(a) Except as otherwise provided in Subsections (c), (d) and (e) of this section, a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.

(b) Except as otherwise provided in Subsection (d) of this section, a description of collateral reasonably identifies the collateral if it identifies the collateral by:

(1) specific listing;

(2) category;

(3) except as otherwise provided in Subsection (e) of this section, a type of collateral defined in the Uniform Commercial Code [Chapter 55 NMSA 1978];

(4) quantity;

(5) computational or allocational formula or procedure; or

(6) except as otherwise provided in Subsection (c) of this section, any other method, if the identity of the collateral is objectively determinable.

(c) A description of collateral as "all the debtor's assets" or "all the debtor's personal property" or using words of similar import does not reasonably identify the collateral.

(d) Except as otherwise provided in Subsection (e) of this section, a description of a security entitlement, securities account or commodity account is sufficient if it describes:

(1) the collateral by those terms or as investment property; or

(2) the underlying financial asset or commodity contract.

(e) A description only by type of collateral defined in the Uniform Commercial Code is an insufficient description of:

(1) a commercial tort claim; or

(2) in a consumer transaction, consumer goods, a security entitlement, a securities account or a commodity account.

History: 1978 Comp., § 55-9-108, enacted by Laws 2001, ch. 139, § 8.

OFFICIAL COMMENTS

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

1. Source. Former sections 9-110 and 9-115(3).

2. General Rules. Subsection (a) retains substantially the same formulation as former Section 9-110. Subsection (b) expands upon Subsection (a) by indicating a variety of ways in which a description might reasonably identify collateral. Whereas a provision similar to Subsection (b) was applicable only to investment property under former Section 9-115(3), subsection (b) applies to all types of collateral, subject to the limitation in subsection (d). Subsection (b) is subject to Subsection (c), which follows prevailing case law and adopts the view that an "all assets" or "all personal property" description for purposes of a security agreement is not sufficient. Note, however, that under Section 9-504, a financing statement sufficiently indicates the collateral if it "covers all assets or all personal property."

The purpose of requiring a description of collateral in a security agreement under Section 9-203 is evidentiary. The test of sufficiency of a description under this section, as under former Section 9-110, is that the description do the job assigned to it: Make possible the identification of the collateral described. This section rejects any requirement that a description is insufficient unless it is exact and detailed (the so-called "serial number" test).

3. After-Acquired Collateral. Much litigation has arisen over whether a description in a security agreement is sufficient to include after-acquired collateral if the agreement does not explicitly so provide. This question is one of contract interpretation and is not susceptible to a statutory rule (other than a rule to the effect that it is a question of contract interpretation). Accordingly, this section contains no reference to descriptions of after-acquired collateral.

4. Investment Property. Under Subsection (d), the use of the wrong article 8 terminology does not render a description invalid (e.g., a security agreement intended to cover a debtor's "security entitlements" is sufficient if it refers to the debtor's "securities"). Note also that given the broad definition of "securities account" in Section 8-501, a security interest in a securities account also includes all other rights of the debtor against the securities intermediary arising out of the securities account. For example, a security interest in a securities account would include credit balances due to the debtor from the securities intermediary, whether or not they are proceeds of a security entitlement. Moreover, describing collateral as a securities account is a simple way of describing all of the security entitlements carried in the account.

5. Consumer Investment Property; Commercial Tort Claims. Subsection (e) requires greater specificity of description in order to prevent debtors from inadvertently encumbering certain property. Subsection (e) requires that a description by defined "type" of collateral alone of a commercial tort claim or, in a consumer transaction, of a security entitlement, securities account, or commodity account, is not sufficient. For example, "all existing and after-acquired investment property" or "all existing and after-acquired security entitlements," without more, would be insufficient in a consumer transaction to describe a security entitlement, securities account, or commodity account. The reference to "only by type" in Subsection (e) means that a description is sufficient if it satisfies Subsection (a) and contains a descriptive component beyond the "type" alone. Moreover, if the collateral consists of a securities account or commodity account, a description of the account is sufficient to cover all existing and future security entitlements or commodity contracts carried in the account. See Section 9-203(h) and (i).

Under Section 9-204, an after-acquired collateral clause in a security agreement will not reach future commercial tort claims. It follows that when an effective security agreement covering a commercial tort claim is entered into the claim already will exist. Subsection (e) does not require a description to be specific. For example, a description such as "all tort claims arising out of the explosion of debtor's factory" would suffice, even if the exact amount of the claim, the theory on which it may be based, and the identity of the tortfeasor(s) are not described. (Indeed, those facts may not be known at the time.)

Repeals and reenactments. — Laws 2001, ch. 139, § 8 repealed former 55-9-108 NMSA 1978, as enacted by Laws 1961, ch. 96, § 9-108, and enacted a new section, effective July 1, 2001.

Decisions under former 55-9-110 and 55-9-115 NMSA 1978. — In light of the similarity of this section and former Sections 55-9-110 and 55-9-115 NMSA 1978, annotations decided under former 55-9-110 and 55-9-115 NMSA 1978 have been included in the annotations in this section.

Filing of instrument with accurate description safeguards lien. — Since under former law the legislature provided that the filing of a chattel mortgage, assignment thereof, or affidavit in lieu of an assignment, would have the force and effect given by law to the recording of instruments affecting real estate, and since when an instrument with an accurate description of realty is filed in the county wherein the realty is situate, all persons are placed on constructive notice where the personal property subject to the chattel mortgage was accurately and completely described in the recorded instruments, and the filing of a copy of the instrument in the county into which the property was moved safeguarded the mortgage lien. Reconstruction Fin. Corp. v. Stephens, 118 F. Supp. 565 (D.N.M. 1954) (decided under former law).

Description in security agreement may prevail over contrary financing statement. — In a conflict between the unsigned financing statement and the language of the security agreement the latter prevails for the reason that no security interest can exist in the absence of a security agreement, and therefore a financing statement which goes beyond the scope of the agreement has no effect to that extent. Jones & Laughlin Supply v. Dugan Prod. Corp., 1973-NMCA-050, 85 N.M. 51, 508 P.2d 1348 (decided under former law).

Security agreement on mobile home did not secure appliances installed therein. — A security agreement which listed the year, model name and number and serial number of a mobile home in the description of collateral did not create a security interest in a washer, dryer and refrigerator installed in that mobile home. State v. Woodward, 1983-NMCA-153, 100 N.M. 708, 675 P.2d 1007 (decided under former law).

Agreement that did not describe collateral was inadequate. — A security agreement between a floor plan financier and a used car dealer which left blank a space therein for describing collateral was inadequate to perfect an interest in automobiles obtained by the dealer for resale from another dealer which retained possession of the certificates of title until it was paid. Avlin Inc. v. Manis, 1998-NMCA-011, 124 N.M. 544, 953 P.2d 309 (decided under former law).

"Inventory," "equipment" and "supplies" sufficient to describe collateral. — The terms "inventory," "equipment" and "supplies" are sufficient to meet the requirement that collateral must be described in general language reasonably describing the items. Waterfield v. Burnett (In re Burnett), 21 B.R. 752 (Bankr. D.N.M. 1982) (decided under former law).

Language in financing statement fails to satisfy section. — The words "all assets . . . regardless of type or description now owned . . . or to be bought in the future . . ." in a financing statement fail to satisfy the requirements of this section. The language is too general and vague to fulfill the demand that the financing statement at least reveal "the type" of collateral. The language is misleading and does not give subsequent secured parties adequate notice of a security interest in inventory and accounts receivable. Mogul Enters., Inc. v. Commercial Credit Bus. Loans, Inc., 1978-NMSC-081, 92 N.M. 215, 585 P.2d 1096 (decided under former law).

Am. Jur. 2d, A.L.R. and C.J.S. references. — Sufficiency of description of property in conditional sales contract, 65 A.L.R. 714.

Sufficiency of description of property in mortgage on animals, 124 A.L.R. 944.

Defect in written record as ground for avoiding sale of contractual rights, 10 A.L.R.2d 728.

Sufficiency of description of property, as against third persons, in chattel mortgage on farm equipment, machinery, implements and the like, 32 A.L.R.2d 929.

Sufficiency of description in chattel mortgage as covering all property of a particular kind, 2 A.L.R.3d 839, 30 A.L.R.3d 9.

Sufficiency of description of collateral in financing statement under UCC §§ 9-110 and 9-402, 100 A.L.R.3d 10.

Sufficiency of description of collateral in security agreement under UCC §§ 9-110 and 9-203, 100 A.L.R.3d 940.