After-acquired property; future advances

(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. (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) 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) a commercial tort claim. (b.1) Subsection (b) of this section does not prevent a security interest from attaching: (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) to a commercial tort claim as proceeds under Subsection (a) of Section 55-9-315 NMSA 1978; or (3) under an after-acquired property clause to property that is proceeds of consumer goods or a commercial tort claim. (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. History: 1978 Comp., § 55-9-204, enacted by Laws 2001, ch. 139, § 14; 2023, ch. 142, § 51. OFFICIAL COMMENTS UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved. 1. Source. Former Section 9-204 [55-9-204 NMSA 1978]. 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. 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. 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). 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]. 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. 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. 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.