2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 9 - Secured Transactions › Part 6 - DEFAULT › Subpart 1 - DEFAULT AND ENFORCEMENT OFSECURITY INTEREST › Section 55-9-611 - Notification before disposition of collateral.

(a) In this section, "notification date" means the earlier of the date on which:
(1) a secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or
(2) the debtor and any secondary obligor waive the right to notification.
(b) Except as otherwise provided in Subsection (d) of this section, a secured party that disposes of collateral under Section 55-9-610 NMSA 1978 shall send to the persons specified in Subsection (c) of this section a reasonable authenticated notification of disposition.
(c) To comply with Subsection (b) of this section, the secured party shall send an authenticated notification of disposition to:
(1) the debtor;
(2) any secondary obligor; and
(3) if the collateral is other than consumer goods:
(A) any other person from which the secured party has received, before the notification date, an authenticated notification of a claim of an interest in the collateral;
(B) any other secured party or lienholder that, ten days before the notification date, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:
(i) identified the collateral;
(ii) was indexed under the debtor's name as of that date; and
(iii) was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date; and
(C) any other secured party that, ten days before the notification date, held a security interest in the collateral perfected by compliance with a statute, regulation or treaty described in Subsection (a) of Section 55-9-311 NMSA 1978.
(d) Subsection (b) of this section does not apply if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market.
(e) A secured party complies with the requirement for notification prescribed by Subparagraph (B) of Paragraph (3) of Subsection (c) of this section if:
(1) not later than twenty days or earlier than thirty days before the notification date, the secured party requests, in a commercially reasonable manner, information concerning financing statements indexed under the debtor's name in the office indicated in Subparagraph (B) of Paragraph (3) of Subsection (c) of this section; and
(2) before the notification date, the secured party:
(A) did not receive a response to the request for information; or
(B) received a response to the request for information and sent an authenticated notification of disposition to each secured party or other lienholder named in that response whose financing statement covered the collateral.
History:
1978 Comp., § 55-9-611, enacted by Laws 2001, ch. 139, § 108.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1.
Source.
Former section 9-504(3).
2.
Reasonable Notification.
This section requires a secured party who wishes to dispose of collateral under Section 9-610 to send "a reasonable signed notification of disposition" to specified interested persons, subject to certain exceptions. The notification must be reasonable as to the manner in which it is sent, its timeliness (i.e., a reasonable time before the disposition is to take place), and its content. See Sections 9-612 (timeliness of notification), 9-613 (contents of notification generally), 9-614 (contents of notification in consumer-goods transactions).
3.
Notification to Debtors and Secondary Obligors.
This section imposes a duty to send notification of a disposition not only to the debtor but also to any secondary obligor. Subsections (b) and (c) resolve an uncertainty under former article 9 by providing that secondary obligors (sureties) are entitled to receive notification of an intended disposition of collateral, regardless of who created the security interest in the collateral. If the surety created the security interest, it would be the debtor. If it did not, it would be a secondary obligor. (This article also resolves the question of the secondary obligor's ability to waive, pre-default, the right to notification - waiver generally is not permitted.
See
section 9-602.) Section 9-605 relieves a secured party from any duty to send notification to a debtor or secondary obligor unknown to the secured party.
Under subsection (b), the principal obligor (borrower) is not always entitled to notification of disposition.
Example: Behnfeldt borrows on an unsecured basis, and Bruno grants a security interest in her car to secure the debt. Behnfeldt is a primary obligor, not a secondary obligor. As such, she is not entitled to notification of disposition under this section.
4.
Notification to Other Secured Parties.
Prior to the 1972 amendments to Article 9, former Section 9-504(3) [55-9-504(3) NMSA 1978] required the enforcing secured party to send reasonable notification of the disposition:
except in the case of consumer goods to any other person who has a security interest in the collateral and who has duly filed a financing statement indexed in the name of the debtor in this State or who is known by the secured party to have a security interest in the collateral.
The 1972 amendments eliminated the duty to give notice to secured parties other than those from whom the foreclosing secured party had received written notice of a claim of an interest in the collateral.
Many of the problems arising from dispositions of collateral encumbered by multiple security interests can be ameliorated or solved by informing all secured parties of an intended disposition and affording them the opportunity to work with one another. To this end, subsection (c)(3)(B) expands the duties of the foreclosing secured party to include the duty to notify (and the corresponding burden of searching the files to discover) certain competing secured parties. The subsection imposes a search burden that in some cases may be greater than the pre-1972 burden on foreclosing secured parties but certainly is more modest than that faced by a new secured lender.
To determine who is entitled to notification, the foreclosing secured party must determine the proper office for filing a financing statement as of a particular date, measured by reference to the "notification date," as defined in subsection (a). This determination requires reference to the choice-of-law provisions of Part 3. The secured party must ascertain whether any financing statements covering the collateral and indexed under the debtor's name, as the name existed as of that date, in fact were filed in that office. The foreclosing secured party generally need not notify secured parties whose effective financing statements have become more difficult to locate because of changes in the location of the debtor, proceeds rules, or changes in the name that is sufficient as the name of the debtor under Section 9-503(a) [55-9-503(a) NMSA 1978].
5.
Signature Requirement.
Subsections (b), (c), and (e) explicitly provide that notifications must be "signed." Some cases read pre-1998 Section 9-504(3) as validating oral notification. Consistent with the revised definition of "sign" in Section 1-201, the cognate term "signed" replaces the references to "authenticated" in the pre-2022 text of this section.
6.
Second Try.
This article leaves to judicial resolution, based upon the facts of each case, the question whether the requirement of "reasonable notification" requires a "second try," i.e., whether a secured party who sends notification and learns that the debtor did not receive it must attempt to locate the debtor and send another notification.
7.
Recognized Market; Perishable Collateral.
Subsection (d) makes it clear that there is no obligation to give notification of a disposition in the case of perishable collateral or collateral customarily sold on a recognized market (e.g., marketable securities). As to what constitutes a recognized market, see Section 9-610, Comment 9.
8.
Failure to Conduct Notified Disposition.
Nothing in this article prevents a secured party from electing not to conduct a disposition after sending a notification. Nor does this article prevent a secured party from electing to send a revised notification if its plans for disposition change. This assumes, however, that the secured party acts in good faith, the revised notification is reasonable, and the revised plan for disposition and any attendant delay are commercially reasonable.
9.
Waiver.
A debtor or secondary obligor may waive the right to notification under this section only by a post-default signed agreement. See Section 9-624(a).
10.
Other Law.
Other State or federal law may contain requirements concerning notification of a disposition of property by a secured party. For example, federal law imposes notification requirements with respect to the enforcement of mortgages on federally documented vessels. Principles of statutory interpretation and, in the context of federal law, supremacy and preemption determine whether and to what extent law other than this Article supplements, displaces, or is displaced by this Article.
See
Sections 1-103, 1-104, 9-109(c)(1) [55-1-103, 55-1-104, 55-9-109(c) NMSA 1978].
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 139, § 155 makes the act effective July 1, 2001.
Decisions under former Section 55-9-504 NMSA 1978.
— In light of the similarity of this section and former Section 55-9-504 NMSA 1978, annotations decided under former Section 55-9-504 NMSA 1978 have been included in the annotations in this section.
Secured party required to give notice.
— Notice of the time and place of sale under the Code is required to be given the debtor by a secured party.
Foundation Discs., Inc. v. Serna
, 1970-NMSC-072, 81 N.M. 474, 468 P.2d 875 (decided under former law).
Test for notification good faith effort not whether notice received.
— In construing the requirements of notification to be sent a debtor under Subsection (3) (now this section), the test of notification is not whether the debtor receives the notice but only whether the secured party has made a good faith effort and took such steps as a reasonable person would have taken to give notice.
Begay v. Foutz & Tanner, Inc.
, 1979-NMCA-136, 95 N.M. 106, 619 P.2d 551,
rev'd on other grounds sub nom.
Reeves v. Foutz & Tanner, Inc.
, 1980-NMSC-095, 94 N.M. 760, 617 P.2d 149 (decided under former law).
Requirement of reasonable notification is a question of fact
to be determined only after considering all the facts and circumstances of the individual case.
Ridley v. First Nat'l Bank
, 1974-NMCA-149, 87 N.M. 184, 531 P.2d 607, cert. denied, 87 N.M. 179, 531 P.2d 602 (1975) (decided under former law).
Written not verbal notice satisfactory under code.
— Where the record discloses that no formal written notice of the time and place of sale was given to defendant, the fact that defendant may have had verbal notice that there would be a sale of the collateral does not satisfy the requirements of the code.
Foundation Discs., Inc. v. Serna
, 1970-NMSC-072, 81 N.M. 474, 468 P.2d 875 (decided under former law).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
Construction of term "debtor" as used in UCC § 9-504(3), requiring secured party to give notice to debtor of sale of collateral securing obligation, 5 A.L.R.4th 1291.
Loss or modification of right to notification of sale of repossessed collateral under Uniform Commercial Code § 9-504, 9 A.L.R.4th 552.
Sufficiency of secured party's notification of sale or other intended disposition of collateral under UCC § 9-504(3), 11 A.L.R.4th 241.
Nature of collateral which secured party may sell or otherwise dispose of without giving notice to defaulting debtor under UCC § 9-504(3), 11 A.L.R.4th 1060.