Sufficiency of description

(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 [55-9-110 NMSA 1978] and 9-115(3) [55-9-115 NMSA 1978]. 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 [55-9-504 NMSA 1978], 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 [55-9-203 NMSA 1978] is evidentiary. The test of sufficiency of a description under this section, as under former Section 9-110 [55-9-110 NMSA 1978], 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)(2), the use of the wrong Article 8 or commodities 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"); nor does Subsection (d) require the use of the terms "security entitlement," "securities account," "commodity account," or "investment property" if the collateral description is otherwise sufficient under Subsection (a). See PEB Commentary No. 28, dated January 16, 2024. The commentary is available at https://www.ali.org/peb-ucc. Note also that given the broad definition of "securities account" in Section 8-501 [55-8-501 NMSA 1978], 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) provides 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 also contains a descriptive component beyond the "type" alone. For example, a description such as "all goods now or hereafter sold by secured party to debtor" would suffice, but note that Section 9-204(b)(1) [55-9-204 NMSA 1978] would apply except in the case of a purchase-money security interest. See Section 9- 204, Comment 3. 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), (i) [55-9-203 NMSA 1978]. Under Section 9-204 [55-9-204 NMSA 1978], an after-acquired collateral clause in a security agreement will not reach future commercial tort claims. It follows that when an effective security agreement (or amendment) covering a commercial tort claim as original collateral is entered into the claim already will exist. Subsection (e) does not require a description to be specific, so long as it extends beyond the "type." 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.) The enhanced specificity (beyond the "type") that subsection (e) requires does not apply to the attachment of security interests in commercial tort claims or collateral in consumer transactions that are identifiable proceeds of other collateral. A security interest automatically attaches to such property under Sections 9-203(f) [55-9-203 NMSA 1978] and 9-315(a)(2) [55-9-315 NMSA 1978]. This point is confirmed by Section 9-204(b.1) [55-9-204 NMSA 1978].