If a security interest or agricultural lien is perfected by a filed financing statement providing information described in Paragraph (5) of Subsection (b) of Section 55-9-516 NMSA 1978 that is incorrect at the time the financing statement is filed:

(1) the security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and

(2) a purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, tangible documents, goods, instruments or a security certificate, receives delivery of the collateral.

History: 1978 Comp., § 55-9-338, enacted by Laws 2001, ch. 139, § 58; 2005, ch. 144, § 106.

OFFICIAL COMMENTS

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

1. Source. New.

2. Effect of Incorrect Information in Financing Statement. Section 9-520(a) requires the filing office to reject financing statements that do not contain information concerning the debtor as specified in section 9-516(b)(5). An error in this information does not render the financing statement ineffective. On rare occasions, a subsequent purchaser of the collateral (i.e., a buyer or secured party) may rely on the misinformation to its detriment. This section subordinates a security interest or agricultural lien perfected by an effective, but flawed, financing statement to the rights of a buyer or holder of a perfected security interest to the extent that, in reasonable reliance on the incorrect information, the purchaser gives value and, in the case of tangible collateral, receives delivery of the collateral. A purchaser who has not made itself aware of the information in the filing office with respect to the debtor cannot act in "reasonable reliance" upon incorrect information.

3. Relationship to Section 9-507 [55-9-507 NMSA 1978]. This section applies to financing statements that contain information that is incorrect at the time of filing and imposes a small risk of subordination on the filer. In contrast, Section 9-507 deals with financing statements containing information that is correct at the time of filing but which becomes incorrect later. Except as provided in Section 9-507 with respect to changes in the name that is sufficient as the name of the debtor under Section 9-503(a) [55-9-503(a) NMSA 1978], an otherwise effective financing statement does not become ineffective if the information contained in it becomes inaccurate.

Effective dates. — Laws 2001, ch. 139, § 155 makes the act effective July 1, 2001.

The 2005 amendment, effective January 1, 2006, changes the phrase "chattel paper" to "tangible chattel paper" and the word "documents" to "tangible documents" in Subsection (2).