1. (a) Except as otherwise provided in Subsection (b) of this section, a security agreement may create or provide for a security interest in after-acquired collateral.

2. (b) Subject to Subsection (b.1) of this section, security interest does not attach under a term constituting an after-acquired property clause to:

   1. (1) consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within ten days after the secured party gives value; or
   2. (2) a commercial tort claim.

3. (b.1) Subsection (b) of this section does not prevent a security interest from attaching:

   1. (1) to consumer goods as proceeds under Subsection (a) of Section 55-9-315 NMSA 1978 or commingled goods under Subsection (c) of Section 55-9-336 NMSA 1978;
   2. (2) to a commercial tort claim as proceeds under Subsection (a) of Section 55-9-315 NMSA 1978; or
   3. (3) under an after-acquired property clause to property that is proceeds of consumer goods or a commercial tort claim.

4. (c) A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.

   OFFICIAL COMMENTS

5. UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
6. 1. Source. Former Section 9-204 [55-9-204 NMSA 1978].
7. 2. After-Acquired Property; Continuing General Lien. Subsection (a) makes clear that a security interest arising by virtue of an after-acquired property clause is no less valid than a security interest in collateral in which the debtor has rights at the time value is given. A security interest in after-acquired property is not merely an "equitable" interest; no further action by the secured party - such as a supplemental agreement covering the new collateral - is required. This section adopts the principle of a "continuing general lien" or "floating lien." It validates a security interest in the debtor's existing and (upon acquisition) future assets, even though the debtor has liberty to use or dispose of collateral without being required to account for proceeds or substitute new collateral. See Section 9-205 [55-9-205 NSMA 1978]. Subsection (a), together with subsection (c), also validates "cross-collateral" clauses under which collateral acquired at any time secures advances whenever made.
8. 3. After-Acquired Consumer Goods. Subsection (b)(1) makes ineffective an after-acquired property clause covering consumer goods (defined in Section 9-102(a)(23)) [55-9-102 NMSA 1978], except as accessions (see Section 9-335 [55-9-335 NMSA 1978]), acquired more than 10 days after the secured party gives value. Subsection (b)(1) is unchanged in substance from the corresponding provision in pre-1998 Section 9-204(2) [55-9-204 NMSA 1978]. However, a term granting a security interest in consumer goods that will be purchase-money collateral in the transaction is not "a term constituting an after-acquired property clause." Consequently, Subsection (b)(1) does not prevent the security interest from attaching to the purchase-money collateral even if the collateral is not an accession and the debtor acquires rights in the collateral more than 10 days after the secured party gives value.
9. 4. Commercial Tort Claims. Subsection (b)(2) provides that an after-acquired property clause in a security agreement does not reach future commercial tort claims. In order for a security interest in a tort claim as original collateral to attach, the claim must be in existence when the security agreement is signed. In addition, the security agreement must describe the tort claim with greater specificity than simply "all tort claims." See Section 9-108(e).
10. 4A. Proceeds and Commingled Goods. Subsection (b.1) clarifies and makes explicit what is implicit in the pre-2022 text of Subsection (b). Subsection (b) does not prevent a security interest from attaching to consumer goods as proceeds or as commingled goods, to commercial tort claims as proceeds, or under an after-acquired property clause to proceeds of consumer goods or commercial tort claims. This clarification corrects and rejects the erroneous holdings of several cases addressing commercial tort claims that are proceeds. As to proceeds, this result also follows from Section 9-203(f) [55-9-203 NMSA 1978].
11. 5. Future Advances; Obligations Secured. Under Subsection (c) collateral may secure future as well as past or present advances if the security agreement so provides. This is in line with the policy of this article toward security interests in after-acquired property under subsection (a). Indeed, the parties are free to agree that a security interest secures any obligation whatsoever. Determining the obligations secured by collateral is solely a matter of construing the parties' agreement under applicable law. This article rejects the holdings of cases decided under former Article 9 that applied other tests, such as whether a future advance or other subsequently incurred obligation was of the same or a similar type or class as earlier advances and obligations secured by the collateral.
12. 6. Sales of Receivables. Subsections (a) and (c) expressly validate after-acquired property and future advance clauses not only when the transaction is for security purposes but also when the transaction is the sale of accounts, chattel paper, payment intangibles, or promissory notes. This result was implicit under former Article 9.
13. 7. Financing Statements. The effect of after-acquired property and future advance clauses as components of a security agreement should not be confused with the requirements applicable to financing statements under this article's system of perfection by notice filing. The references to after-acquired property clauses and future advance clauses in this section are limited to security agreements. There is no need to refer to after-acquired property or future advances or other obligations secured in a financing statement. See section 9-502, comment 2.

History: 1978 Comp., § 55-9-204, enacted by Laws 2001, ch. 139, § 14; 2023, ch. 142, § 51.

ANNOTATIONS

Repeals and reenactments. — Laws 2001, ch. 139, § 14 repealed former 55-9-204 NMSA 1978, as amended by Laws 1985, ch. 193, § 14, and enacted a new section, effective July 1, 2001.

The 2023 amendment, effective January 1, 2024, added a provision related creating or providing a security interest in after-acquired collateral; in Subsection (b), added "Subject to Subsection (b.1) of this section"; and added Subsection (b.1).

Decisions under former 55-9-204 NMSA 1978. — In light of the similarity of this section and former Section 55-9-204 NMSA 1978, annotations decided under former 55-9-204 NMSA 1978 have been included in the annotations in this section.

I. GENERAL CONSIDERATION.

Steps necessary to create security interest may be taken in any order. — If a financing statement is filed, value is extended, and a security agreement is executed, then there is a security interest in the described collateral. These steps can be taken in any order and priority is given to the security interest which is filed first, even if that security interest has not attached at the time of filing. Waterfield v. Burnett (In re Burnett), 21 B.R. 752 (Bankr. D.N.M. 1982) (decided under former law).

Effect of security agreement is to immediately transfer property interest in collateral. Hernandez v. S.I.C. Fin. Co., 1968-NMSC-192, 79 N.M. 673, 448 P.2d 474 (decided under former law).

Description of collateral in financing statement. — The description of collateral in the financing statement as the "entire inventory of merchandise together with all proceeds derived therefrom" is sufficient to give another creditor notice of the security interest in after-acquired inventory. Kuemmerle v. United N.M. Bank, 1992-NMSC-028, 113 N.M. 677, 831 P.2d 976 (decided under former law).

Effect of future advance clause with respect to third persons. — With respect to third persons, future advances do not come within the protection of the future advance clause of the security agreement unless the future advance is of the same general class of debt as the original debt and was within the contemplation of the parties where the security agreement was made. AG-Chem Farm Servs., Inc. v. Coberly, 1987-NMCA-009, 105 N.M. 384, 733 P.2d 15 (decided under former law).

Debt consolidation loan did not cause lapse of prior security agreement. — A loan consolidating a debtor's preceding debts was, in effect, a renewal of his previous loans, including a 1979 loan covered by a security agreement, so that the security agreement did not lapse as a result of the consolidation, since the security agreement provided that the agreement would secure "the payment of all extensions and renewals," and it was the parties' intent that the agreement secure the amount owing under the 1979 loan as well as future advances. Bond Enters., Inc. v. W. Bank, 54 B.R. 366 (Bankr. D.N.M. 1985) (decided under former law).

Failure to disclose time limit for acquisition of after-acquired property. — The Consumer Credit Protection Act, 15 U.S.C. §1601, et seq. was not violated where a loan agreement disclosed that the agreement covered after-acquired property, but failed to disclose the provision of New Mexico law that a security interest in after-acquired property covers only property acquired by the borrower within ten days after the lender gives value. Montoya v. Postal Credit Union, 630 F.2d 745 (10th Cir. 1980).

II. AGREEMENT TO ATTACH.

Agreement not payment key to attachment. — When defendant agreed to buy equipment from pump company, company agreed to furnish the equipment, and lessee of the equipment agreed that defendant would have an interest in the equipment, security interest attached immediately, not upon actual payment by defendant of purchase price. Honea v. Laco Auto Leasing, Inc., 1969-NMCA-025, 80 N.M. 300, 454 P.2d 782 (decided under former law).

No security interest created if collateral omitted from security agreement. — If the collateral is described on a financing statement but omitted from the security agreement, there is no enforceable security interest. First Nat'l Bank v. Niccum (In re Permian Anchor Servs.), 649 F.2d 763 (10th Cir. 1981) (decided under former law).

III. VALUE GIVEN.

Value previously given. — Having previously given value for security interest, secured party acquired this interest (the security interest attached) by the equipment lease agreement. Transamerica Leasing Corp. v. Bureau of Revenue, 1969-NMCA-011, 80 N.M. 48, 450 P.2d 934 (decided under former law).

Binding commitment to extend credit deemed sufficient value. — The fact that equipment leases were not signed until after the installation of the equipment, and thus not enforceable at the time of the installations, did not prevent the attachment of defendant's security interest at the time of installation where defendant gave a binding commitment to extend credit, and this commitment was acted upon. Honea v. Laco Auto Leasing, Inc., 1969-NMCA-025, 80 N.M. 300, 454 P.2d 782 (decided under former law).

IV. DEBTOR RIGHTS IN COLLATERAL.

Rights acquired and security interests attach upon delivery to debtor. — Where vendor from whom business owner purchased inventory provided delivery of the items in its own trucks and at its own risk, and all sales were for cash on delivery, business owner acquired rights in the collateral when it was delivered, and the bank's security interest in his inventory "now owned or hereafter acquired" attached at that point and was perfected. National Inv. Trust v. First Nat'l Bank, 1975-NMSC-065, 88 N.M. 514, 543 P.2d 482 (decided under former law).

Law reviews. — For comment, "New Mexico's Uniform Commercial Code in Oil and Gas Transactions," see 10 Nat. Resources J. 361 (1970).

For article, "Buyers and Sellers of Goods in Bankruptcy," see 1 N.M. L. Rev. 435 (1971).

Am. Jur. 2d, A.L.R. and C.J.S. references. — Term "increase" in description in chattel mortgage on animals, as including increase other than by generation, 1 A.L.R. 554.

Chattel mortgage on livestock as including increase, 39 A.L.R. 153.

Chattel mortgage on fruit crops growing or to be grown, 54 A.L.R. 1532.

Filing of chattel mortgage on crops as constructive notice, 77 A.L.R. 572.

Chattel mortgage on livestock as covering animals subsequently acquired by means other than increase of generation, 129 A.L.R. 899.

Chattel mortgage lien attaching to subsequently born offspring as surviving period of suitable nurture, 144 A.L.R. 330.

Priority as between seller or conditional seller of personalty and claimant under after acquired property clause of mortgage or other instrument, 86 A.L.R.2d 1152.

Construction and effect of "future advances" clauses under UCC Article 9, 90 A.L.R.4th 859.

Avoidance under 11 USCS § 522(f)(2) of the Bankruptcy Code of 1978 of nonpossessory, nonpurchase-money security interest in debtor's exempt personal property, 55 A.L.R. Fed. 353.