Laws Regarding Break of Title

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Laws Regarding Break of Title

U.C.C. provision, U.C.C. §3-305(c): “An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.”

LEGAL CITATION: U.S.C. §3-203

UNIFORM COMMERCIAL CODE – ARTICLE 3 – NEGOTIABLE INSTRUMENT

PART 2 – NEGOTIATION, TRANSFER, AND INDORSEMENT

§3-203 – TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY TRANSFER.

(a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.

(b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any rights of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.

In layman terms, this part of the law is discussing how an instrument is transferred to another party. It is crucial to know because of course the average promissory note is sold 5 times from the date of closing until present day, and that’s a low average as well. The most important paragraph is (b) where it says that the “transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.” Well in every single case, they engaged in fraud AND illegality which of course affected all the people’s security instruments (mortgage note).

LEGAL CITATION: U.S.C. §3-501

UNIFORM COMMERCIAL CODE – ARTICLE 3 – NEGOTIABLE INSTRUMENTS

PART 5 – DISHONOR

§3-501 – PRESENTMENT.

(a) “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.

(b) The following rules are subject to Article 4, agreement of the parties, and clearing-house rules and the like:

(1) Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of two or more makers, acceptors, drawees, or other payors.

(2) Upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument, (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.

Again, the most important part of this law is paragraph (a) and paragraph (b)(2) which are the foundation of the “show me the note” argument which is clearly a very strong legal argument no matter what anyone says about it. Presentment is defined as a “demand made by or on behalf of a person entitled to enforce an instrument, to pay the instrument made to the drawee (lender/holder in due course) or a party (servicer) obliged to pay the instrument.” It goes on to say in a few paragraphs under it that upon demand of the person to whom presentment is made (borrower), the person making presentment (lender/holder in due course/servicer) must exhibit the instrument (show me my original instrument and give reasonable identification to who they are. If the person demanding presentment is servicing the loan then they need to provide you with the reasonable evidence of authority to do so! No more taking their words for the truth, we must let them know that we know the law, and that no one is going to ever take advantage of us, ever again!