(a) In Chapter 55, Article 9 NMSA 1978:
(1) "accession" means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost;
(2) "account", except as used in "account for", "account statement", "account to", "commodity account" in Paragraph (14) of this subsection, "customer's account", "deposit account" in Paragraph (29) of this subsection, "on account of" and "statement of account":
(A) means a right to payment of a monetary obligation, whether or not earned by performance:
(i) for property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of;
(ii) for services rendered or to be rendered;
(iii) for a policy of insurance issued or to be issued;
(iv) for a secondary obligation incurred or to be incurred;
(v) for energy provided or to be provided;
(vi) for the use or hire of a vessel under a charter or other contract;
(vii) arising out of the use of a credit or charge card or information contained on or for use with the card; or
(viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state or person licensed or authorized to operate the game by a state or governmental unit of a state; and
(B) includes controllable accounts and health-care-insurance receivables; but
(C) does not include:
(i) chattel paper;
(ii) commercial tort claims;
(iii) deposit accounts;
(iv) investment property;
(v) letter-of-credit rights or letters of credit;
(vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card; or
(vii) rights to payment evidenced by an instrument;
(3) "account debtor" means a person obligated on an account, chattel paper or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the negotiable instrument evidences chattel paper;
(4) "accounting", except as used in "accounting for", means a record:
(A) signed by a secured party;
(B) indicating the aggregate unpaid secured obligations as of a date not more than thirty-five days earlier or thirty-five days later than the date of the record; and
(C) identifying the components of the obligations in reasonable detail;
(5) "agricultural lien" means an interest in farm products:
(A) that secures payment or performance of an obligation for:
(i) goods or services furnished in connection with a debtor's farming operation; or
(ii) rent on real property leased by a debtor in connection with its farming operation;
(B) that is created by statute in favor of a person that:
(i) in the ordinary course of its business furnished goods or services to a debtor in connection with a debtor's farming operation; or
(ii) leased real property to a debtor in connection with the debtor's farming operation; and
(C) whose effectiveness does not depend on the person's possession of the personal property;
(6) "as-extracted collateral" means:
(A) oil, gas or other minerals that are subject to a security interest that:
(i) is created by a debtor having an interest in the minerals before extraction; and
(ii) attaches to the minerals as extracted; or
(B) accounts arising out of the sale at the wellhead or minehead of oil, gas or other minerals in which the debtor had an interest before extraction;
(7) [Reserved];
(7A) "assignee", except as used in "assignee for benefit of creditors", means a person:
(i) in whose favor a security interest that secures an obligation is created or provided for under a security agreement, whether or not the obligation is outstanding; or
(ii) to which an account, chattel paper, payment intangible or promissory note has been sold. The term includes a person to which a security interest has been transferred by a secured party;
(7B) "assignor" means a person that:
(i) under a security agreement, creates or provides for a security interest that secures an obligation; or
(ii) sells an account, chattel paper, payment intangible or promissory note. The term includes a secured party that has transferred a security interest to another person;
(8) "bank" means an organization that is engaged in the business of banking and includes savings banks, savings and loan associations, credit unions and trust companies;
(9) "cash proceeds" means proceeds that are money, checks, deposit accounts or the like;
(10) "certificate of title" means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral;
(11) "chattel paper" means:
(A) a right to payment of a monetary obligation secured by specific goods if the right to payment and security agreement are evidenced by a record; or
(B) a right to payment of a monetary obligation owed by a lessee under a lease agreement with respect to specific goods and a monetary obligation owed by the lessee in connection with the transaction giving rise to the lease, if:
(i) the right to payment and lease agreement are evidenced by a record; and
(ii) the predominant purpose of the transaction giving rise to the lease was to give the lessee the right to possession and use of the goods.
The term does not include a right to payment arising out of a charter or other contract involving the use or hire of a vessel or a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card;
(12) "collateral" means the property subject to a security interest or agricultural lien and includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles and promissory notes that have been sold; and
(C) goods that are the subject of a consignment;
(13) "commercial tort claim" means a claim arising in tort with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the claim:
(i) arose in the course of the claimant's business or profession; and
(ii) does not include damages arising out of personal injury to or the death of an individual;
(14) "commodity account" means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer;
(15) "commodity contract" means a commodity futures contract, an option on a commodity futures contract, a commodity option or another contract if the contract or option is:
(A) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws; or
(B) traded on a foreign commodity board of trade, exchange or market, and is carried on the books of a commodity intermediary for a commodity customer;
(16) "commodity customer" means a person for which a commodity intermediary carries a commodity contract on its books;
(17) "commodity intermediary" means a person that:
(A) is registered as a futures commission merchant under federal commodities law; or
(B) in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law;
(18) "communicate" means:
(A) to send a written or other tangible record;
(B) to transmit a record by any means agreed upon by the persons sending and receiving the record; or
(C) in the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing-office rule;
(19) "consignee" means a merchant to which goods are delivered in a consignment;
(20) "consignment" means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a name other than the name of the person making delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its creditors to be substantially engaged in selling the goods of others;
(B) with respect to each delivery, the aggregate value of the goods is one thousand dollars ($1,000) or more at the time of delivery;
(C) the goods are not consumer goods immediately before delivery; and
(D) the transaction does not create a security interest that secures an obligation;
(21) "consignor" means a person that delivers goods to a consignee in a consignment;
(22) "consumer debtor" means a debtor in a consumer transaction;
(23) "consumer goods" means goods that are used or bought for use primarily for personal, family or household purposes;
(24) "consumer-goods transaction" means a consumer transaction in which:
(A) an individual incurs an obligation primarily for personal, family or household purposes; and
(B) a security interest in consumer goods secures the obligation;
(25) "consumer obligor" means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family or household purposes;
(26) "consumer transaction" means a transaction in which:
(A) an individual incurs an obligation primarily for personal, family or household purposes;
(B) a security interest secures the obligation; and
(C) the collateral is held or acquired primarily for personal, family or household purposes. The term includes consumer-goods transactions;
(27) "continuation statement" means an amendment of a financing statement that:
(A) identifies, by its file number, the initial financing statement to which it relates; and
(B) indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement;
(27A) "controllable account" means an account evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under Section 55-12-105 NMSA 1978 of the controllable electronic record;
(27B) "controllable payment intangible" means a payment intangible evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person that has control under Section 55-12-105 NMSA 1978 of the controllable electronic record;
(28) "debtor" means:
(A) a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;
(B) a seller of accounts, chattel paper, payment intangibles or promissory notes; or
(C) a consignee;
(29) "deposit account" means a demand, time, savings, passbook or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument;
(30) "document" means a document of title or a receipt of the type described in Subsection (b) of Section 55-7-201 NMSA 1978;
(31) [Reserved];
(31A) "electronic money" means money in an electronic form;
(32) "encumbrance" means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property;
(33) "equipment" means goods other than inventory, farm products or consumer goods;
(34) "farm products" means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and that are:
(A) crops grown, growing or to be grown, including:
(i) crops produced on trees, vines and bushes; and
(ii) aquatic goods produced in aquacultural operations;
(B) livestock, born or unborn, including aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming operation; or
(D) products of crops or livestock in their unmanufactured states;
(35) "farming operation" means raising, cultivating, propagating, fattening, grazing or any other farming, livestock or aquacultural operation;
(36) "file number" means the number assigned to an initial financing statement pursuant to Subsection (a) of Section 55-9-519 NMSA 1978;
(37) "filing office" means an office designated in Section 55-9-501 NMSA 1978 as the place to file a financing statement;
(38) "filing-office rule" means a rule adopted pursuant to Section 55-9-526 NMSA 1978;
(39) "financing statement" means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement;
(40) "fixture filing" means the filing of a financing statement covering goods that are or are to become fixtures and satisfying Subsections (a) and (b) of Section 55-9-502 NMSA 1978. The term includes the filing of a financing statement covering goods of a transmitting utility that are or are to become fixtures;
(41) "fixtures" means goods that have become so related to particular real property that an interest in them arises under real property law;
(42) "general intangible" means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money and oil, gas or other minerals before extraction. The term includes controllable electronic records, payment intangibles and software;
(43) [Reserved];
(44) "goods" means all things that are movable when a security interest attaches and:
(A) includes:
(i) fixtures;
(ii) standing timber that is to be cut and removed under a conveyance or contract for sale;
(iii) the unborn young of animals;
(iv) crops grown, growing or to be grown, even if the crops are produced on trees, vines or bushes;
(v) manufactured homes; and
(vi) a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if the program is associated with the goods in such a manner that it customarily is considered part of the goods, or by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods; but
(B) does not include:
(i) a computer program embedded in goods that consist solely of the medium in which the program is embedded; or
(ii) accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money or oil, gas or other minerals before extraction;
(45) "governmental unit" means a subdivision, agency, department, county, parish, municipality or other unit of the government of the United States, a state or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States;
(46) "health-care-insurance receivable" means an interest in or claim under a policy of insurance that is a right to payment of a monetary obligation for health care goods or services provided or to be provided;
(47) "instrument" means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease and is of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include:
(A) investment property;
(B) letters of credit;
(C) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card; or
(D) writings that evidence chattel paper;
(48) "inventory" means goods, other than farm products, that:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or to be furnished under a contract of service;
(C) are furnished by a person under a contract of service; or
(D) consist of raw materials, work in process or materials used or consumed in a business;
(49) "investment property" means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract or commodity account;
(50) "jurisdiction of organization", with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized;
(51) "letter-of-credit right" means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit;
(52) "lien creditor" means:
(A) a creditor that has acquired a lien on the property involved by attachment, levy or the like;
(B) an assignee for benefit of creditors from the time of assignment;
(C) a trustee in bankruptcy from the date of the filing of the petition; or
(D) a receiver in equity from the time of appointment;
(53) "manufactured home" means a structure, transportable in one or more sections, which, in the traveling mode, is eight body feet or more in width or forty body feet or more in length, or, when erected on site, is three hundred twenty or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning and electrical systems contained therein. The term includes any structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States secretary of housing and urban development and complies with the standards established under 42 USCA;
(54) "manufactured-home transaction" means a secured transaction:
(A) that creates a purchase-money security interest in a manufactured home, other than a manufactured home held as inventory; or
(B) in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral;
(54A) "money" has the meaning in Paragraph (24) of Subsection (b) of Section 55-1-201 NMSA 1978, but does not include: (i) a deposit account; or (ii) money in an electronic form that cannot be subjected to control under Section 55-9-105A NMSA 1978.
(55) "mortgage" means a consensual interest in real property, including fixtures, that secures payment or performance of an obligation;
(56) "new debtor" means a person that becomes bound as debtor under Subsection (d) of Section 55-9-203 NMSA 1978 by a security agreement previously entered into by another person;
(57) "new value" means:
(A) money;
(B) money's worth in property, services or new credit; or
(C) release by a transferee of an interest in property previously transferred to the transferee. The term does not include an obligation substituted for another obligation;
(58) "noncash proceeds" means proceeds other than cash proceeds;
(59) "obligor" means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral:
(A) owes payment or other performance of the obligation;
(B) has provided property other than the collateral to secure payment or other performance of the obligation; or
(C) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit;
(60) "original debtor", except as used in Subsection (c) of Section 55-9-310 NMSA 1978, means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under Subsection (d) of Section 55-9-203 NMSA 1978;
(61) "payment intangible" means a general intangible under which the account debtor's principal obligation is a monetary obligation. The term includes a controllable payment intangible;
(62) "person related to", with respect to an individual, means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister or sister-in-law of the individual;
(C) an ancestor or lineal descendant of the individual or the individual's spouse; or
(D) any other relative, by blood or marriage, of the individual or the individual's spouse who shares the same home with the individual;
(63) "person related to", with respect to an organization, means:
(A) a person directly or indirectly controlling, controlled by or under common control with the organization;
(B) an officer or director of, or a person performing similar functions with respect to, the organization;
(C) an officer or director of, or a person performing similar functions with respect to, a person described in Subparagraph (A) of this paragraph;
(D) the spouse of an individual described in Subparagraph (A), (B) or (C) of this paragraph; or
(E) an individual who is related by blood or marriage to an individual described in Subparagraph (A), (B), (C) or (D) of this paragraph and shares the same home with the individual;
(64) "proceeds", except as used in Subsection (b) of Section 55-9-609 NMSA 1978, means:
(A) whatever is acquired upon the sale, lease, license, exchange or other disposition of collateral;
(B) whatever is collected on, or distributed on account of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral, claims arising out of the loss, nonconformity or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or
(E) to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral;
(65) "promissory note" means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds;
(66) "proposal" means a record signed by a secured party, which record includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to Sections 55-9-620 through 55-9-622 NMSA 1978;
(67) "public-finance transaction" means a secured transaction in connection with which:
(A) debt securities are issued;
(B) all or a portion of the securities issued have an initial stated maturity of at least twenty years; and
(C) the debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation or assignor or assignee of a security interest is a state or a governmental unit of a state;
(68) "public organic record" means a record that is available to the public for inspection and is:
(A) a record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States that amends or restates the initial record;
(B) an organic record of a business trust consisting of the record initially filed with a state and any record filed with the state that amends or restates the initial record if a statute of the state governing business trusts requires that the record be filed with the state; or
(C) a record consisting of legislation enacted by the legislature of a state or the congress of the United States that forms or organizes an organization; any record amending the legislation; and any record filed with or issued by the state or the United States that amends or restates the name of the organization;
(69) "pursuant to commitment", with respect to an advance made or other value given by a secured party, means pursuant to the secured party's obligation, whether or not a subsequent event of default or other event not within the secured party's control has relieved or may relieve the secured party from its obligation;
(70) "record", except as used in "for record", "of record", "record or legal title" and "record owner", means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
(71) "registered organization" means an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by or the enactment of legislation by the state or the United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust's organic record be filed with the state;
(72) "secondary obligor" means an obligor to the extent that:
(A) the obligor's obligation is secondary; or
(B) the obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor or property of either;
(73) "secured party" means:
(A) a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment intangibles or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral agent or other representative in whose favor a security interest or agricultural lien is created or provided for; or
(F) a person that holds a security interest arising under Section 55-2-401, Section 55-2-505, Subsection (3) of Section 55-2-711, Subsection (5) of Section 55-2A-508, Section 55-4-210 or Section 55-5-118 NMSA 1978;
(74) "security agreement" means an agreement that creates or provides for a security interest;
(75) [Reserved];
(76) "software" means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods;
(77) "state" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands or any territory or insular possession subject to the jurisdiction of the United States;
(78) "supporting obligation" means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument or investment property;
(79) [Reserved];
(79A) "tangible money" means money in a tangible form;
(80) "termination statement" means an amendment of a financing statement that:
(A) identifies, by its file number, the initial financing statement to which it relates; and
(B) indicates either that it is a termination statement or that the identified financing statement is no longer effective; and
(81) "transmitting utility" means an organization primarily engaged in the business of:
(A) operating a railroad, subway, street railway or trolley bus;
(B) transmitting communications electrically, electromagnetically or by light;
(C) transmitting goods by pipeline or sewer; or
(D) transmitting or producing and transmitting electricity, steam, gas or water.
(b) "Control", as provided in Section 55-7-106 NMSA 1978, and the following definitions in other articles apply to this article:
"applicant"
Section 55-5-102 NMSA 1978;
"beneficiary"
Section 55-5-102 NMSA 1978;
"broker"
Section 55-8-102 NMSA 1978;
"certificated security"
Section 55-8-102 NMSA 1978;
"check"
Section 55-3-104 NMSA 1978;
"clearing corporation".
Section 55-8-102 NMSA 1978;
"contract for sale"
Section 55-2-106 NMSA 1978;
"controllable electronic record"
Section 55-12-102 NMSA 1978
"customer"
Section 55-4-104 NMSA 1978;
"entitlement holder"
Section 55-8-102 NMSA 1978;
"financial asset"
Section 55-8-102 NMSA 1978;
"holder in due course".
Section 55-3-302 NMSA 1978;
"issuer" (with respect to a letter of credit or letter-of-credit right)
Section 55-5-102 NMSA 1978;
"issuer" (with respect to a security)
Section 55-8-201 NMSA 1978
"issuer" (with respect to documents of title)
Section 55-7-102 NMSA 1978;
"lease"
Section 55-2A-103 NMSA 1978;
"lease agreement"
Section 55-2A-103 NMSA 1978;
"lease contract"
Section 55-2A-103 NMSA 1978;
"leasehold interest"
Section 55-2A-103 NMSA 1978;
"lessee"
Section 55-2A-103 NMSA 1978;
"lessee in ordinary course of business"
Section 55-2A-103 NMSA 1978;
"lessor"
Section 55-2A-103 NMSA 1978;
"lessor's residual interest"
Section 55-2A-103 NMSA 1978;
"letter of credit"
Section 55-5-102 NMSA 1978;
"merchant"
Section 55-2-104 NMSA 1978;
"negotiable instrument"
Section 55-3-104 NMSA 1978;
"nominated person"
Section 55-5-102 NMSA 1978;
"note"
Section 55-3-104 NMSA 1978;
"proceeds of a letter of credit"
Section 55-5-114 NMSA 1978;
"protected purchaser"
Section 55-8-303 NMSA 1978;
"prove"
Section 55-3-103 NMSA 1978;
"qualifying purchaser"
Section 55-12-102 NMSA 1978;
"sale"
Section 55-2-106 NMSA 1978;
"securities account"
Section 55-8-501 NMSA 1978;
"securities intermediary"
Section 55-8-102 NMSA 1978;
"security"
Section 55-8-102 NMSA 1978;
"security certificate"
Section 55-8-102 NMSA 1978;
"security entitlement"
Section 55-8-102 NMSA 1978;
and
"uncertificated security"
Section 55-8-102 NMSA 1978.
(c) Chapter 55, Article 1 NMSA 1978 contains general definitions and principles of construction and interpretation applicable throughout Chapter 55, Article 9 NMSA 1978.
History: 1978 Comp., § 55-9-102, enacted by Laws 2001, ch. 139, § 2; 2005, ch. 144, § 94; 2013, ch. 137, § 3; 2021, ch. 86, § 1; 2023, ch. 142, § 43.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1. Source. All terms that are defined in Article 9 and used in more than one section are consolidated in this section. Note that the definition of "security interest" is found in Section 1-201, not in this Article. Many of the definitions in this section derive from those in pre-1998 Section 9-105. Other definitions were added by the 1998 Revisions or modified or added by the 2022 Article 9 Revisions.
2. Parties to Secured Transactions.
a. "Debtor"; "Obligor"; "Secondary Obligor." Determining whether a person was a "debtor" under pre-1998 Section 9-105(1)(d) required a close examination of the context in which the term was used. To reduce the need for this examination, the 1998 Revisions redefined "debtor" and added new defined terms, "secondary obligor" and "obligor." In the context of Part 6 (default and enforcement), these definitions distinguish among three classes of persons: (i) those persons who may have a stake in the proper enforcement of a security interest by virtue of their non-lien property interest (typically, an ownership interest) in the collateral, (ii) those persons who may have a stake in the proper enforcement of the security interest because of their obligation to pay the secured debt, and (iii) those persons who have an obligation to pay the secured debt but have no stake in the proper enforcement of the security interest. Persons in the first class are debtors. Persons in the second class are secondary obligors if any portion of the obligation is secondary or if the obligor has a right of recourse against the debtor or another obligor with respect to an obligation secured by collateral. One must consult the law of suretyship to determine whether an obligation is secondary. The Restatement (3d), Suretyship and Guaranty § 1 (1996), contains a useful explanation of the concept. Obligors in the third class are neither debtors nor secondary obligors. With one exception (Section 9-616, as it relates to a consumer obligor), the rights and duties provided by Part 6 affect non-debtor obligors only if they are "secondary obligors."
By including in the definition of "debtor" all persons with a property interest (other than a security interest in or other lien on collateral), the definition includes transferees of collateral, whether or not the secured party knows of the transfer or the transferee's identity. Exculpatory provisions in Part 6 protect the secured party in that circumstance. See Sections 9-605 and 9-628. The definition renders unnecessary pre-1998 Section 9-112, which governed situations in which collateral was not owned by the debtor. The definition also includes a "consignee," as defined in this section, as well as a seller of accounts, chattel paper, payment intangibles, or promissory notes.
Secured parties and other lienholders are excluded from the definition of "debtor" because the interests of those parties normally derive from and encumber a debtor's interest. However, if in a separate secured transaction a secured party grants, as debtor, a security interest in its own interest ( i.e. , its security interest and any obligation that it secures), the secured party is a debtor in that transaction. This typically occurs when a secured party with a security interest in specific goods assigns chattel paper.
Consider the following examples:
Example 1: Behnfeldt borrows money and grants a security interest in her Miata to secure the debt. Behnfeldt is a debtor and an obligor.
Example 2: Behnfeldt borrows money and grants a security interest in her Miata to secure the debt. Bruno cosigns a negotiable note as maker. As before, Behnfeldt is the debtor and an obligor. As an accommodation party ( see section 3-419), Bruno is a secondary obligor. Bruno has this status even if the note states that her obligation is a primary obligation and that she waives all suretyship defenses.
Example 3: Behnfeldt borrows money on an unsecured basis. Bruno cosigns the note and grants a security interest in her Honda to secure her obligation. Inasmuch as Behnfeldt does not have a property interest in the Honda, Behnfeldt is not a debtor. Having granted the security interest, Bruno is the debtor. Because Behnfeldt is a principal obligor, she is not a secondary obligor. Whatever the outcome of enforcement of the security interest against the Honda or Bruno's secondary obligation, Bruno will look to Behnfeldt for her losses. The enforcement will not affect Behnfeldt's aggregate obligations.
When the principal obligor (borrower) and the secondary obligor (surety) each has granted a security interest in different collateral, the status of each is determined by the collateral involved.
Example 4: Behnfeldt borrows money and grants a security interest in her Miata to secure the debt. Bruno cosigns the note and grants a security interest in her Honda to secure her obligation. When the secured party enforces the security interest in Behnfeldt's Miata, Behnfeldt is the debtor, and Bruno is a secondary obligor. When the secured party enforces the security interest in the Honda, Bruno is the "debtor." As in Example 3, Behnfeldt is an obligor, but not a secondary obligor.
If a security interest is granted by a protected series of a limited liability company formed, for example, under the Uniform Protected Series Act (2017), the debtor is the protected series. See PEB Commentary No. 23. The 2022 definition of "person" in Section 1-201(b)(27) includes a protected series.
b. "Secured Party." The secured party is the person in whose favor the security interest has been created, as determined by reference to the security agreement. This definition controls, among other things, which person has the duties and potential liability that part 6 imposes upon a secured party. The definition of "secured party" also includes a "consignee," a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold, and the holder of an agricultural lien.
The definition of "secured party" clarifies the status of various types of representatives. Consider, for example, a multi-bank facility under which Bank A, Bank B, and Bank C are lenders and Bank A serves as the collateral agent. If the security interest is granted to the banks, then they are the secured parties. If the security interest is granted to Bank A as collateral agent, then Bank A is the secured party.
b.1. "Assignee"; "Assignor." Instead of referring to a "debtor," "secured party," and "security interest," all of which are defined terms, several provisions of Article 9, including Part 4, refer to the "assignment" or the "transfer" of property interests and some refer to an "assignor," "assignee," or "assigned contract." None of those terms are defined in the UCC. Some courts have read the undefined terms in an unduly narrow way. In 2020, the Permanent Editorial Board for the UCC issued a Commentary clarifying the meanings of these terms and amended the official comments accordingly. PEB Commentary No. 21. This Article generally follows common usage by using the terms "assignment" and "assign" to refer to transfers of rights to payment, claims, and liens and other security interests. It generally uses the term "transfer" to refer to other transfers of interests in property. Except when used in connection with a letter-of-credit transaction (see Section 9-107, Comment 4), no significance should be placed on the use of one term or the other. Depending on the substance of the transaction, each term as used in this Article refers to the assignment or transfer of an outright ownership interest or to the assignment or transfer of a limited interest, such as a security interest, or both.
The 2022 Article 9 Revisions added new definitions of "assignee" and "assignor." Paragraph 7A defines "assignee" as a person in whose favor a security interest securing an obligation is created or to which an account, chattel paper, a payment intangible, or a promissory note has been sold. Paragraph 7B defines "assignor" as creating a security interest securing an obligation or that sells an account, chattel paper, a payment intangible, or a promissory note. These definitions incorporate the essence of the 2020 PEB Commentary into the statutory text. The definitions also specify that an "assignor" includes a secured party that transfers a security interest to another person and an "assignee" includes a person to which a security interest has been transferred by a secured party. By their terms, the defined terms "assignee" and "assignor" contemplate assignments in particular contexts. However, several references in this article to "assigned," "assignment" and "assignee" include transfers in broader contexts than those addressed in the defined terms. See, e.g., subsection (a)(2) ("assigned," in definition of "account") and (a)(47) ("assignment," in definition of "instrument") and Sections 9-109, 9-408, 9-409, and 9-519.
Absent a contrary agreement, an assignee obtains the rights and powers of an assignor as against an account debtor on assigned collateral (e.g., under Section 9-406) and as between the assignee and the assignor (debtor) (e.g., under Section 9-607). See also Restatement (Second) of Contracts § 317(1) (1981) (emphasis added):
An assignment of a right is a manifestation of the assignor's intention to transfer it by virtue of which the assignor's right to performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance.
Several provisions of this Article and its official comments also refer to the "transfer" of property interests. Although that term and its cognates are not defined, depending on the context it may include an "assignment." Moreover, a transfer of property is not limited to transactions of "purchase" and may include the transfer of a limited interest. See also Section 9-332, Comment 2A.
c. Other Parties. A "consumer obligor" is defined as the obligor in a consumer transaction. Definitions of "new debtor" and "original debtor" are used in the special rules found in sections 9-326 and 9-508.
3. Definitions Relating to Creation of a Security Interest.
a. "Collateral." As under pre-1998 Section 9-105, "collateral" is the property subject to a security interest and includes accounts, and chattel paper, payment intangibles, and promissory notes that have been sold. The 1998 Revisions expanded the term to include proceeds subject to a security interest and also broadened the scope of the Article to include as collateral property subject to an agricultural lien as well as payment intangibles and promissory notes that have been sold.
b. "Security Agreement." The definition of "security agreement" is substantially the same as under pre-1998 Section 9-105 an agreement that creates or provides for a security interest. However, the term frequently was used colloquially in pre-1998 Article 9 to refer to the document or writing that contained a debtor's security agreement. The 1998 Article 9 eliminated that usage, reserving the term for the more precise meaning specified in the definition.
Whether an agreement creates a security interest depends not on whether the parties intend that the law characterize the transaction as a security interest but rather on whether the transaction falls within the definition of "security interest" in section 1-201. Thus, an agreement that the parties characterize as a "lease" of goods may be a "security agreement," notwithstanding the parties' stated intention that the law treat the transaction as a lease and not as a secured transaction.
4. Goods-Related Definitions.
a. "Goods"; "Consumer Goods"; "Equipment"; "Farm Products"; "Farming Operation"; "Inventory." The definition of "goods" is substantially the same as the definition in pre-1998 Section 9-105. This Article also retains the four mutually-exclusive "types" of collateral that consist of goods: "consumer goods," "equipment," "farm products," and "inventory." The revisions are primarily for clarification.
The classes of goods are mutually exclusive. For example, the same property cannot simultaneously be both equipment and inventory. In borderline cases a physician's car or a farmer's truck that might be either consumer goods or equipment the principal use to which the property is put is determinative. Goods can fall into different classes at different times. For example, a radio may be inventory in the hands of a dealer and consumer goods in the hands of a consumer. As under pre-1998 Article 9, goods are "equipment" if they do not fall into another category.
The definition of "consumer goods" follows pre-1998 Section 9-109. The classification turns on whether the debtor uses or bought the goods for use "primarily for personal, family, or household purposes."
Goods are inventory if they are leased by a lessor or held by a person for sale or lease. The revised definition of "inventory" makes clear that the term includes goods leased by the debtor to others as well as goods held for lease. (The same result should have obtained under the pre-1998 definition.) Goods to be furnished or furnished under a service contract, raw materials, and work in process also are inventory. Implicit in the definition is the criterion that the sales or leases are or will be in the ordinary course of business. For example, machinery used in manufacturing is equipment, not inventory, even though it is the policy of the debtor to sell machinery when it becomes obsolete or worn. Inventory also includes goods that are consumed in a business (e.g., fuel used in operations). In general, goods used in a business are equipment if they are fixed assets or have, as identifiable units, a relatively long period of use, but are inventory, even though not held for sale or lease, if they are used up or consumed in a short period of time in producing a product or providing a service.
Goods are "farm products" if the debtor is engaged in farming operations with respect to the goods. Animals in a herd of livestock are covered whether the debtor acquires them by purchase or as a result of natural increase. Products of crops or livestock remain farm products as long as they have not been subjected to a manufacturing process. The terms "crops" and "livestock" are not defined. The new definition of "farming operations" is for clarification only.
Crops, livestock, and their products cease to be "farm products" when the debtor ceases to be engaged in farming operations with respect to them. If, for example, they come into the possession of a marketing agency for sale or distribution or of a manufacturer or processor as raw materials, they become inventory. Products of crops or livestock, even though they remain in the possession of a person engaged in farming operations, lose their status as farm products if they are subjected to a manufacturing process. What is and what is not a manufacturing process is not specified in this Article. At one end of the spectrum, some processes are so closely connected with farming such as pasteurizing milk or boiling sap to produce maple syrup or sugar that they would not constitute manufacturing. On the other hand an extensive canning operation would be manufacturing. Once farm products have been subjected to a manufacturing process, they normally become inventory.
The revised definition of "farm products" clarifies the distinction between crops and standing timber and makes clear that aquatic goods produced in aquacultural operations may be either crops or livestock. Although aquatic goods that are vegetable in nature often would be crops and those that are animal would be livestock, this article leaves the courts free to classify the goods on a case-by-case basis. See section 9-324, comment 11.
The definitions of "goods" and "software" are also mutually exclusive. Computer programs usually constitute "software," and, as such, are not "goods" as this Article uses the terms. However, under the circumstances specified in the definition of "goods," computer programs embedded in goods are part of the "goods" and are not "software."
b. "Accession"; "Manufactured Home"; "Manufactured-Home Transaction." Other specialized definitions of goods include "accession" (see the special priority and enforcement rules in section 9-335) and "manufactured home" ( see section 9-515, permitting a financing statement in a "manufactured-home transaction" to be effective for 30 years). The definition of "manufactured home" borrows from the federal Manufactured Housing Act, 42 U.S.C. section 5401 et seq., and is intended to have the same meaning.
c. "As-Extracted Collateral." Under this Article, oil, gas, and other minerals that have not been extracted from the ground are treated as real property, to which this Article does not apply. Upon extraction, minerals become personal property (goods) and eligible to be collateral under this Article. See the definition of "goods," which excludes "oil, gas, and other minerals before extraction." To take account of financing practices reflecting the shift from real to personal property, this Article contains special rules for perfecting security interests in minerals which attach upon extraction and in accounts resulting from the sale of minerals at the wellhead or minehead. See, e.g., Sections 9-301(4) (law governing perfection and priority); 9-501 (place of filing), 9-502 (contents of financing statement), 9-519 (indexing of records). The new term, "as-extracted collateral," added by the 1998 Revisions, refers to the minerals and related accounts to which the special rules apply. The term "at the wellhead" encompasses arrangements based on a sale of the product (goods) at the moment that it issues from the ground and is measured, without technical distinctions as to whether title passes at the "Christmas tree" of a well, the far side of a gathering tank, or at some other point. The term "at . . . the minehead" is comparable.
The following examples explain the operation of these provisions.
Example 5: Debtor owns an interest in oil that is to be extracted. To secure Debtor's obligations to Lender, Debtor enters into a signed agreement granting Lender an interest in the oil. Although Lender may acquire an interest in the oil under real-property law, Lender does not acquire a security interest under this Article until the oil becomes personal property, i.e., until it is extracted and becomes "goods" to which this Article applies. Because Debtor had an interest in the oil before extraction and Lender's security interest attached to the oil as extracted, the oil is "as-extracted collateral."
Example 6: Debtor owns an interest in oil that is to be extracted and contracts to sell the oil to Buyer at the wellhead. In a signed agreement, Debtor agrees to sell to Lender the right to payment from Buyer. This right to payment is an account that constitutes "as-extracted collateral." If Lender then resells the account to Financer, Financer acquires a security interest. However, inasmuch as the debtor-seller in that transaction, Lender, had no interest in the oil before extraction, Financer's collateral (the account it owns) is not "as-extracted collateral."
Example 7: Under the facts of example 6, before extraction, Buyer grants a security interest in the oil to Bank. Although Bank's security interest attaches when the oil is extracted, Bank's security interest is not in "as-extracted collateral," inasmuch as its debtor, Buyer, did not have an interest in the oil before extraction.
5. Receivables-related Definitions.
a. "Account"; "Health-Care-Insurance Receivable"; "As-Extracted Collateral." The definition of "account" has been expanded and reformulated. It is no longer limited to rights to payment relating to goods or services. Many categories of rights to payment that were classified as general intangibles under pre-1998 Article 9 are accounts under this Article. Thus, if they are sold, a financing statement must be filed to perfect the buyer's interest in them. As used in the definition of "account," a right to payment "arising out of the use of a credit or charge card or information contained on or for use with the card" is the right of a card issuer to payment from its cardholder. A credit-card or charge-card transaction may give rise to other rights to payments; however, those other rights do not "arise out of the use" of the card or information contained on or for use with the card. Among the types of property that are expressly excluded from the definition is "a right to payment for money or funds advanced or sold." As used in the exclusion from the definition of "account," "funds" is a broader concept than money (although the term is not defined). For example, when a bank-lender credits a borrower's deposit account for the amount of a loan, the bank's advance of funds is not a transaction giving rise to an account. The 2022 Article 9 Revisions amended the definition of "money" in Section 1-201(b)(24) and added a new, more narrow, definition of "money" in Section 9-102(a)(54A). See Comment 12A.
The definition of "health-care-insurance receivable" is new. It is a subset of the definition of "account." However, the rules generally applicable to account debtors on accounts do not apply to insurers obligated on health-care-insurance receivables. See Sections 9-404(e), 9-405(d), 9-406(i) [55-9-404, 55-9-405, 55-9-406 NMSA 1978, respectively].
Note that certain accounts also are "as-extracted collateral." See Comment 4.c., Examples 6 and 7.
The 2022 Article 9 Revisions amended the definition of "account" to reflect the 2022 revised definition of "chattel paper," discussed in Comment 5.b. The revised definition of "account" also includes some additional exceptions that accommodate the use of the term "account" in other provisions. These new exceptions were implicit in the former definition. Moreover, the exceptions for the defined terms "commodity account" and "deposit account" implicitly apply to all uses of those terms in this Article.
b. "Chattel Paper." "Chattel paper" consists of a monetary obligation that is either secured by specific goods or arises in connection with a lease of specific goods, in each case if the obligation and security interest or lease is evidenced by a record. The monetary obligation itself need not be related to the goods. For example, a loan secured by specific goods and evidenced by one or more records creates chattel paper regardless of the purpose of the loan.
Rights to payment arising out of charters of vessels or the use of credit or charge cards are expressly excluded from the definition of chattel paper; they are accounts. The term "charter" as used in this section includes bareboat charters, time charters, successive voyage charters, contracts of affreightment, contracts of carriage, and all other arrangements for the use of vessels.
What distinguishes chattel paper from other rights to payment is the fact that creditor has an interest in specific goods to enforce the right to payment. For example, the fact that a secured party also has an interest in other property does not prevent the right to payment from being chattel paper, provided that the specific goods are the primary collateral.
Example 8. To secure a loan, Borrower grants Lender a security interest in a specified item of equipment and a deposit account. The loan and the security interest are evidenced by one or more records. The right to payment is chattel paper, assuming the equipment is the primary collateral.
In Example 8, the inclusion of some incidental collateral, such as a deposit account, does not prevent characterization of the right to payment as chattel paper. Another typical example would be the inclusion of after-acquired replacement parts to be installed on the specific goods. On the other hand, to be chattel paper, a right to payment must be accompanied by a security interest in specific goods or a lease of specific goods. A right to payment secured by a security interest in rotating collateral is not chattel paper.
Example 9. To secure a loan, Borrower grants Lender a security interest in all of Borrower's existing and after-acquired inventory. The loan and the security interest are evidenced by one or more records. The right to payment is not chattel paper.
Example 10. To secure a loan, Borrower grants Lender a security interest in a specifically described item of equipment, which is not the primary collateral, and also in all of Borrower's existing and after-acquired equipment. The loan and the security interest are evidenced by one or more records. The right to payment is not chattel paper.
Example 9 is the easy case because no "specific goods" are identified. As to Example 10, it is true that the monetary obligation is secured by "specific goods" and the definition of chattel paper does not specify that the obligation must be secured only by specific goods. However, if the right to payment in Example 10 were to be characterized as chattel paper, it would be possible to convert virtually any monetary obligation evidenced by records and secured by any collateral into chattel paper merely by including as collateral a specific item of goods (whether inventory, equipment, consumer goods, or farm products). The special rules for chattel paper contemplate that specific goods are the primary collateral, even if some incidental property also might be included. If additional goods or other property are included and the specific goods are not the primary collateral, then classification as chattel paper would not be appropriate. Of course, there may be close cases. In those situations, parties should take appropriate precautions.
A right to payment arising from a lease of specific goods gives rise to chattel paper only if the predominant purpose of the transaction is to provide the lessee the right to possession and use of the goods. Therefore, under paragraph (11)(B)(ii), when a lease of specific goods is combined with an obligation to provide or right to receive other property or services, the resulting right to payment will be chattel paper only if the goods aspect of the transaction predominates.
Example 11. Customer and Car Dealer enter into a transaction, evidenced by one or more records, pursuant to which, in exchange for a payment of $2,000 per month: (i) Customer is entitled to possession of a specific vehicle for 36 months; (ii) Car Dealer will provide round-the-clock monitoring of the vehicle's location and condition, and alert authorities to provide road-side assistance in the event of a malfunction or accident; and (iii) Car Dealer will, from time to time, remotely update the vehicle's operating system. The value of the right to possess and use the vehicle is significantly greater than the value of the monitoring service and updates. Because the goods aspect of the transaction predominates, under paragraph (11)(B)(ii) Customer's monetary obligation, including the portion attributable to Car Dealer's obligation to provide monitoring and updates, constitutes chattel paper.
Example 12. Customer and Cableco enter into a transaction, evidenced by one or more records, pursuant to which, in exchange for a payment of $200 per month, Cableco will provide Customer with specified television programming and a device needed to access the programming (a "lease" of the device). If the components of the transaction were priced separately, the price for the programming would be substantially more than the price for possession and use of the device. Because the goods aspect of this transaction does not predominate, under paragraph (11)(B)(ii) Customer's monetary obligation does not constitute chattel paper.
The 2022 revision to the definition of chattel paper omits the references to "software used in the goods" and a "license of software used in the goods" as superfluous, inasmuch as there is no reason to single out software. Other types of property may secure an obligation or be included in a transaction involving a lease, as discussed above. See also Sections 2-102 (scope of Article 2); 2-106(5) (defining "hybrid transaction"); 2A-102 (scope of Article 2A); 2A-103(aa) (definition of "hybrid lease"). These references were omitted from the definition of chattel paper for clarification and did not result in any change in the scope of the definition.
The 2022 revision to the definition of "chattel paper" also changed the language from "a record or records that evidence a monetary obligation" to "a right to payment of a monetary obligation . . . evidenced by a record." This semantic change was for clarification purposes only; it does not imply a change in meaning. Chattel paper is and has always been a right to payment of a monetary obligation. Because the revised definition is based on the obligation, rather than the record, the definition no longer includes the following statement, which was included in the previous definition: "If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper." The omission of that statement also does not imply a change in meaning, except that writings evidencing chattel paper are excluded from the definition of "instrument" under Section 9-102(a)(47). Although the definition refers to "a record," chattel paper can be evidenced by one or more records because, under Section 1-106, unless the statutory context otherwise requires, words in the singular number include the plural.
Finally, the revised definition of "chattel paper" and the approach to perfection of a security interest by possession and control under Section 9-314A have eliminated the need to have separate definitions of "electronic chattel paper" and "tangible chattel paper" in Section 9-102. Consequently, those definitions have been deleted.
c. "Instrument"; "Promissory Note." The definition of "instrument" includes a negotiable instrument. As under pre-1998 Sect‹ Prev All New Mexico sections Next ›
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