§ 394-a. Proof of lost negotiable paper. 1. Where, upon the trial of an action, it appears that a negotiable instrument within article three of the uniform commercial code, upon which the action or a counterclaim interposed in the action is founded, was lost while it belonged to the party claiming the amount due thereupon, he may prove the contents thereof by parol or other secondary evidence and may recover or set off the amount due thereupon as if it was produced.

2. For that purpose, he must give to the adverse party a written undertaking, in a sum fixed by the judge or the referee, not less than twice the amount of the note or bill, with at least two sureties, approved by the judge or the referee, to the effect that he will indemnify the adverse party, his heirs and personal representatives, against any claim by any other person, on account of the note or bill, and against all costs and expenses, by reason of such a claim.

3. But where an action is prosecuted or defended by the state, or by a public officer in its behalf, the state or the public officer may prove the contents of a lost negotiable instrument within article three of the uniform commercial code, by parol or other secondary evidence, and may recover or set off the amount due thereupon, without giving any security to the adverse party notwithstanding section 3–804 of such code.