(a) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.
(b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
History: 1978 Comp., § 55-3-201, enacted by Laws 1992, ch. 114, § 107.
ANNOTATIONSOFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
1. Subsections (a) and (b) are based in part on subsection (1) of the former Section 3-202. A person can become holder of an instrument when the instrument is issued to that person, or the status of holder can arise as the result of an event that occurs after issuance. "Negotiation" is the term used in Article 3 to describe this post-issuance event. Normally, negotiation occurs as the result of a voluntary transfer of possession of an instrument by a holder to another person who becomes the holder as a result of the transfer. Negotiation always requires a change in possession of the instrument because nobody can be a holder without possessing the instrument, either directly of through an agent. But in some cases the transfer of possession is involuntary and in some cases the person transferring possession is not a holder. In defining "negotiation" former Section 3-202(1) used the word "transfer," an undefined term, and "delivery," defined in Section 1-201(14) [55-1-201 NMSA 1978] to mean voluntary change of possession. Instead, subsections (a) and (b) used the term "transfer of possession" and, subsection (a) states that negotiation can occur by an involuntary transfer of possession. For example, if an instrument is payable to bearer and it is stolen by Thief or is found by Finder, Thief or Finder becomes the holder of the instrument when possession is obtained. In this case there is an involuntary transfer of possession that results in negotiation to Thief or Finder.
2. In most cases negotiation occurs by a transfer of possession by a holder or a remitter. Remitter transactions usually involve a cashier's or teller's check. For example, Buyer buys goods from the Seller and pays for them with a cashier's check of Bank that Buyer buys from Bank. The check is issued by Bank when it is delivered to Buyer, regardless of whether the check is payable to Buyer or to Seller. Section 3-105(a) [55-3-105 NMSA 1978]. If the check is payable to Buyer, negotiation to Seller is done by delivery of the check to Seller after it is indorsed by Buyer. It is more common, however, that the check when issued will be payable to Seller. In that case Buyer is referred to as the "remitter." Section 3-103(a)(11) [55-3-103 NMSA 1978]. The remitter, although not a party to the check, is the owner of the check until ownership is transferred to Seller by delivery. This transfer is a negotiation because Seller becomes the holder of the check when Seller obtains possession. In some cases Seller may have acted fraudulently in obtaining possession of the check. In those cases Buyer may be entitled to rescind the transfer to Seller because of the fraud and assert a claim of ownership to the check under Section 3-306 [55-3-306 NMSA 1978] against Seller or a subsequent transferee of the check. Section 3-202(b) [55-3-202 NMSA 1978] provides for rescission of negotiation, and that provision applies to rescission by a remitter as well as by holder.
3. Other sections of Article 3 may modify the the rule stated in the first sentence of the subsection (b). See for example, Sections 3-404, 3-405, and 3-406 [55-3-404, 55-3-405, 55-3-406 NMSA 1978, respectively].
Repeals. — Laws 1992, ch. 114, § 237 repealed former 55-3-201 NMSA 1978, as enacted by Laws 1961, ch. 96, § 3-201, relating to transfer and right to indorsement, effective July 1, 1992. Laws 1992, ch. 114, § 107, enacted a new section, effective July 1, 1992. For provisions of former section, see the 1991 NMSA 1978 on NMOneSource.com. For present comparable provisions, see 55-3-203 NMSA 1978.
A negotiable instrument may be assigned or transferred without a writing. Goode v. Harris, 1966-NMSC-249, 77 N.M. 178, 420 P.2d 767.
Law reviews. — For note, "New Mexico's Uniform Commercial Code: Presentment Warranties and the Myth of the 'Shelter Provision'," see 4 Nat. Resources J. 398 (1964).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 11 Am. Jur. 2d Bills and Notes §§ 314 to 317, 320, 323, 325, 328, 351, 353, 360, 367; 12 Am. Jur. 2d Bills and Notes § 1026.
Production of paper purporting to be endorsed in blank by payee or by a special endorsee, as prima facie evidence of plaintiff's title, 11 A.L.R. 952, 85 A.L.R. 304.
Endorsement of bill or note in form of guaranty of payment, 21 A.L.R. 1375, 33 A.L.R. 97, 46 A.L.R. 1516.
Endorsement without words of negotiability, of note payable to maker, as affecting its validity and effect, 42 A.L.R. 1067, 50 A.L.R. 426.
Effect of assignment endorsed on back of commercial paper, 44 A.L.R. 1353.
Construction and application of provision in respect to endorsements which purport to transfer part only of amount payable, 63 A.L.R. 499.
Authority of agent to endorse and transfer commercial paper, 37 A.L.R.2d 453.
Endorsement of negotiable instrument by writing not on instrument itself, 19 A.L.R.3d 1297.
10 C.J.S. Bills and Notes §§ 127, 148.