(a) If a document of title is lost, stolen or destroyed, a court may order delivery of the goods or issuance of a substitute document and the bailee may without liability to any person comply with the order. If the document was negotiable, a court may not order delivery of the goods or issuance of a substitute document without the claimant's posting security unless it finds that any person that may suffer loss as a result of nonsurrender of possession or control of the document is adequately protected against the loss. If the document was nonnegotiable, the court may require security. The court may also order payment of the bailee's reasonable costs and attorney fees in any action under this subsection.

(b) A bailee that, without a court order, delivers goods to a person claiming under a missing negotiable document of title is liable to any person injured thereby. If the delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is not conversion if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify any person injured by the delivery that files a notice of claim within one year after the delivery.

History: 1953 Comp., § 50A-7-601, enacted by Laws 1961, ch. 96, § 7-601; 2005, ch. 144, § 89.

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 7-601 [55-7-601 NMSA 1978].

Changes. — To accommodate electronic documents; to provide flexibility to courts similar to the flexibility in Section 3-309 [55-3-309 NMSA 1978]; to update to the modern era of deregulation; and for style.

1. Subsection (a) authorizes courts to order compulsory delivery of the goods or compulsory issuance of a substitute document. Compare Section 7-402 [55-7-402 NMSA 1978]. Using language similar to that found in Section 3-309 [55-3-309 NMSA 1978], courts are given discretion as to what is adequate protection when the lost, stolen or destroyed document was negotiable or whether security should be required when the lost, stolen or destroyed document was nonnegotiable. In determining whether a party is adequately protected against loss in the case of a negotiable document, the court should consider the likelihood that the party will suffer a loss. The court is also given discretion as to the bailee's costs and attorney fees. The rights and obligations of a bailee under this section depend upon whether the document of title is lost, stolen or destroyed and is in addition to the ability of the bailee to bring an action for interpleader. See Section 7-603 [55-7-603 NMSA 1978].

2. Courts have the authority under this section to order a substitute document for either tangible or electronic documents. If the substitute document will be in a different medium than the original document, the court should fashion its order in light of the requirements of Section 7-105 [55-7-105 NMSA 1978].

3. Subsection (b) follows prior Section 7-601 [55-7-601 NMSA 1978] in recognizing the legality of the well established commercial practice of bailees making delivery in good faith when they are satisfied that the claimant is the person entitled under a missing (i.e. lost , stolen, or destroyed) negotiable document. Acting without a court order, the bailee remains liable on the original negotiable document and, to avoid conversion liability, the bailee may insist that the claimant provide an indemnity bond. Cf. Section 7-403 [55-7-403 NMSA 1978].

4. Claimants on non-negotiable instruments are permitted to avail themselves of the subsection (a) procedure because straight (non-negotiable) bills of lading sometimes contain provisions that the goods shall not be delivered except upon production of the bill. If the carrier should choose to insist upon production of the bill, the consignee should have some means of compelling delivery on satisfactory proof of entitlement. Without a court order, a bailee may deliver, subject to Section 7-403 [55-7-403 NMSA 1978], to a person claiming goods under a non-negotiable document that the same person claims is lost, stolen, or destroyed.

5. The bailee's lien should be protected when a court orders delivery of the goods pursuant to this section.

Point 1: Sections 3-309 [55-3-309 NMSA 1978], 7-402 [55-7-402 NMSA 1978] and 7-603 [55-7-603 NMSA 1978].

Point 2: Section 7-105 [55-7-105 NMSA 1978].

Point 3: Section 7-403 [55-7-403 NMSA 1978].

Point 4: Section 7-403.

Point 5: Sections 7-209 [55-7-209 NMSA 1978] and 7-307 [55-7-307 NMSA 1978].

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

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

"Document of title". Section 1-201.

"Good faith". Section 1-201.

"Goods". Section 7-102.

"Person". Section 1-201.

Repeals and reenactments. — Laws 2005, ch. 144, § 89, effective January 1, 2006, repealed former 55-7-601 NMSA 1978 as enacted by Laws 1961, ch. 96, § 7-601, 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 § 421; 15A Am. Jur. 2d Commercial Code §§ 39, 117; 78 Am. Jur. 2d Warehouses §§ 45, 220.

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

Provision in warehouseman's receipt limiting liability as applicable where warehouseman converts property, 99 A.L.R. 266.

Degree or quantum of evidence necessary to establish a lost instrument, 148 A.L.R. 400.

54 C.J.S. Lost Instruments § 1 et seq.