(a) In Chapter 55, Article 4 NMSA 1978, unless the context otherwise requires:

(1) "account" means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft or like account, other than an account evidenced by a certificate of deposit;

(2) "afternoon" means the period of a day between noon and midnight;

(3) "banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;

(4) "clearinghouse" means an association of banks or other payors regularly clearing items;

(5) "customer" means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;

(6) "documentary draft" means a draft to be presented for acceptance or payment if specified documents, certificated securities pursuant to Section 55-8-102 NMSA 1978 or instructions for uncertificated securities pursuant to Section 55-8-102 NMSA 1978 or other certificates, statements or the like are to be received by the drawee or other payor before acceptance or payment of the drafts;

(7) "draft" means a draft as defined in Section 55-3-104 NMSA 1978 or an item, other than an instrument, that is an order;

(8) "drawee" means a person ordered in a draft to make payment;

(9) "item" means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by Chapter 55, Article 4A NMSA 1978 or a credit or debit card slip;

(10) "midnight deadline" with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;

(11) "settle" means to pay in cash, by clearinghouse settlement, in a charge or credit or by remittance or otherwise as agreed. A settlement may be either provisional or final; and

(12) "suspends payments" with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.

(b) Other definitions applying to Chapter 55, Article 4 NMSA 1978 and the sections in which they appear are:

"agreement for electronic presentment"

Section 55-4-110 NMSA 1978;

"banking"

Section 55-4-105 NMSA 1978;

"collecting bank"

Section 55-4-105 NMSA 1978;

"depositary bank"

Section 55-4-105 NMSA 1978;

"intermediary bank"

Section 55-4-105 NMSA 1978;

"payor bank"

Section 55-4-105 NMSA 1978;

"presenting bank"

Section 55-4-105 NMSA 1978; and

"presentment notice"

Section 55-4-110 NMSA 1978.

(c) "Control", as provided in Section 55-7-106 NMSA 1978, and the following definitions in other articles apply to Chapter 55, Article 4 NMSA 1978:

"acceptance"

Section 55-3-409 NMSA 1978;

"alteration"

Section 55-3-407 NMSA 1978;

"cashier's check"

Section 55-3-104 NMSA 1978;

"certificate of deposit"

Section 55-3-104 NMSA 1978;

"certified check"

Section 55-3-409 NMSA 1978;

"check"

Section 55-3-104 NMSA 1978;

"holder in due course"

Section 55-3-302 NMSA 1978;

"instrument"

Section 55-3-104 NMSA 1978;

"notice of dishonor"

Section 55-3-503 NMSA 1978;

"order"

Section 55-3-103 NMSA 1978;

"ordinary care"

Section 55-3-103 NMSA 1978;

"person entitled to enforce"

Section 55-3-301 NMSA 1978;

"presentment"

Section 55-3-501 NMSA 1978;

"promise"

Section 55-3-103 NMSA 1978;

"prove"

Section 55-3-103 NMSA 1978;

"teller's check"

Section 55-3-104 NMSA 1978; and

"unauthorized signature"

Section 55-3-403 NMSA 1978.

(d) In addition, Chapter 55, Article 1 NMSA 1978 contains general definitions and principles of construction and interpretation applicable throughout this article.

History: 1953 Comp., § 50A-4-104, enacted by Laws 1961, ch. 96, § 4-104; 1977, ch. 340, § 2; 1987, ch. 102, § 2; 1992, ch. 114, § 159; 1996, ch. 47, § 3; 2005, ch. 144, § 46.; 2009, ch. 234, § 12.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

1. Paragraph (a)(1): "Account" is defined to include both asset accounts in which a customer has deposited money and accounts from which a customer may draw on a line of credit. The limiting factor is that the account must be in a bank.

2. Paragraph (a)(3): "Banking day." Under this definition that part of a business day when a bank is open only for limited functions, e.g., to receive deposits and cash checks, but with loan, bookkeeping and other departments closed, is not part of a banking day.

3. Paragraph (a)(4): "Clearing house." Occasionally express companies, governmental agencies and other nonbanks deal directly with a clearing house; hence the definition does not limit the term to an association of banks.

4. Paragraph (a)(5): "Customer." It is to be noted that this term includes a bank carrying an account with another bank as well as the more typical nonbank customer or depositor.

5. Paragraph (a)(6): "Documentary draft" applies even though the documents do not accompany the draft but are to be received by the drawee or other payor before acceptance or payment of the draft. Documents may be either in electronic or tangible form. See Article 5, Section 5-102 [55-5-102 NMSA 1978], Comment 2 and Article 1, Section 1-201 [55-1-201 NMSA 1978] (definition of "document of title").

6. Paragraph (a)(7): "Draft" is defined in Section 3-104 as a form of instrument. Since Article 4 applies to items that may not fall within the definition of instrument, the term is defined here to include an item that is a written order to pay money, even though the item may not qualify as an instrument. The term "order" is defined in Section 3-103 [55-3-103 NMSA 1978].

7. Paragraph (a)(8): "Drawee" is defined in Section 3-103 [55-3-103 NMSA 1978] in terms of an Article 3 draft which is a form of instrument. Here "drawee" is defined in terms of an Article 4 draft which includes items that may not be instruments.

8. Paragraph (a)(9): "Item" is defined broadly to include an instrument, as defined in Section 3-104, as well as promises or orders that may not be within the definition of "instrument." The terms "promise" and "order" are defined in Section 3-103 [55-3-103 NMSA 1978]. A promise is a written undertaking to pay money. An order is a written instruction to pay money. But see Section 4-110(c) [55-4-110 NMSA 1978]. Since bonds and other investment securities under Article 8 may be within the term "instrument" or "promise," they are items and when handled by banks for collection are subject to this Article. See Comment 1 to Section 4-102 [55-4-102 NMSA 1978]. The functional limitation on the meaning of this term is the willingness of the banking system to handle the instrument, undertaking or instruction for collection or payment.

9. Paragraph (a)(10): "Midnight deadline." The use of this phrase is an example of the more mechanical approach used in this Article. Midnight is selected as a termination point or time limit to obtain greater uniformity and definiteness than would be possible from other possible terminating points, such as the close of the banking day or business day.

10. Paragraph (a)(11): The term "settle" has substantial importance throughout Article 4. In the American Bankers Association Bank Collection Code, in deferred posting statutes, in Federal Reserve regulations and operating circulars, in clearing-house rules, in agreements between banks and customers and in legends on deposit tickets and collection letters, there is repeated reference to "conditional" or "provisional" credits or payments. Tied in with this concept of credits or payments being in some way tentative, has been a related but somewhat different problem as to when an item is "paid" or "finally paid" either to determine the relative priority of the item as against attachments, stop-payment orders and the like or in insolvency situations. There has been extensive litigation in the various states on these problems. To a substantial extent the confusion, the litigation and even the resulting court decisions fail to take into account that in the collection process some debits or credits are provisional or tentative and others are final and that very many debits or credits are provisional or tentative for awhile but later become final. Similarly, some cases fail to recognize that within a single bank, particularly a payor bank, each item goes through a series of processes and that in a payor bank most of these processes are preliminary to the basic act of payment or "final payment."

The term "settle" is used as a convenient term to characterize a broad variety of conditional, provisional, tentative and also final payments of items. Such a comprehensive term is needed because it is frequently difficult or unnecessary to determine whether a particular action is tentative or final or when a particular credit shifts from the tentative class to the final class. Therefore, its use throughout the Article indicates that in that particular context it is unnecessary or unwise to determine whether the debit or the credit or the payment is tentative or final. However, if qualified by the adjective "provisional" its tentative nature is intended, and if qualified by the adjective "final" its permanent nature is intended.

Examples of the various types of settlement contemplated by the term include payments in cash; the efficient but somewhat complicated process of payment through the adjustment and offsetting of balances through clearing houses; debit or credit entries in accounts between banks; the forwarding of various types of remittance instruments, sometimes to cover a particular item but more frequently to cover an entire group of items received on a particular day.

11. Paragraph (a)(12): "Suspends payments." This term is designed to afford an objective test to determine when a bank is no longer operating as a part of the banking system.

The 2009 amendment, effective January 1, 2010, in Subsection (b), deleted the definition for "banks" and reference to Section 55-4-105 NMSA 1978.

The 2005 amendment, effective January 1, 2006, defines "control" in Subsection (c) to mean "control" as provided in Section 55-7-106 NMSA 1978 and deletes the definition of "good faith" in Subsection (c).

The 1996 amendment, substituted "Section 55-8-102" for "Section 55-8-308" near the middle of Subsection (a)(6). Laws 1996, ch. 47 contains no effective date provision, but, pursuant to N.M. Const., art. IV, § 23, is effective May 15, 1996, 90 days after adjournment of the legislature. See Volume 14 NMSA 1978 for "Adjournment Dates of Sessions of Legislature" table.

The 1992 amendment, effective July 1, 1992, revised the subsection and paragraph designations; made minor stylistic changes and deleted the former definitions of "day" and "properly payable" in Subsection (a); rewrote Subsection (a)(1); deleted "excluding Saturday, Sunday and legal holidays for banks as set forth in Section 58-5-7 NMSA 1978" following "a day" in Subsection (a)(3); rewrote Subsection (a)(6); added Subsections (a)(7) and (a)(8); rewrote Subsection (a)(9); substituted "agreed" for "instructed" in Subsection (a)(11); and rewrote Subsections (b) and (c).

The 1987 amendment, effective June 19, 1987, in Subsection (1), in Paragraph (c) substituted "58-5-7 NMSA 1978" for "48-2-21A NMSA 1953," inserted Paragraph (f) and relettered the subsequent paragraphs accordingly; and, in Subsections (2) and (3), substituted the NMSA 1978 section references for the UCC references.

The 1977 amendment inserted "excluding Saturday, Sunday and legal holidays for banks as set forth in Section 48-2-21A NMSA 1953," in the definition of "banking day" in Subsection (1) and made minor changes in form and punctuation in that subsection.

"Customer". — In a suit brought by plaintiff and the estate of her deceased husband against a bank to recover funds paid by the bank to the sole signatory of an account which plaintiff and her husband allegedly had an interest in, there was sufficient evidence for the jury to find that plaintiff's husband was a "customer" of the bank, as defined by Subsection (1)(e) (now (a)(5)) of this section with references to the account in question, where the bank was aware of a possible relation between the name of the account and the ranch owned by plaintiff's husband, and that he had a possible beneficial interest in the account. Lietzman v. Ruidoso State Bank, 1992-NMSC-021, 113 N.M. 480, 827 P.2d 1294.

Partnership deemed "customer". — Pursuant to Section 55-1-201 NMSA 1978, Subsections 28 and 30 (now 25 and 27), a partnership may be a customer to whom the bank is required to respond in damages for any wrongful dishonor. Loucks v. Albuquerque Nat'l Bank, 1966-NMSC-176, 76 N.M. 735, 418 P.2d 191.

Documentary drafts. — A draft written on an envelope is a documentary draft when it purports to contain title certificates to motor vehicles that were to be delivered when the draft was honored. Therefore, because the instruments received by the bank purported to contain documents necessary to the sale of an automobile, they were documentary drafts as defined by this section. Shannon v. Sunwest Bank, 1994-NMSC-124, 118 N.M. 749, 887 P.2d 285.

Law reviews. — For article, "New Mexico's Uniform Commercial Code: Who Is the Beneficiary of the Stop Payment Provisions of Article 4?" see 4 Nat. Resources J. 69 (1964).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 10 Am. Jur. 2d Banks §§ 694, 700, 704, 706, 710, 713, 720, 724, 748, 756, 838; 11 Am. Jur. 2d Bills and Notes §§ 889, 893, 895.

Banks: What is "documentary draft" under UCC § 4-104(1)(f), 65 A.L.R.4th 1095.

9 C.J.S. Banks and Banking § 2; 82 C.J.S. Statutes § 315.