No Real Property as Security

Another interesting tidbit:

“Chapter 53: Regulation of Financial Services

§ 53-180.  Limitations and prohibitions on practices and agreements.

(f)         No Real Property as Security. – No licensee shall make any loan within this State which shall in any way be secured by real property.”

So is a mortgage loan officer a licensee?

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The Deed of Trust: Settlor’s Powers

If you signed a Deed of Trust to secure the property related to a promissory note,  You were the Settlor.  That word is synonymous with grantor/mortgagor.

§ 36C-8-808.  Powers of a settlor to take certain actions with respect to the trust.

While a trust is revocable, the settlor of a revocable trust has, at all times, the power to direct or consent to the actions of the trustee whether or not the power is conferred upon the settlor by the terms of the trust. The duty and liability of the trustee subject to the direction and consent of the settlor is as follows:

(1)        The trustee may follow a direction of the settlor that is not authorized by or is contrary to the terms of the trust, even if by doing so (i) the trustee exceeds the authority granted to the trustee under the terms of the trust, or (ii) the trustee would otherwise violate a duty the trustee owes under the trust.

(2)        The trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction. If the settlor requires the settlor’s consent to certain actions of the trustee, and the settlor does not provide consent within a reasonable time after the trustee has made a timely request for the settlor’s consent, the trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the trustee’s failure to take any action that required the settlor’s consent.  (2005-192, s. 2; 2007-106, s. 34; 2012-18, s. 3.1.)”

Don’t be confused by the word “may” in (1).  In the previous sentence, when “duty and liability” are mentioned, those relate to (1)…duty, and (2)…liability.  When read as imparting a duty, “may” should be read as “may only” or “must”, meaning he does not have a choice.

Now, about that revocability thing… in the terms of the Deed of Trust, it might say something to the effect of “…do hereby irrevocably grant, gift, donate…”.  Does that mean that the trust itself is irrevocable?  Changing the trustee is not the same as dissolving the trust. Trustees can be changed regularly.

 I contend that the trust itself is revocable.  When I asked the lawyer* (see bottom of page) about the revocable/irrevocable status of the trust arising from the DoT, he said “Hmmm… we don’t normally think of this kind of trust as being revocable or irrevocable… but yes, you can revoke the trust.”  He also mentioned some particulars in the trust terms that provide consequences for doing so. The problem is… you can effectively remove the power of sale by assigning a different trustee.  What are the remaining consequences?  Bill collectors calling you?

Also of note is “If the settlor requires the settlor’s consent “. It does not say “If the terms of the trust require the settlor’s consent”.  This is because certain powers are always retained by the settlor, whether the settlor knows it or not. This section of the statutes proves that.  It should therefore be sufficient to notice the trustee of that requirement. 

In sum, the settlor can order the trustee to do anything in regard to the trust, as well as require the trustee to ask for settlor’s consent before performing ANY act (wouldn’t that include the act of selling the property?).  No consent= no power of sale, among other things.

*He had already lied and said that the trustee had an equitable interest, and that the legal title was held by us.  My question to him was “If the lender is the trust beneficiary, and the trustee has legal title, what do we have?” Makes sense that we have a mere possessory interest, meaning we are allowed to live there.  We are tenants, paying rent.

“An equitable interest is an “interest held by virtue of an equitable title (a title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title) or claimed on equitable grounds, such as the interest held by a trust beneficiary. “The equitable interest is a right in equity that, if violated (suffers a harm), is subject to satisfaction by an equitable remedy. This concept exists only in the common law.”

This mention of common law supports the understanding that the deed of trust is a private agreement– that is also why the power of sale is a non-judicial remedy for the beneficiary (lender) to regain losses due to non-payment of loan (for which, in truth, it has risked no consideration or value whatsoever).

 

Your Rights Are in Full Effect! Only Waived, That’s All.

More from our good friends, the North Carolina General Assembly.

“Chapter 1A: Rules of Civil Procedure

Article 6.

Trials.

Rule 38. Jury trial of right.

(a)        Right preserved. – The right of trial by jury as declared by the Constitution or statutes of North Carolina shall be preserved to the parties inviolate.

(b)        Demand. – Any party may demand a trial by jury of any issue triable of right by a jury by serving upon the other parties a demand  therefor in writing at any time after commencement of the action and not later than 10 days after the service of the last pleading directed to such issue. Such demand may be made in the pleading of the party or endorsed on the pleading.

(c)        Demand – Specification of issues. – In his demand a party may specify the issues which he wishes so tried; otherwise, he shall be deemed to have demanded trial by jury for all the issues so triable. If a party has demanded trial by jury for only some of the issues, any other party within 10 days after service of the last pleading directed to such issues or within 10 days after service of the demand, whichever is later, or such lesser time as the court may order, may serve a demand for trial by jury of any other or all of the issues in the action.

(d)       Waiver. – Except in actions wherein jury trial cannot be waived, the failure of a party to serve a demand as required by this rule and file it as required by Rule 5(d) constitutes a waiver by him  of trial by jury. A demand for trial by jury as herein provided may not be withdrawn without the consent of the parties who have pleaded or otherwise appear in the action.

(e)        Right granted. – The right of trial by jury as to the issue of just compensation shall be granted to the parties involved in any condemnation proceeding brought by bodies politic, corporations or persons which possess the power of eminent domain. (1967, c. 954, s. 1; 1973, c. 149.)”

 

____________________________________________

Did you catch that?  The right to a trial by jury cannot be violated.

 

However, it is presumed to be waived unless expressly reserved.  How is that not a violation?

More on Natural Persons, from the NC General Statutes

This was too good not to post:

“Article 7A.

Application of Foreign Law.

§ 1-87.12.  Definitions.

The following definitions apply in this Article:

(1)        Foreign law. – A law, rule, resolution, legal code, legal system, or any component of a legal system established and used or applied in a foreign venue or forum.

(2)        Foreign venue or forum. – A venue or forum operating under the authority of a government other than any of the following:

a.         The United States.

b.         A state, district, commonwealth, territory, or insular possession of the United States.

c.         Any other government with regard to which the decision in this State as to whether to recognize a judgment of that government’s courts is initially subject to determination under the Full Faith and Credit Clause of the United States Constitution.

(3)        Fundamental constitutional right. – A fundamental right of a natural person guaranteed by the United States Constitution or the North Carolina Constitution.  (2013-416, s. 1.)”

Notice the use of the term “natural persons”.  Legislators have to be unambiguous when major rights are at stake.

____________________________________

§ 1-87.18.  Contracts not capable of modification to preserve fundamental constitutional rights void.

Any provision in a contract or other agreement incapable of being modified or amended pursuant to this Article in order to preserve the fundamental constitutional rights of the natural persons who are parties to the contract or agreement shall be null and void.  (2013-416, s. 1.)

Like I said…

___________________

“§ 1-87.19.  Strict construction of waivers of constitutional rights.

Nothing in this Article shall be interpreted to limit the right of natural persons voluntarily to restrict or limit their own constitutional rights by contract or specific waiver consistent with constitutional principles; however, any ambiguity in the language of any such contract or other waiver shall be strictly construed in favor of preserving the constitutional rights of natural persons in this State.  (2013-416, s. 1.)”

Your rights are well-protected– but you con compromise them at a moment’s notice.  However, if it can be reasonably argued that the terms of a contract are misleading, the unintentional waiver of your rights is invalid.

Good stuff. These are principles that are not new concepts to me, but as always, it is good to see them spelled out.

Moral? Be a natural person.

The Secret of Debt in the United States

Telling tidbit from the UCC.

Are you a debtor in the United States? Look at “(h)”:

 

“§ 25-9-307.  Location of debtor.

(a)        “Place of business.” – In this section, “place of business” means a place where a debtor conducts its affairs.

(b)        Debtor’s location: general rules. – Except as otherwise provided in this section, the following rules determine a debtor’s location:

(1)        A debtor who is an individual is located at the individual’s principal residence.

(2)        A debtor that is an organization and has only one place of business is located at its place of business.

(3)        A debtor that is an organization and has more than one place of business is located at its chief executive office.

(c)        Limitation of applicability of subsection (b). – Subsection (b) of this section applies only if a debtor’s residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) of this section does not apply, the debtor is located in the District of Columbia.

(d)       Continuation of location: cessation of existence, etc. – A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c) of this section.

(e)        Location of registered organization organized under state law. – A registered organization that is organized under the law of a state is located in that state.

(f)        Location of registered organization organized under federal law; bank branches and agencies. – Except as otherwise provided in subsection (i) of this section, a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located:

(1)        In the state that the law of the United States designates, if the law designates a state of location;

(2)        In the state that the registered organization, branch, or agency designates, if the law of the United States authorizes the registered organization, branch, or agency to designate its state of location, including by designating its main office, home office, or other comparable office; or

(3)        In the District of Columbia, if neither subdivision (1) nor subdivision (2) of this subsection applies.

(g)        Continuation of location: change in status of registered organization. – A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) of this section notwithstanding:

(1)        The suspension, revocation, forfeiture, or lapse of the registered organization’s status as such in its jurisdiction of organization; or

(2)        The dissolution, winding up, or cancellation of the existence of the registered organization.

(h)        Location of United States. – The United States is located in the District of Columbia.

(i)         Location of foreign bank branch or agency if licensed in only one state. – A branch or agency of a bank that is not organized under the law of the United States or a state is located in the state in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one state.

(j)         Location of foreign air carrier. – A foreign air carrier under the Federal Aviation Act of 1958, as amended, is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.

(k)        Section applies only to this Part. – This section applies only for purposes of this Part.  (2000-169, s. 1; 2012-70, s. 3.)”

 

It’s nice when they come out and say it.

I spoke to a lawyer yesterday regarding a refinancing of our home, and asked why there was a charge of a couple of thousand to research the title.  He said it was standard practice, and I asked why it was necessary when all registered land carries a guarantee according to the statutes.

Registering land is done by decree, and once the court issues it:

“§ 43-12.  Effect of decree; approval of judge.

Every decree rendered as hereinbefore provided shall bind the land and bar all persons and corporations claiming title thereto or interest therein; quiet the title thereto, and shall be forever binding and conclusive upon and against all persons and corporations, whether mentioned by name in the order of publication, or included under the general description, “to whom it may concern”; and every such decree so rendered, or a duly certified copy thereof, as also the certificate of title issued thereon to the person or corporation therein named as owner, or to any subsequent transferee or purchaser, shall be conclusive evidence that such person or corporation is the owner of the land therein described, and no other evidence shall be required in any court of this State of his, her, or its right or title thereto. It shall not be an exception to such conclusiveness that a person is a minor, is incompetent, or is under any disability, but such person may have recourse upon the indemnity fund hereinafter provided for, for any loss the person may suffer by reason of being so concluded. Notwithstanding the provisions of G.S. 43-10, such decrees shall not be binding on and include the State of North Carolina or any of its agencies unless the State of North Carolina is made a party to the proceeding and notice of said proceeding and copy of petition, etc., are served upon the State of North Carolina as provided in this Chapter. Such decrees shall, in addition to being signed by the clerk of the court, be approved by the judge of the superior court, who shall review the whole proceeding and have power to require any reformation of the process, pleading, decrees or entries.  (1913, c. 90, s. 9; 1919, c. 82, s. 3; C.S., s. 2388; 1925, c. 263; 1979, c. 73, s. 2; 2011-29, s. 4.)”

What about later purchasers?

“§ 43-17.5.  Issuance of new certificate validated.

Whenever heretofore any registered certificate of title has been surrendered by the heirs or devisees of any deceased registered owner of any registered title and the registered certificate of title of such deceased owner has been surrendered and canceled and a new certificate of title issued to a purchaser or to such heirs or devisees, the same is hereby validated and confirmed and made effectual to the same extent as though such new certificate had been issued in compliance with the provisions of this Chapter. (1943, c. 466, s. 1.)

This quality of assurance contained in the certificate issued from the original decree carries through undiluted, to every subsequent holder of a certificate of title.

So why do we need title insurance?

 

“§ 43-18.  Registered owner’s estate free from adverse claims; exceptions.

Every registered owner of any estate or interest in land brought under this Chapter shall, except in cases of fraud to which he is a party or in which he is a privy, without valuable consideration paid in good faith, and except when any registration has been procured through forgery, hold the land free from any and all adverse claims, rights or encumbrances not noted on the certificate of title, except

(1)        Liens, claims or rights arising or existing under the laws or Constitution of the United States which the statutes of this  State cannot require to appear of record under registry laws;

(2)        Taxes and assessments thereon due the State or any county, city or town therein, but not delinquent;

(3)        Any lease for a term not exceeding three years, under which the land is actually occupied. (1913, c. 90, s. 25; C.S., s.  2393.)”