From Tom Ice:
Contemporary negotiable instruments law developed hundreds of years ago, before every important institution of the modern financial world: incorporated banks, business corporations, developed capital markets, global monetary systems, electronic transfers, and even paper currency.1 It is counterintuitive that this ancient law of negotiable instruments would have any relevance to one of the world’s most sophisticated, cutting-edge tools of high finance “” the pooling and securitization of mortgage loans. Yet, the courts routinely look to such law to resolve a foreclosure crisis spawned by the collapse of mortgage-backed securitization, a process which is as strained as trying to decide First Amendment issues using cases pre-dating the Constitution. It is all the more extraordinary that, just as the nation begins to awaken to ” robo-signing” and other such pervasive and methodical abuses of the court systems, judges should find themselves slavishly compelled to apply a body of law shaped (and then abandoned) by the very authors of such scandals: the financial institutions.
This article explores the historical underpinnings of negotiability and whether the evidentiary shortcut that negotiability appears to offer as a means of proving a plaintiff’s standing to sue can or should be applied in the context of the foreclosure cases facing the courts today. Examination of the original purposes of negotiability, as well as recent changes to the Uniform Commercial Code, leads to the conclusion that mere possession of a negotiable instrument (the promissory note) is insufficient to enforce a mortgage. The possessor or ” holder” must prove ownership of the instrument “” a complete chain of title from the original creditor “” to invoke the equitable remedy of foreclosure.
FLORIDA BAR JOURNAL
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Well done Florida Bar!!
as I suspected…
“Even if the court decides that a note is negotiable (and that the plaintiff bank is its holder), the bank’s work in a foreclosure case is only half done. Successfully claiming to be an Article 3 holder only entitles the bank to a money judgment on the note. It must now prove that it is entitled to enforce the mortgage.”
Outstanding article! Thank you for the road map through the specious negotiability argument. I have been taking the position that the Statute of Frauds requires the lawful assignment of the mortgage (and not forged by the servicers pretending to be officers of MERS or the original “lender.”) Negotiable or not (and I say it is clearly not) a mortgage note endorsed in blank cannot transfer an interest in land. The attempt to do so violates the Statute of Frauds. That is why Article 9 proofs are essential for the equitable assignment of the mortgage, along with the equitable principle that clean hands are required for any party seeking the equitable remedy of foreclosure. An endorsement in blank is not sufficient to establish an entitlement to foreclose on the land.
This article concludes as I did when I researched the topic. Thank you, Mr. Ice, for citing all your resources and putting it down in print.
If I can ever get my attorney to return my calls, I will forward the link to him.
Thank you, Matt Weidner, for posting this excellent piece of research and summary!
What an incredible article. All these cases misapplying Johns v. Gillians. All these Defense attorneys getting laughed out of the courthouse on a motion for dismiss or for more definite statement when the Judge says, “Why do I care who owns the Note?”.
So much bad law, so many pending cases ripe for dismissal, the system bending over backwards to protect the banks from having to pay attorneys fees, all the while destroying not only the property record system, but the rule of law itself along the way.
For what? Why are we destroying the court system for the banks? So THEY DON’T HAVE TO PAY RECORDING FEES ON ASSIGNMENTS. THAT’S WHAT THE COURTS ARE FIGHTING FOR.
Give me a break. No one is asking for free houses. All we want is the banks to act reasonably, work with people who can’t pay these garbage notes (WAIVE THE DAMN DEFICIENCIES). But as long as they won’t, we will have to pick apart their garbage legal work and their forged documents and keep the houses out of their hands as long as possible.