(a) A security interest that is enforceable immediately before July 1, 2001 and would have priority over the rights of a person that becomes a lien creditor at that time is a perfected security interest under this act if, on July 1, 2001, the applicable requirements for enforceability and perfection under this act are satisfied without further action.

(b) Except as otherwise provided in Section 149 [55-9-705 NMSA 1978] of this act, if, immediately before July 1, 2001, a security interest is enforceable and would have priority over the rights of a person that becomes a lien creditor at that time, but the applicable requirements for enforceability or perfection under this act are not satisfied on July 1, 2001, the security interest:

(1) is a perfected security interest until midnight on June 30, 2002;

(2) remains enforceable on and after July 1, 2002 only if the security interest becomes enforceable pursuant to Section 55-9-203 NMSA 1978 before midnight on June 30, 2002; and

(3) remains perfected on and after July 1, 2002 only if the applicable requirements for perfection under this act are satisfied before midnight on June 30, 2002.

History: Laws 2001, ch. 139, § 147.

OFFICIAL COMMENTS

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

1. Perfected Security Interests Under Former Article 9 and This Article. This section deals with security interests that are perfected (i.e., that are enforceable and have priority over the rights of a lien creditor) under former article 9 or other applicable law immediately before this article takes effect. Subsection (a) provides, not surprisingly, that if the security interest would be a perfected security interest under this article (i.e., if the transaction satisfies this article's requirements for enforceability (attachment) and perfection), no further action need be taken for the security interest to be a perfected security interest.

2. Security Interests Enforceable and Perfected Under Former Article 9 but Unenforceable or Unperfected Under This Article. Subsection (b) deals with security interests that are enforceable and perfected under former article 9 or other applicable law immediately before July 1, 2001, but do not satisfy the requirements for enforceability (attachment) or perfection under this article. Except as otherwise provided in section 9-705, these security interests are perfected security interests for one year after July 1, 2001. If the security interest satisfies the requirements for attachment and perfection within that period, the security interest remains perfected thereafter. If the security interest satisfies only the requirements for attachment within that period, the security interest becomes unperfected at the end of the one-year period.

Example 1: A pre-July 1, 2001, security agreement in a consumer transaction covers "all securities accounts." The security interest is properly perfected. The collateral description was adequate under former article 9 (see former section 9-115(3)) but is insufficient under this article (see section 9-108(e)(2)). Unless the debtor authenticates a new security agreement describing the collateral other than by "type" (or section 9-203(b)(3) otherwise is satisfied) within the one-year period following July 1, 2001, the security interest becomes unenforceable at the end of that period.

Other examples under former article 9 or other applicable law that may be effective as attachment or enforceability steps but may be ineffective under this article include an oral agreement to sell a payment intangible or possession by virtue of a notification to a bailee under former section 9-305. Neither the oral agreement nor the notification would satisfy the revised section 9-203 requirements for attachment.

Example 2: A pre-July 1, 2001, possessory security interest in instruments is perfected by a bailee's receipt of notification under former section 9-305. The bailee has not, however, acknowledged that it holds for the secured party's benefit under revised section 9-313. Unless the bailee authenticates a record acknowledging that it holds for the secured party (or another appropriate perfection step is taken) within the one-year period following July 1, 2001, the security interest becomes unperfected at the end of that period.

3. Interpretation of Pre-July 1, 2001, Security Agreements. Section 9-102 defines "security agreement" as "an agreement that creates or provides for a security interest." Under section 1-201(3), an "agreement" is a "bargain of the parties in fact." If parties to a pre-July 1, 2001, security agreement describe the collateral by using a term defined in former article 9 in one way and defined in this article in another way, in most cases it should be presumed that the bargain of the parties contemplated the meaning of the term under former article 9.

Example 3: A pre-July 1, 2001, security agreement covers "all accounts" of a debtor. As defined under former article 9, an "account" did not include a right to payment for lottery winnings. These rights to payment are "accounts" under this article, however. The agreement of the parties presumptively created a security interest in "accounts" as defined in former article 9. A different result might be appropriate, for example, if the security agreement explicitly contemplated future changes in the article 9 definitions of types of collateral - e.g., "'Accounts' means 'accounts' as defined in the UCC article 9 of (State X), as that definition may be amended from time to time." Whether a different approach is appropriate in any given case depends on the bargain of the parties, as determined by applying ordinary principles of contract construction.

Effective dates. — Laws 2001, ch. 139, § 155 makes the Uniform Commercial Code - Secured Transactions Act effective July 1, 2001.