the similarity of this section and former Section 55-9-101, annotations decided under former 55-9-101 NMSA 1978 have been included in the annotations in this section.
Priority between landlord's lien and Article 9 security interest.
— The priority between a landlords' lien and an Article 9 security interest is not covered by the statutory provisions of the Uniform Commercial Code - Secured Transactions. In such a case, the common law doctrine of "first in time, first in right" controls the priorities between the parties.
Kuemmerle v. United N.M. Bank
, 1992-NMSC-028, 113 N.M. 677, 831 P.2d 976 (decided under former law).
Failure to comply with code precludes mortgagee from foreclosure.
— Mortgagee was precluded from foreclosing on a mortgage taken on property subject to an executory sales contract of which it had actual notice, since it failed to comply with the provisions of the Uniform Commercial Code on secured transactions, including failing to comply with the filing provisions of the Code.
First Nat'l Bank v. Luce
, 1974-NMSC-098, 87 N.M. 94, 529 P.2d 760 (decided under former law).
The security assignment of a real estate contract
is not subject to the perfection requirements of this article.
In re Anthony
, 1992-NMSC-038, 114 N.M. 95, 835 P.2d 811 (decided under former law).
Law reviews.
— For comment on Strevell-Paterson Fin. Co. v. May, 77 N.M. 331, 422 P.2d 366 (1967), see 8 Nat. Resources J. 713 (1968).
For comment, "New Mexico's Uniform Commercial Code in Oil and Gas Transactions," see 10 Nat. Resources J. 361 (1970).
For article, "Lender Recourse in Indian Country: A Navajo Case Study," see 21 N.M.L. Rev. 275 (1991).
For note, "Commercial Law - And Then Personal Property Became Real Property:
In re Anthony
," see 23 N.M.L. Rev. 263 (1993).
For article, "Secured Transactions History: The Fraudulent Myth," see 29 N.M.L. Rev. 363 (1999).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
68A Am. Jur. 2d Secured Transactions § 1 et seq.
Construction and effect of U.C.C., art. 9, dealing with secured transactions, sales of accounts, contract rights and chattel paper, 30 A.L.R.3d 9, 67 A.L.R.3d 308, 69 A.L.R.3d 1162, 76 A.L.R.3d 11, 99 A.L.R.3d 807, 99 A.L.R.3d 1080, 100 A.L.R.3d 10, 100 A.L.R.3d 940, 7 A.L.R.4th 308, 11 A.L.R.4th 241, 90 A.L.R.4th 859, 25 A.L.R.5th 696.
6A C.J.S. Assignments § 93; 8 C.J.S. Bailments § 103; 35 C.J.S. Factors §§ 46 et seq.; 53 C.J.S. Liens § 1 et seq.; 72 C.J.S. Pledges §§ 28 et seq., 40 et seq.; 79 C.J.S. Secured Transactions § 1 et seq.