(a) A secured party has control of a deposit account if:

(1) the secured party is the bank with which the deposit account is maintained;

(2) the debtor, secured party and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or

(3) the secured party becomes the bank's customer with respect to the deposit account.

(b) A secured party that has satisfied Subsection (a) of this section has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.

History: 1978 Comp., § 55-9-104, enacted by Laws 2001, ch. 139, § 4.

OFFICIAL COMMENTS

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

1. Source. New; derived from section 8-106.

2. Why "Control" Matters. This section explains the concept of "control" of a deposit account. "Control" under this section may serve two functions. First, "control . . . pursuant to the debtor's agreement" may substitute for an authenticated security agreement as an element of attachment. See Section 9-203(b)(3)(D). Second, when a deposit account is taken as original collateral, the only method of perfection is obtaining control under this section. See Section 9-312(b)(1).

3. Requirements for "Control." This section derives from Section 8-106 [55-8-106 NMSA 1978] of Revised Article 8, which defines "control" of securities and certain other investment property. Under Subsection (a)(1), the bank with which the deposit account is maintained has control. The effect of this provision is to afford the bank automatic perfection. No other form of public notice is necessary; all actual and potential creditors of the debtor are always on notice that the bank with which the debtor's deposit account is maintained may assert a claim against the deposit account.

Example: D maintains a deposit account with Bank A. To secure a loan from Banks X, Y, and Z, D creates a security interest in the deposit account in favor of Bank A, as agent for Banks X, Y, and Z. Because Bank A is a "secured party" as defined in Section 9-102 [55-9-102 NMSA 1978], the security interest is perfected by control under Subsection (a)(1).

Under Subsection (a)(2), a secured party may obtain control by obtaining the bank's authenticated agreement that it will comply with the secured party's instructions without further consent by the debtor. The analogous provision in Section 8-106 [55-8-106 NMSA 1978] does not require that the agreement be authenticated. An agreement to comply with the secured party's instructions suffices for "control" of a deposit account under this section even if the bank's agreement is subject to specified conditions, e.g., that the secured party's instructions are accompanied by a certification that the debtor is in default. (Of course, if the condition is the debtor's further consent, the statute explicitly provides that the agreement would not confer control.) See revised Section 8-106 [55-8-106 NMSA 1978], Comment 7.

Under Subsection (a)(3), a secured party may obtain control by becoming the bank's "customer," as defined in Section 4-104 [55-4-104 NMSA 1978]. As the customer, the secured party would enjoy the right (but not necessarily the exclusive right) to withdraw funds from, or close, the deposit account. See Sections 4-401(a), 4-403(a) [55-4-401(a), [55-4-403(a) NMSA 1978].

As is the case with possession under Section 9-313 [55-9-313 NMSA 1978], in determining whether a particular person has control under Subsection (a), the principles of agency apply. See Section 1-103 [55-1-103 NMSA 1978] and Restatement (3d), Agency § 8.12, Comment b.

Repeals and reenactments. — Laws 2001, ch. 139, § 4 repealed former 55-9-104 NMSA 1978, as amended by Laws 1997, ch. 75, § 21, and enacted a new section, effective July 1, 2001.