NMSA 55-9-341. Bank's rights and duties with respect to deposit account

55-9-341. Bank's rights and duties with respect to deposit account. Except as otherwise provided in Subsection (c) of Section 55-9-340 NMSA 1978, and unless the bank otherwise agrees in a signed record, a bank's rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended or modified by: (1) the creation, attachment or perfection of a security interest in the deposit account; (2) the bank's knowledge of the security interest; or (3) the bank's receipt of instructions from the secured party. History: 1978 Comp., § 55-9-341, enacted by Laws 2001, ch. 139, § 61; 2023, ch. 142, § 75. OFFICIAL COMMENTS UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved. 1. Source. New. 2. Free Flow of Funds. This section is designed to prevent security interests in deposit accounts from impeding the free flow of funds through the payment system. Subject to two exceptions, it leaves the bank's rights and duties with respect to the deposit account and the funds on deposit unaffected by the creation or perfection of a security interest or by the bank's knowledge of the security interest. In addition, the section permits the bank to ignore the instructions of the secured party unless it had agreed to honor them or unless other law provides to the contrary. A secured party who wishes to deprive the debtor of access to funds on deposit or to appropriate those funds for itself needs to obtain the agreement of the bank, utilize the judicial process, or comply with procedures set forth in other law. Section 4-303(a), concerning the effect of notice on a bank's right and duty to pay items, is not to the contrary. That section addresses only whether an otherwise effective notice comes too late; it does not determine whether a timely notice is otherwise effective. 3. Operation of Rule. The general rule of this section is subject to section 9-340(c), under which a bank's right of set-off may not be exercised against a deposit account in the secured party's name if the right is based on a claim against the debtor. This result reflects current law in many jurisdictions and does not appear to have unduly disrupted banking practices or the payments system. The more important function of this section, which is not impaired by section 9-340, is the bank's right to follow the debtor's (customer's) instructions (e.g., by honoring checks, permitting withdrawals, etc.) until such time as the depository institution is served with judicial process or receives instructions with respect to the funds on deposit from a secured party who has control over the deposit account. 4. Liability of Bank. This article does not determine whether a bank that pays out funds from an encumbered deposit is liable to the holder of a security interest. Although the fact that a secured party has control over the deposit account and the manner by which control was achieved may be relevant to the imposition of liability, whatever rule applies generally when a bank pays out funds in which a third party has an interest would determine liability to a secured party. Often, this rule is found in a non-UCC adverse claim statute. 5. Certificates of Deposit. This section does not address the obligations of banks that issue instruments evidencing deposits (e.g., certain certificates of deposit). 6. "Signed" Replaces "Authenticated." Consistent with the revised definition of "sign" in Section 1-201, the cognate term "signed" replaces the reference to "authenticated" in the pre-2022 text of this section.