2018 New Mexico Statutes
Chapter 55 - Uniform Commercial Code
Article 3 - Negotiable Instruments
Section 55-3-207 - Reacquisition.

Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel indorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An indorser whose indorsement is canceled is discharged, and the discharge is effective against any subsequent holder.

History: 1978 Comp., § 55-3-207, enacted by Laws 1992, ch. 114, § 113.

OFFICIAL COMMENTS

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

Section 3-207 [55-3-207 NMSA 1978] restates former Section 3-208 [repealed]. Reacquisition refers to cases in which a former holder reacquires the instrument either by negotiation from the present holder or by a transfer other than negotiation. If the reacquisition is by negotiation, the former holder reacquires the status of holder. Although Section 3-207 [55-3-207 NMSA 1978] allows the holder to cancel all indorsements made after the holder first acquired holder status, cancellation is not necessary. Status of holder is not affected by whether or not cancellation is made. But if the reacquisition is not the result of negotiation the former holder can obtain holder status only by striking the former holder's indorsement and any subsequent indorsements. The latter case is an exception to the general rule that if an instrument is payable to an identified person, the indorsement of that person is necessary to allow a subsequent transferee to obtain the status of holder. Reacquisition without indorsement by the person to whom the instrument is payable is illustrated by two examples:

Case #1. X, a former holder, buys the instrument from Y, the present holder. Y delivers the instrument to X but fails to indorse it. Negotiation does not occur because the transfer of possession did not result in X's becoming holder. Section 3-201(a) [55-3-201 NMSA 1978]. The instrument by its terms is payable to Y, not to X. But X can obtain the status of holder by striking X's indorsement and all subsequent indorsements. When these indorsements are struck, the instrument by its terms is payable either to X or to bearer, depending on how X originally became holder. In either case X becomes holder. Section 1-201(20).

Case #2. X, the holder of an instrument payable to X, negotiates it to Y by special indorsement. The negotiation is part of an underlying transaction between X and Y. The underlying transaction is rescinded by agreement of X and Y, and Y returns the instrument without Y's indorsement. The analysis is the same as that in Case #1. X can obtain holder status by cancelling X's indorsement to Y.

In Case #1 and Case #2, X acquired ownership of the instrument after reacquisition, but X's title was clouded because the instrument by its terms was not payable to X. Normally, X can remedy the problem by obtaining Y's indorsement, but in some cases X may not be able to conveniently obtain that indorsement. Section 3-207 [55-3-207 NMSA 1978] is a rule of convenience which relieves X of the burden of obtaining an indorsement that serves no substantive purpose. The effect of cancellation of any indorsement under Section 3-207 [55-3-207 NMSA 1978] is to nullify it. Thus, the person whose indorsement is cancelled is relieved of indorser's liability. Since cancellation is notice of discharge, discharge is effective even with respect to the rights of a holder in due course. Sections 3-601 and 3-604 [55-3-601 and 55-3-604 NMSA 1978, respectively].

Repeals. — Laws 1992, ch. 114, § 237 repealed former 55-3-207 NMSA 1978, as enacted by Laws 1961, ch. 96, § 3-207, relating to negotiation effective although it may be rescinded, effective July 1, 1992. Laws 1992, ch. 114, § 113, enacted a new section, effective July 1, 1992. For provisions of former section, see the 1991 NMSA 1978 on NMOneSource.com.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 11 Am. Jur. 2d Bills and Notes §§ 319, 393, 529.

Effect of endorsement and delivery of note to comakers, 51 A.L.R. 936.

10 C.J.S. Bills and Notes §§ 158, 244 et seq.