1. (a) "Alteration" means (i) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or (ii) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
2. (b) Except as provided in Subsection (c), an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.

3. (c) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument (i) according to its original terms, or (ii) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.

   OFFICIAL COMMENTS

4. UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
5. 1. This provision restates former Section 3-407. Former Section 3-407 defined a "material" alteration as any alteration that changes the contract of the parties in any respect. Revised Section 3-407 [55-3-407 NMSA 1978] refers to such a change as an alteration. As under subsection (2) of former Section 3-407, discharge because of alteration occurs only in the case of an alteration fraudulently made. There is no discharge if a blank is filled in the honest belief that it is authorized or if a change is made with a benevolent motive such as a desire to give the obligor the benefit of a lower interest rate. Changes favorable to the obligor are unlikely to be made with any fraudulent intent, but if such an intent is found the alteration may operate as a discharge.
6. Discharge is a personal defense of the party whose obligation is modified and anyone whose obligation is not affected is not discharged. But if an alteration discharges a party there is also discharge of any party having a right of recourse against the discharged party because the obligation of the party with the right recourse is affected by the alteration. Assent to the alteration given before or after it is made will prevent the party from asserting the discharge. The phrase "or is precluded from asserting the alteration" in Subsection (b) recognizes the possibility of an estoppel or other ground barring the defense which does not rest on assent.
7. 2. Under Subsection (c) a person paying a fraudulently altered instrument or taking it for value, in good faith and without notice of the alteration, is not affected by a discharge under Subsection (b). The person paying or taking the instrument may assert rights with respect to the instrument according to its original terms or, in the case of an incomplete instrument that is altered by unauthorized completion, according to its terms as completed. If blanks are filled or an incomplete instrument is otherwise completed, Subsection (c) places the loss upon the party who left the instrument incomplete by permitting enforcement in its completed form. This result is intended even though the instrument was stolen from the issuer and completed after the theft.

History: 1978 Comp., § 55-3-407, enacted by Laws 1992, ch. 114, § 132.

ANNOTATIONS

Repeals. — Laws 1992, ch. 114, § 237 repealed former 55-3-407 NMSA 1978, as enacted by Laws 1961, ch. 96, § 3-407, relating to alteration, effective July 1, 1992. Laws 1992, ch. 114, § 132, enacted a new section, effective July 1, 1992. For provisions of former section, see the 1991 NMSA 1978 on NMOneSource.com.

Generally. — Defense of alteration of an instrument is not available under pleadings alleging fraud. Schmidt v. Bank of Commerce, 234 U.S. 64, 34 S. Ct. 730, 58 L. Ed. 1214 (1914) (decided under former law).

Defense of alteration of instrument by addition of other signatures must be pleaded to be available to other comakers. Schmidt v. Bank of Commerce, 234 U.S. 64, 34 S. Ct. 730, 58 L. Ed. 1214 (1914) (decided under former law).

This section is not applicable unless the alteration made by the holder was fraudulent; and where there is no evidence from which an inference of fraud could be drawn, there is no question of fact for the jury concerning discharge of the maker. Bank of N.M. v. Rice, 1967-NMSC-109, 78 N.M. 170, 429 P.2d 368.

Law reviews. — For note, "New Mexico's Uniform Commercial Code: Presentment Warranties and the Myth of the 'Shelter Provision'," see 4 Nat. Resources J. 398 (1964).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 4 Am. Jur. 2d Alteration of Instruments § 29; 11 Am. Jur. 2d Bills and Notes §§ 78, 666.

Alteration of commercial paper by reducing the amount, 9 A.L.R. 1087.

Liability of party to commercial paper so drawn as to be easily alterable as to amount, 22 A.L.R. 1139, 36 A.L.R. 327, 39 A.L.R. 1380.

Rights and liabilities of bank with respect to certified check or draft fraudulently altered, 22 A.L.R. 1157.

Detachment of paper used to conceal the nature or terms of a bill or note which one signed or endorsed, as an alteration, 34 A.L.R. 532.

Alteration of note before delivery to payee as affecting parties who do not personally consent, 44 A.L.R. 1244.

Erasing endorsement of payment as an alteration of instrument, 44 A.L.R. 1540.

Alteration of instrument by agent as binding on principal, 51 A.L.R. 1229.

Rights and liabilities of drawee bank, as to persons other than drawer, with respect to uncertified check which was altered, 75 A.L.R.2d 611.

What constitutes "fraudulent and material" alteration of negotiable instrument under U.C.C. § 3-407(2)(a), 88 A.L.R.3d 905.

3A C.J.S. Alteration of Instruments § 5 et seq.; 10 C.J.S. Bills and Notes §§ 33, 997.