“The note is not a secured transaction (in and of itself)” — Dan Edstrom, senior forensic analyst for living lies.
from the point of view of Article 9 there can be no foreclosure of a mortgage without the party claiming rights under the mortgage showing that they purchased the mortgage for value
THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
After completing another two trials — one of which went exceedingly well (I will be commenting on it in the next few days) — and receiving more inquiries about the same things I am revisiting the UCC. It seems that everyone is paying attention to Article 3 but nobody is paying any attention to a very simple proposition in Article 9. The important thing to remember is that the UCC is not some sort of guideline. It has been adopted as state law in all 50 states, most without any major revision. It is the law — and courts are supposed to follow it, not rewrite it. Of course they can’t do that unless the foreclosure defense attorney raises the issue.
Transfers of “property” (meaning real property, or personal property — which includes legal rights) can be accomplished in a number of ways. Gifts, loans, purchase and sale, endorsement, assignment, etc. So in our context, the transfer of negotiable paper (note not in default) or non negotiable paper (mortgages etc.) can occur legally in the stroke of a pen. But being the transferee is not the same as having all rights to the paper or property.
So if a courier picks up a bearer note, it has been transferred by delivery from Point A to the courier. Theoretically this would alow the courier to take the note to the maker and demand payment, and to sue for payment on the note. The courier would have standing because of legal presumptions. As the possessor of the note he is presumed to be the holder. But as holder of the note he is NOT presumed to be a holder in due course.
Follow the statute. So what are the rights of a holder? To make demand and sue on the note. On a motion to dismiss he is presumed to be entitled to enforce. The mistake by the courts is that they don’t allow for that presumption to be rebutted by evidence from the maker. If the courier wins at trial then the debt is merged into the judgment. (Remember the debt was merged into the note when the note was executed — otherwise there would be two liabilities for the same loan).
The note is not a secured transaction (in and of itself). The obligee of the note is the one entitled to repayment of a debt. The security is for repayment of the debt to the obligee, the one entitled to repayment. No security arises to a party that did not pay money to acquire the note (if they didn’t pay value they have no security to enforce). The security only arises to the specific amount A debt is owed, and only then to the one owed the debt. A judgment on the note would entitle the alleged holder to be paid, but it would seem this would only be valid if issued in conjunction with a bond protecting the maker against double payment.*Further each payment to a party that did not pay value would be unjust enrichment, which is why the so called holder is subject to the defenses of the maker (real and personal) including the defense of lack of consideration and/or failure of consideration. The “holder” who paid no value might be entitled to be repaid the value they paid. They don’t have the ability to show even sufficient consideration, because there isn’t any. Further, to the extent the consideration might be nonmonetary, there were no promises passed between the parties.*Look to the intent of the parties. The homeowner attempted to enter I to the transaction to give a security interest to the LENDER, and gave up a valuable Constitutional Right by way of contract. The right to the LENDER to foreclose, not the right to a party holding the note but which paid no money, who also has an interest adverse to the party that actually paid money.*The provisions in the security instrument apply to a lender, not some holder who is not even licensed as a lender.*And it would seem that there are conditions for repayment and the power of sale that are specifically for a lender and not for some party who at most might be considered a 3rd party incidental beneficiary with no ability to enforce the security instrument as a contract.
Filed under: foreclosure