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39 W. St. U. L. Rev. 313 (2011-2012)
Mortgage Foreclosures, Promissory Notes, and the Uniform Commercial Code

handle is hein.journals/wsulr39 and id is 325 raw text is: Mortgage Foreclosures, Promissory Notes, and the Uniform Commercial Code By Douglas J. Whaley* INTRODUCTION ............................................................. 313 THE LANDSCAPE OF THE MORTGAGE MESS .................................. 314 THE UNIFORM COMMERCIAL CODE.......................................... 316 H older .......................................................... 3 17 N egotiation........... ........................................... 317 The A llonge ....................................................... 318 The Shelter R ule ................................................... 320 L ost N otes......................................................... 321 The Golden Rule of Mortgage Foreclosure Under the UCC .......... 322 Is the Promissory Note Negotiable? ................................. 324 THE DIFFERENCE BETWEEN THE NOTE AND THE MORTGAGE .................. 326 Security Follows the Debt....... ................................. 326 The M erger R ule................................................... 328 How To RESOLVE THESE MATTERS......................................... 331 C ONCLUSION ............................................................... 334 INTRODUCTION As is true of many things in life the Uniform Commercial Code's statutes concerning the role of promissory notes in a mortgage foreclosure are both simple and at the same time complicated. The purpose of this article is to draw out the matter in detail, but let's begin with the simple (and basic) rule first. Indeed let's call the Golden Rule of Mortgage Foreclosure: the Uniform Commercial Code forbids foreclosure of the mortgage unless the creditor possesses the properly-negotiated original promissory note. If this can't be done the foreclosure must stop. Of course there are exceptions and situations in which problems with the note can be addressed and cleared up, and those will be explored as we progress. The difficulty is that all too often the Golden Rule of Mortgage Foreclosure is simply ignored and the foreclosure goes ahead as if the rule were not the statutory law of every jurisdiction in the United States.' * Professor Emeritus, The Ohio State University Moritz College of Law. The author would like to thank Professor Stephen McJohn of the Suffolk University Law School for his help in researching this article, and the many attorneys (often former students) whose contacts and questions has gotten him involved in these issues. Professor Whaley's blog has a post which updates current developments in mortgage foreclosure matters; see http://douglaswhaley.blogspot.com/2010/11/update-mortgage-fore closure-and-missing.html. 1. Article 3 of the Uniform Commercial Code has been adopted in all jurisdictions in the United States. New York has adopted only the original version of Article 3, but in that state, the relevant citations and the law remain the same with only minor variations in language.

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