(a) Subject to Sections 55-7-205 and 55-7-503 NMSA 1978, a holder to which a negotiable document of title has been duly negotiated acquires thereby:

(1) title to the document;

(2) title to the goods;

(3) all rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and

(4) the direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of any defense or claim by the issuer except those arising under the terms of the document or under Chapter 55, Article 7 NMSA 1978, but in the case of a delivery order, the bailee's obligation accrues only upon the bailee's acceptance of the delivery order and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee.

(b) Subject to Section 55-7-503 NMSA 1978, title and rights acquired by due negotiation are not defeated by any stoppage of the goods represented by the document of title or by surrender of the goods by the bailee and are not impaired even if:

(1) the due negotiation or any prior due negotiation constituted a breach of duty;

(2) any person has been deprived of possession of a negotiable tangible document or control of a negotiable electronic document by misrepresentation, fraud, accident, mistake, duress, loss, theft or conversion; or

(3) a previous sale or other transfer of the goods or document has been made to a third person.

History: 1953 Comp., § 50A-7-502, enacted by Laws 1961, ch. 96, § 7-502; 2005, ch. 144, § 81.

OFFICIAL COMMENTS

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

Prior Uniform Statutory Provision. — Former Section 7-502 [55-7-502 NMSA 1978].

Changes. — To accommodate electronic documents of title and for style.

1. This section applies to both tangible and electronic documents of title. The elements of duly negotiated, which constitutes a due negotiation, are set forth in Section 7-501 [55-7-501 NMSA 1978]. The several necessary qualifications of the broad principle that the holder of a document acquired in a due negotiation is the owner of the document and the goods have been brought together in the next section (Section 7-503 [55-7-503 NMSA 1978]).

2. Subsection (a)(3) covers the case of "feeding" of a duly negotiated document by subsequent delivery to the bailee of such goods as the document falsely purported to cover; the bailee in such case is estopped as against the holder of the document.

3. The explicit statement in subsection (a)(4) of the bailee's direct obligation to the holder precludes the defense that the document in question was "spent" after the carrier had delivered the goods to a previous holder. But the holder is subject to such defenses as non-negligent destruction even though not apparent on the document. The sentence on delivery orders applies only to delivery orders in negotiable form which have been duly negotiated. On delivery orders, see also Section 7-503(b) [55-7-503 NMSA 1978] and Comment.

4. Subsection (b) continues the law which gave full effect to the issuance or due negotiation of a negotiable document. The subsection adds nothing to the effect of the rules stated in Subsection (a), but it has been included since such explicit reference was provided under former Section 7-502 [55-7-502 NMSA 1978] to preserve the right of a purchaser by due negotiation. The listing is not exhaustive. The language"any stoppage" is included lest an inference be drawn that a stoppage of the goods before or after transit might cut off or otherwise impair the purchaser's rights.

Cross References. — Sections 7-103 [55-7-103 NMSA 1978], 7-205 [55-7-205 NMSA 1978], 7-403 [55-7-403 NMSA 1978], 7-501 [55-7-501 NMSA 1978], and 7-503 [55-7-503 NMSA 1978].

"Bailee". Section 7-102 [55-7-102 NMSA 1978].

"Control". Section 7-106 [55-7-106 NMSA 1978].

"Delivery". Section 1-201 [55-1-201 NMSA 1978].

"Delivery order". Section 7-102.

"Document of title". Section 1-201.

"Duly negotiate". Section 7-501 [55-7-501 NMSA 1978].

"Fungible". Section 1-201.

"Goods". Section 7-102 .

"Holder". Section 1-201.

"Issuer". Section 7-102.

"Person". Section 1-201.

"Rights". Section 1-201.

"Term". Section 1-201.

"Warehouse receipt". Section 1-201.

Repeals and reenactments. — Laws 2005, ch. 144, § 81, effective January 1, 2006, repealed former 55-7-502 NMSA 1978 as enacted by Laws 1961, ch. 96, § 7-502, and enacted a new section. Pursuant to 12-2A-14 NMSA 1978, the 2005 revision is considered an amendment rather than a new enactment.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 13 Am. Jur. 2d Carriers § 358 et seq.; 15A Am. Jur. 2d Commercial Code § 61 et seq.; 68A Am. Jur. 2d Secured Transactions §§ 18, 109, 476; 78 Am. Jur. 2d Warehouses §§ 68 to 75, 80, 93.

Receipt of partial payment or commercial paper for purchase price for goods as terminating vendor's right of stoppage in transitu, 7 A.L.R. 1412.

Assignment of duplicate bill of lading as terminating vendor's right of stoppage in transitu, 7 A.L.R. 1422.

Failure to ship by carrier designated by buyer as affecting passing of title, 31 A.L.R. 955.

Right of purchaser of warehouse receipt against warehouseman, 38 A.L.R. 1205.

Measure of seller's damages under executory contract as affected by his resale of the property, 44 A.L.R. 296, 119 A.L.R. 1141.

Passing of title to goods by acceptance of draft for purchase price, with warehouse receipt attached or by transfer of draft with receipt, 55 A.L.R. 1116.

Issuance or nonissuance of bill of lading as affecting delivery of freight to carrier, 113 A.L.R. 1469.

Right of carrier as against transferee of bill to deny receipt of goods, 130 A.L.R. 1315.

Validity as against third persons of sale or pledge of goods retained in warehouse on premises of seller or pledgor (field warehousing), 133 A.L.R. 209.

Bailors of goods covered by policy of insurance issued to warehousemen as subject to defenses that would be available to insurer as against warehousemen, 153 A.L.R. 190.

Effectiveness, as pledge, of transfer of nonnegotiable instruments which represent obligation, 53 A.L.R.2d 1396.

13 C.J.S. Carriers § 400; 80 C.J.S. Shipping § 259; 93 C.J.S. Warehousemen and Safe Depositaries § 25.