memorandum article 9 and ny trust law vers published
TRANSCRIPT
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7/31/2019 Memorandum Article 9 and NY Trust Law Vers Published
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Ronald Ryan
Ronald Ryan PCAttorney at Law1413 E. Hedrick DriveTucson, Arizona 85719(520)298-3333 fax: (520)743-1020
[email protected] #018140 Pima County #65325
ARTICLE 9 APPLICATION TO SALES OF NEGOTIABLE AND NON-NEGOTIABLE
PROMISSORY NOTES AND INCLUDES THE ONLY WAY THAT A MORTGAGE
INCIDENT TO THE SALE OF A NOTE CAN BE ACCOMPLISHED
Source, see March 29, 2011, Draft Report of the Permanent Editorial Board on the
UCC Rules Applicable to the Assignment of Mortgage Notes and to the Ownership
and Enforcement of Those Notes and the Mortgages Securing Them, plusintroductory letter from Board Chairman
1
The security interest follows ownership of the Loan/Note. This rule has been
codified in ARS 33-817. The transfer of any contract or contracts secured by a trust
deed shall operate as a transfer of the security for such contract or contracts. The
phrase transfer of any contract, does not refer to transfer of the right to enforce the
Note, or holder status, it means transfer of ownership of the Loan.2
UCC Article 3
applies to the right to enforce promissory notes, but not to the ownership of notes, no
1 See http://docs.google.com/viewer?a=v&q=cache:1iCsqRxN-
CYJ:extranet.ali.org/directory/files/PEB_Report_on_Mortgage_Notes-
Circulation_Draft.pdf+American+Law+Institute+and+the+Uniform+Law+Commission,+the+or
ganizations+that+jointly+sponsor+the+UCC,+established+the+Permanent+Editorial+Board+for+the+Uniform+Commercial+Code&hl=en&gl=us&pid=bl&srcid=ADGEESi4LGDLbXX6yZG
VqMSbZTpLTJgwr2eXB9nh2LqgtihUwuIVP6catuvoV-
NoOqChWVEoU3piXZJ2BHZWj4QyCL5qbpEy92lRTe9itlda-PJRpPPQfzrwoQWJj-XQyy98qQs2Pso7&sig=AHIEtbScAm5B0hAJH_Xec46DDM7h-6gASg&pli=1
2 "Contract", as distinguished from "agreement", means the total legal obligation that results
from the parties' agreement as determined by this title [UCC Art. 9] as supplemented by anyother applicable laws. ARS 47-1201 (B)(12).
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to the right to enforce the deed of trust rights incident to the sale of said notes. Article
9 applies to sales of negotiable and non-negotiable promissory notes. UCC 9-109(a)(3)
ARS 47-9109(A)(3). [Article 9] applies to. . . a sale of . . . promissory notes. Id
Ownership of the Loan/Note is required to enforce a mortgage and being the holder of a
note is insufficient. Exhibit M, p. 82. It must be borne in mind that in this context
definitions used are unexpected and should be studied.3
The rightful purchaser of a
Loan/Note that is secured by a deed of trust in real estate obtains the security interest.
The attachment of a security interest in a right to payment or
performance secured by a security interest or other lien on
personal or real property is also attachment of a security interest
in the security interest, mortgage or other lien.
ARS 47-9203(G); See also, as stated, ARS 33-817. However, in order to transfer
the security in the mortgage, there must be a true and valid sale of the
loan/note.4
For there to be a true sale, it must be complete, which requires
complete divestiture by the seller to the buyer, such that the sale is legally
enforceable between them.
3 See "Debtor" means . . . A seller of . . . promissory notes. . . ARS 47-9102(A)(28)(b).
"Secured party" means. . . a person to which . . . promissory notes have been sold. ARS 47-9102(A)(71)(d). "Security interest" . . . includes any interest of a . . . buyer of a promissory
note in a transaction that is subject to [UCC Article 9]. ARS 47-1201(B)(35); "Securityagreement" means an agreement that creates or provides for a security interest.. ARS 47-9102(A)(72). "Collateral" means . . promissory notes that have been sold. ARS 47-
9102(A)(12)(b).4 Error! Main Document Only.As used here, Mortgage is synonymous with the deed of
trust security interest. "Mortgage" means a consensual interest in real property, includingfixtures, that secures payment or performance of an obligation. ARS 47-9102(A)(55).
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A security interest attaches to collateral when it becomes
enforceable against the debtor with respect to the collateral, unless
an agreement expressly postpones the time of attachment.
ARS 47-9203(A). For the sale to be complete, three criteria must be met to
validly sell a loan/note, and the mortgage that goes with it, such that the buyer
(secured party) can enforce the mortgage against the homeowner. They are set
forth in ARS 47-9203(B). The first two are substantive and are extremely
important. First, the buyer does not have a security interest on the homeowners
property and the mortgage cannot be enforced by the loan/note buyer or their
agents, unless the loan/note was purchased for value. Second, the buyer does
not have a security interest on the homeowners property and the mortgage
cannot be enforced by the loan/note buyer or their agents, unless loan/note was
purchased from a party that owned the loan/note and mortgage, and was the
holder or otherwise had the right to transfer the note.
[A] Security interest is enforceable against the debtor and third
parties with respect to the collateral only if: 1. Value has been
given; 2. The debtor has rights in the collateral or the power to
transfer rights in the collateral to a secured party; and [the third
criterion is met].
ARS 47-9203(B)(1) and (2). The third criterion can be met in one of two ways.
The buyer of the loan/note has a document transferring ownership of the note to
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the buyer that has been signed by the seller, or the buyer has possession of the
note.
One of the following conditions is met: (a) The debtor hasauthenticated a security agreement that provides a description of
the collateral . . . ; (b) The collateral is in the possession of the
secured party under section 47-9313 pursuant to the debtor's
security agreement.
ARS 47-9203(B)(3).5
In addition to the above, in order to pursue non-judicial
foreclosure proceedings under the deed of trust, if there is not a valid assignment
of deed of trust of record, the purchaser of the loan/note and mortgage may,
prior to the recording of the notice of trustee sale, record the document
evidencing the sale of the loan/note and a sworn affidavit that the secured party
is entitled to enforce the mortgage nonjudicially.
If necessary to enable a secured party to exercise under subsection
A, paragraph 3 of this section the right of a debtor to enforce a
mortgage nonjudicially, the secured party may record in the office
in which a record of the mortgage is recorded: 1. A copy of the
security agreement that creates or provides for a security interest
in the obligation secured by the mortgage; and 2. The secured
party's sworn affidavit in recordable form stating that: (a) A default
has occurred; and (b) The secured party is entitled to enforce the
mortgage nonjudicially.
5 "Authenticate" means: (a) To sign; or (b) To execute or otherwise adopt a symbol, or encrypt
or similarly process a record in whole or in part, with the present intent of the authenticatingperson to identify the person and adopt or accept a record. ARS 47-9102(A)(7).
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ARS 47-9607(B). Obviously, if the party executing the Affidavit does not qualify
pursuant to ARS 47-9203(B)(1) and (2), and all other relevant provisions, they
would be committing perjury. Such affidavits must surely be challengeable on
cross-examination and with controverting evidence. We must be allowed to
discover proof that they truly purchased for value the Note from the party that
owned in previously.
The application of the above UCC Article 9 provisions to a transaction that
falls within its scope cannot be avoided by agreement. Furthermore, UCC Article
9 trumps common law. UCC Report, p2-3, fn 7-8; ARS 47-9602; ARS 47-1302.
/s/ Ronald Ryan