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).

 

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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.

A Remedy for the Ill. Update… still researching!

I wanted to tell my readers that I am still actively researching things such as tax law, trust law, and property interest.  Some recent moments of clarity:

In the NC code under “Land registration”:

“Chapter 43.

Land Registration.

Article 1.

Nature of Proceeding.

§ 43-1.  Jurisdiction in superior court.

For the purpose of enabling all persons owning real estate within this State to have the title thereto settled and registered, as prescribed by the provisions of this Chapter, the superior court of the county in which the land lies in the State shall have exclusive original jurisdiction of all petitions and proceedings had thereupon,  under the rules of practice and procedure prescribed for special proceedings except as herein otherwise provided. (1913, c. 90, s. 1; C.S., s. 2377.)

 § 43-2.  Proceedings in rem; vests title.

The proceedings under any petition for the registration of land, and all proceedings in the court in relation to registered land, shall be proceedings in rem against the land, and the decrees of the court shall operate directly on the land, and vest and establish title thereto in accordance with the provisions of this Chapter. (1913, c. 90, s. 2; C.S., s. 2378.)”

It is important to read this with an open mind- I believe that when the word “settled” is used, it means something other than “finalized” or established”.  Look at this:

“Settlor

One who establishes a trust—a right of property, real or personal—held and administered by a trustee for the benefit of another.”

Also, Article 9 under that same chapter says:

“Article 9.

Removal of Land from Operation of Torrens Law.

§ 43-56.  Proceedings.

Any land brought under the provisions and operation of this Chapter before April 16, 1931, may be removed and excluded therefrom by a motion in writing filed in the original cause wherein said land was brought under the provisions and operation of said Chapter,…”

Notice the phrase “provisions of this chapter”…

“provision (Act of supplying), noun accommodation, arrangement, catering, donation, endowment, furnishing, preparation, procurement, providence, purveyance, serving

This can be read as an offer for government services, aka privilege. It is a contract with the county, as evidenced here:

“§ 43-20.  Decree and registration run with the land.

The obtaining of a decree of registration and the entry of a certificate of title shall be construed as an agreement running with the land, and the same shall ever remain registered land, subject to the provisions of this Chapter and all amendments thereof. (1913, c. 90, s. 26; C.S., s. 2395.)”

The land is presumed under contract eternally after registration, until that presumption is rebutted. That’s what the “Removal of Land from Operation of Torrens Law” section referenced above is for.  It prescribes the method of breaking that agreement and presumption.

Once removed from Torrens registration, the land can very easily be placed into/under your own trust:

“Chapter 36C: North Carolina Uniform Trust Code.

Article 4.

Creation, Validity, Modification, and Termination of Trust.

§ 36C-4-401.  Methods of creating trust.

A trust may be created by any of the following methods:

(1)        Transfer of property by a settlor to a person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death including either of the following:

a.         The devise to the trustee of the trust as provided in G.S. 31-47.

b.         The designation of the trust as beneficiary of life insurance or other death benefits as provided in G.S. 36C-4-401.1.

(2)        Declaration by the owner of property that the owner holds identifiable property as trustee unless the transfer of title of that property is otherwise required by law.

(3)        Exercise of a power of appointment in favor of a trustee.

(4)        A court by judgment, order, or decree, including the establishment of a trust pursuant to section 1396p(d)(4) of Title 42 of the United States Code.

 I believe we’ve already done “(1)” when signing a deed of trust, and “(2)” is how we initially take it back, and claim private ownership.  Look up the legal definition of “Declaration”– it is not just a statement, but a formal written statement in the nature of an affidavit. This declaration gets recorded, not registered.

It just gets more and more interesting.  So, at this stage, you are trustee AND beneficiary of the land. Legally speaking, you are the holder of the legal title, while the beneficiaries are privately known.

But wait… the deed of trust conveyed full legal title to land that you didn’t know you owned (how else could you convey title?), and the lender is listed as beneficiary to that trust.

How can two people, the named trustee on the deed of trust, and yourself, subsequent declarant of trusteeship of the land, both hold legal title?  The deed of trust hasn’t even been cancelled yet…

Or maybe it has…

“Chapter 45.

Mortgages and Deeds of Trust.

Article 4.

Satisfaction.

§ 45-36.4. Definitions.

As used in this Article, the following terms mean:

(15) Satisfy. – With respect to a security instrument, to terminate the effectiveness of the security instrument.”

Is an instrument that gave a trustee legal title still valid, when the same grantor of legal title records a declaration claiming back that legal title? What do you think?

I say that the D of T is no longer effective, and thus satisfied/cancelled/good riddanced.

Fascinating stuff. No wonder the law always refers to “payment OR performance of the obligation…”:

“(1a) Borrower. – A person primarily liable for payment or performance of the obligation secured by the real property described in a security instrument.”

(17) Secured obligation. – An obligation the payment or performance of which is secured by a security interest.

There are no less than fifteen instances of the phrase “payment or performance” within Chapter 45 Mortgages and Deeds of Trust.  Why can’t they use the word “payment” alone?  Is putting the title back in your own possession and care the “performance” needed to satisfy and cancel the D of T? I don’t know, but I intend to find out.

“Color of Title”… NC Civil procedure goodies

“Article 4 – Limitations, Real Property.

§ 1-35.  Title against State.

The State will not sue any person for, or in respect of, any real property, or the issue or profits thereof, by reason of the right or title of the State to the same –

(1)        When the person in possession thereof, or those under whom he claims, has been in the adverse possession thereof for thirty years, this possession having been ascertained and identified under known and visible lines or boundaries; which shall give a title in fee to the possessor.

(2)        When the person in possession thereof, or those under whom he claims, has been in possession under color of title for twenty-one years, this possession having been ascertained and identified under known and visible lines or boundaries. (R.C., c. 65, s. 2; C.C.P., s. 18; Code, s. 139; Rev., s. 380; C.S., s. 425.)”

Notice “title in fee to the possessor”. This means absolute title, unencumbered ownership. If you are on land for 30 years, it is yours and the state can’t do anything about it. If you have a deed of trust for 21 years, the state cannot bring suit for ownership of the property. There goes the eminent domain theory!

“§ 1-36.  Title presumed out of State.

In all actions involving the title to real property title is conclusively deemed to be out of the State unless it is a party to the action, but this section does not apply to the trials of protested entries laid for the purpose of obtaining grants, nor to actions instituted prior to May 1, 1917. (1917, c. 195; C.S., s. 426.)”

So, if title can be presumed out of State, but is in North Carolina, what does that make the meaning of “In this State” that you read all the time in General Statutes? If it were not in North Carolina, why would there need to be mention of it in the NCGS? How COULD there be? “In this State” likely means “under jurisdiction/voluntary submission to this authority”. Something can be in North Carolina, but not be “In this State”. Look up “State”.

Continue:

“§ 1-37.  Such possession valid against claimants under State.

All such possession as is described in G.S. 1-35, under such title as is therein described, is hereby ratified and confirmed, and declared to be good and legal bar against the entry or suit of any person, under the right or claim of the State. (C.C.P., s. 19; Code, s. 140; Rev., s. 381; C.S., s. 427.)”

And look at this:

“§ 1-38.  Seven years’ possession under color of title.

(a)        When a person or those under whom he claims is and has been in possession of any real property, under known and visible lines and boundaries and under color of title, for seven years, no entry shall be made or action sustained against such possessor by a person having any right or title to the same, except during the seven years next after his right or title has descended or accrued, who in default of suing within that time shall be excluded from any claim thereafter made; and such possession, so held, is a perpetual bar against all persons not under disability: Provided, that commissioner’s deeds in judicial sales and trustee’s deeds under foreclosure shall also constitute color of title.”

(Trustee’s deed, or deed of trust– wikipedia says: http://en.wikipedia.org/wiki/Trust_deed_%28real_estate%29)

After seven years, your possession of the property has given you a claim to it. If you have possession but not color of title, this doesn’t apply to you. If you have color of title but no possession, this doesn’t apply to you. Is this why you should never leave a house when threatened with foreclosure? You certain rights simply because of possession.

To clarify some of those terms:

“Disability. In the acts of limitation it is provided that persons lying under certain disabilities, such as being non compos, an infant, in prison, or under coverture, shall have the right to bring actions after the disability shall have been removed.”

“Disability” simply means anything preventing a person from enforcing his/her claim of title.

“Non compos” means incompetent.

“Coverture” means the legal state of a married woman. It used to be that men had primary rights over all property in a marriage.

And the biggie:

“Color of title.    The appearance, semblance, or simulac­rum of title.    Also termed “apparent title.”    Any fact, extraneous to the act or mere will of the claimant, which has the appearance, on its face, of supporting his claim of a present title to land, but which, for some defect, in reality falls short of establishing it. Howth v. Farrar, C.C.A.Tex., 94 F.2d 654, 658. That which is a semblance or appearance of title, but is not title in fact or in law.    McCoy v. Lowrie, 42 Wash.2d 24,    253    P.2d    4 1 5,    4 1 8.    Any    instrument    having    a grantor and grantee, and containing a description of the lands intended to be conveyed, and apt words for their conveyance, gives color of title to the lands described.    Such an instrument purports to be a con­veyance of the title, and because it does not, for some reason, have that effect, it passes only color or the semblance of a title.”

I liked that one. So, if you signed a mortgage, the deed is encumbered by it; it is not perfect title. It does serve as color of title though- it is evidence of ownership in some sense of the word. Grantees named in the mortgage also have color of title– you basically granted them a lien on your property. That is the defect that makes it “color of title” versus actual title.

The Trustee or the mortgagee, depending on the type of instrument you signed when you bought your land/house, has legal title. You have “equitable title”.

The great and powerful Wiki says:

“Equitable versus legal title

At common law equitable title is the right to obtain full ownership of property, where another maintains legal title to the property. Legal title is actual ownership of the property. When a contract for the sale of land is executed, equitable title passes to the buyer. When the conditions on the sale contract have been met, legal title passes to the buyer in what is known as closing. Legal and equitable title also arises in trust. In a trust, one person may own the legal title, such as the trustees. Another may own the equitable title such as the beneficiary.”

So you and the grantee both have title to some extent. You, however, also have possession and use. I believe this seven-year clause would apply to anyone who possesses the land for seven years and is referred to in the correct paperwork.

I will admit my head hurts after reading all of this. It is a complex thing, and I am learning a lot by researching it well enough to try to explain it.