Free Reference Material You Should Read What Does Accepted for Value Mean?

Millions of people use the phrase accepted for value everyday without nowin! what it "eans and why it is so powerful# You have the ri!ht to "a e personal choices that affect your co""ercial affairs# You can $e in control% or you can $e controlled# Acceptance for value is one "eans of $ein! in control# &his is a free pu$lication offered to those who see the truth $y &he A"erican 'onnection

'opyri!hted ( )**+ $y &he A"erican 'onnection# All ri!hts are reserved% e,cept the contents of this $oo "ay $e reproduced% stored in a retrieval syste"% and transcri$ed in any for" or $y any "eans without e,press per"ission% $ut "ay not $e sold# &he author of this $oo does not !ive le!al advice# Re"edies are availa$le if you now where to loo for the"# &he purpose of this $oo is to reveal and co"pile the sources of so"e of these re"edies that can $e found in "illions of pa!es of case law% statutes% codes% laws% rules% and re!ulations# &his $oo is intended to decrease the ti"e it ta es to discover the co"ponents of your re"edies and their application# -t is the responsi$ility of the readers to understand their re"edies% to see assistance if necessary% and to apply proper and co"plete concepts to reach a successful conclusion to a dispute# &his $oo does not e,haust the infor"ation that "i!ht $e needed to successfully settle a dispute# .a!e -- of V-

&a$le of 'ontents -ntroduction # # # # # # # # # # # # # # # # # # # # # # # # # # # # #/ Value 0 1'' /2)*/ # # # # # # # # # # # # # # # # # # # # # # # # #3 'onstitutional 4aths # # # # # # # # # # # # # # # # # # # # # # # # /3 # Acceptance # # # # # # # # # # # # # # # # # # # # # # # # # # # # # /5 # 4ffer and Acceptance and 'ounteroffer # # # # # # # # # # # # # # /5 # Acceptance for Value 6 &a en for Value # # # # # # # # # # # # # )/ # 7e!otia$ility # # # # # # # # # # # # # # # # # # # # # # # # # # # # )8 # Without Recourse # # # # # # # # # # # # # # # # # # # # # # # # # )+ # -ssued or &ransferred for Value 0 1'' 929*9 # # # # # # # # # # # ): # -nterest in .roperty # # # # # # # # # # # # # # # # # # # # # # # # # ;5 # Settle"ent # # # # # # # # # # # # # # # # # # # # # # # # # # # # # ;: # A;V Recap # # # # # # # # # # # # # # # # # # # # # # # # # # # # # ;: # .a!e --- of V-

4ther writin!s fro" &he A"erican 'onnection on related topics that can $e found at www#lulu#co"# Do a search $y title or $y authority 2 <<<<<<<<<<# =oo s A"erica 0 7ational or Federal? >:+ pa!es? @ach state% in ratifyin! the 'onstitution% is considered a soverei!n $ody% independent of all others% and only to $e $ound $y its own voluntary act# -n this relation% the new 'onstitution will% if esta$lished% $e a federal and not a national 'onstitution# &he Federalist% 7o# 9:% Aa"es Madison -n Search of Bi$erty >//) pa!es? Bi$erty% sir% is the pri"ary o$Cect% Dthe $attles of the Revolution were fou!ht% not to "a e Ea !reat and "i!hty e"pireF% $ut Efor li$ertyF# .atric Genry =oo lets Superior Baw% Gi!her Baw% My Baw FR@@ You have ri!hts antecedent to all earthly !overn"entsF ri!hts that cannot $e repealed or restrained $y hu"an lawsH ri!hts derived fro" the Ireat Be!islator of the 1niverse# Aohn Ada"s -ntroduction to 'orporate .olitical Societies FR@@ Finally% $e stron! in the Bord and in the stren!th of his "i!ht# .ut on the whole ar"or of Iod% that you "ay $e a$le to stand a!ainst the wiles of the devil# For we are not contendin! a!ainst flesh and $lood% $ut a!ainst principalities% a!ainst the powers% a!ainst the world rulers of this present dar ness% a!ainst the spiritual hosts of wic edness in heavenly places# @phesians 3J/*2/) -ntroduction to Baw Merchant FR@@ Stand fast% therefore% in the li$erty with which 'hrist hath "ade us free% and $e not entan!led a!ain with the yo e of $onda!e# Ialatians 8J/ Society of Slaves and Freed"en FR@@ -f "en% throu!h fear% fraud% or "ista e should in ter"s renounce or !ive up any natural ri!ht% the eternal law of reason and the !rand end of society would a$solutely vacate such renunciation# &he ri!ht to freedo" $ein! a !ift of ABM-IG&Y I4D% it is not in

the power of "an to alienate this !ift and voluntarily $eco"e a slave# Sa"uel Ada"s /++) .a!e -V of V-

Soverei!nty FR@@ @ven in al"ost every nation% which has $een deno"inated free% the state has assu"ed a supercilious pre2e"inence a$ove the people who have for"ed it# Gence% the hau!hty notions of state independence% state soverei!nty% and state supre"acy# Austice Wilson% 'hishol" v# Ieor!ia% ) Dal# >1#S#? ;/:% ;85 >/+:)? &he Be!al Syste" for Soverei!n Rulers FR@@ &he Bord shall Cud!e the people with eKuity# .sal"s :5J: &he 7e!ative Side of .ositive Baw FR@@ &herefore% one "ust $e wise and attentive% since there are those a"on! us who "a e in!s and set up princes outside Gis law# Gosea 5J;# Bi$erty FR@@ 7ow the Bord is that SpiritJ and where the Spirit of the Bord is% there is Bi$erty# -- 'orinthians 9J/+ When &here is 7o Money FR@@ For thus saith the Bord% Ye have sold yourselves for nothin!% and ye shall $e redee"ed without "oney# -saiah 8)J9 &he 7atural 4rder of &hin!s FR@@ 4we no one anythin!% e,cept to love one anotherH for he who loves his nei!h$or has fulfilled the law# Ro"ans /9J5 ResidentLMinister FR@@ You "ay also $uy so"e of the te"porary residents livin! a"on! you and "e"$ers of their clans $orn in your country% and they will $eco"e your property# Beviticus )8J;8 .a!e V of V-

A!ree with thine adversary Kuic ly% while thou art in the way with hi"H lest at any ti"e the adversary deliver thee to the Cud!e% and the Cud!e deliver thee to the officer% and thou $e cast into prison# Verily - say unto thee% &hou shalt $y no "eans co"e out thence% till thou hast paid the utter"ost farthin!# Matthew 8J)82 )3 .a!e V- of V-

What Does Accepted for Value Mean? Accepted for Value >A;V? is at the foundation of re"edies availa$le for co""ercial de"ands "ade $y the 1nited States% so "any people have atte"pted to use it to close accounts in the 1nited States# @ven so% no one has had a !ood e,planation of what A;V "eans# Gere is an atte"pt to clarify# -ntroduction &he 1nifor" 'o""ercial 'ode in Article 9 that deals with ne!otia$le instru"ents is one source of e,planation# Article 5 deals with invest"ent securities% and Article : deals with secured transactions# -n addition to opinions written $y Cud!es to shed li!ht on our re"edies% all three of these articles hold a ey to understandin! co""ercial setoff# &he 1'' had an overhaul in )***% $ut the "aCor principles re"ain the sa"e# &he chan!es appear to $e to the sections that deal with secured transactions >Article :? and so"e with invest"ent securities >Article 5?% $ut ne!otia$le instru"ents are what lead to those securities# &he phrase accepted for value has little covera!e in the code $oo s or in court opinions# A $etter understandin! of the co""ercial ter"s acceptance and value and how they relate to instru"ents in !eneral would $e a !ood place to start# Acceptance /# An a!ree"ent% either $y e,press act or $y i"plication fro" conduct% to the ter"s of an offer so that a $indin! contract is for"ed# M -f an acceptance "odifies the ter"s or adds new ones% it !enerally operates as a counteroffer# =lac Fs +th Accept# &o receive with approval or satisfactionH to receive with intent to retain# =lac Fs ;th Acceptance# &he ta in! and receivin! of anythin! in !ood part% and as it were a tacit a!ree"ent to a precedin! act% which "i!ht have $een defeated or avoided if such acceptance had not $een "ade# =lac Fs ;th A na ed acceptance waives re"edies that are

availa$le $y waivin! defects in the instru"ent >a!ree"ent? that is $ein! offered and accepted# Receivin! an instru"ent is an acceptance and a ta in!# Retention is the $asis for a $indin! contract if there is a precedin! act li e a pled!e to the 1nited States# Alterin! the ter"s of the instru"ent and returnin! it operates as a counteroffer# 1'' /2)*/# Ieneral definitions ;;# Value# @,cept as otherwise provided with respect to ne!otia$le instru"ents and $an collections >sections 92 9*9% ;2)/* and ;2)//? a person !ives value for ri!hts if he acKuires the"J >a? -n return for a $indin! co""it"ent to e,tend credit or for the e,tension of i""ediately availa$le credit whether or not drawn upon and whether or not a char!e2$ac is provided for in the event of difficulties in collectionH or >$? As security for or in total or partial satisfaction of a pree,istin! clai"H or >c? =y acceptin! delivery pursuant to a pree,istin! contract for purchaseH or .a!e / of 8*

>d? Ienerally% in return for any consideration sufficient to support a si"ple contract# 1'' /2)*/>;;? !enerally says that a person !ives value# Ge !ives value to !et ri!hts# -f one person is !ivin! value% another person is as ed to !ive ri!hts in e,chan!e# =oth !ivin! value and !ivin! ri!hts "eet the ele"ent of consideration# &he Kuestion has to $e 2 What constitutes value? -n todayFs co""ercial syste" where ownership is not the pri"e focus% interest >ri!hts? in thin!s ta es the place of ownership as the !oal# A security interest constitutes a ri!ht to seiNe control of a pled!ed thin! if the one !ivin! the security interest fails to perfor" as a!reed# &he one !ivin! a security interest retains possession of the thin! that secures the ri!ht of another party to seiNe possession of the thin! that $ac s the security interest that was !iven# &he one receivin! a security interest $eco"es a secured party% especially if the instru"ent esta$lishin! the security interest is re!istered# Ge has ri!hts% which are re"edies and defenses that he can use to enforce an a!ree"ent if the other party fails to perfor" as a!reed# 1'' /2 )*/# Ieneral definitions 93# ORi!htsO includes re"edies# A re"edy is a co""ercial ri!ht for those who acKuire that ri!ht throu!h an instru"ent# -n corporate 1nited States% there "ust $e a written record of everythin!# 7othin! is supposed to $e assu"ed or presu"ed% $ut that does not "ean assu"ptions and presu"ptions are not used everyday to acKuire ri!hts and enforce the"# -f the ri!ht that is $ein! enforced is a security interest in a tan!i$le or intan!i$le thin!% it usually co"es fro" an instru"ent that is actually supported $y the thin!# &his is usually% $ut not always% a pled!e or a pro"ise to relinKuish possession of a thin! if there is a $reach of an a!ree"ent# =ecause enforce"ent of a contract $ased on

an i"plied pro"ise is wea % an instru"ent de"andin! perfor"ance on it is an offer to initiate a new contract $ased on an old >antecedent? and "ay$e i"plied or unenforcea$le contact# -f an instru"ent is $ased on an intentional written pro"ise to perfor" and an intentional pled!e to relinKuish property% it does not have to $e issued for value# -t is Cust issued% and the ori!inal contract with the offerorFs ri!ht to the pled!ed property is the consideration that supports the de"and# A copy of the written pro"ise and pled!e can $e attached to the instru"ent% or the instru"ent can Cust refer to the contract $y its title% nu"$er% or date% etc# &he issuer of the instru"ent de"andin! perfor"ance supported $y a written pro"ise has defenses if the de$tor files a co"plaint a!ainst the issuer for "a in! the de"and# &he issuer can produce the antecedent contract that contains the intentional pro"ise to perfor" and the intentional pled!e to use tan!i$le or intan!i$le property to secure that perfor"ance# -f the de$tor is aware that he had previously si!ned a pro"ise and pled!ed his ri!ht to a thin! to !uarantee his perfor"ance% he would not have to see the contract# &he de"and instru"ent is issued to !et perfor"ance already pro"ised% or in the alternative to !et the thin! already pled!ed# -n so"e cases% there is no pled!e to support an instru"ent% so it "ust $e issued and transferred for value >with i"plied consideration?# &here is no de$tor# &he issuer .a!e ) of 8*

does not have a written instru"ent to $ac his de"and instru"ent# -f he decides to issue the de"and instru"ent in spite of his lac of authority% he is ris in! lia$ility on the instru"ent# -f the transferee >the one who the issuer directs the de"and to? calls the issuerFs $luff% the issuer could $e "ade to pay the transferee# &he issuer >transferor? has no defenses# Ge has no antecedent contract to attach as consideration for the de"and he is sendin! to the transferee# -f the issuer has no written pled!e $ut still decides to issue a de"and% the de"and instru"ent "ust $e issued for value% $ecause there is no evidence of pled!e to attach to it# &here is no written antecedent contract o$li!ation that reKuires the transferee to perfor"% $ut he still has to do so"ethin! with the de"and# &he transferee is the one who receives the instru"ent $y "ail% $y process server% or $y warrant# &he transferee is a tar!et# &he issuer is shootin! the instru"ent at the tar!et% hopin! the tar!et will Cust ta e the shot and a!ree to $eco"e lia$le on the new offer# &he issuer is $luffin!# -f the transferee reco!niNes the de"and instru"ent as a $luff% he can call the issuer on the $luff and reKuire the issuer to pay# &he transferee actually !ains a security interest in the instru"ent if he reco!niNes it# -f the instru"ent is issued and transferred for value >with i"plied consideration?% the transferee acKuires a security interest or other lien on the instru"ent if it was not o$tained $y Cudicial proceedin!# See 1'' 929*9 $elow# -f you properly endorse an instru"ent issued and transferred for value% you acKuire a ri!ht to enforce the instru"ent a!ainst the issuer# You $eco"e the creditor $y returnin! it to the issuer% who $eco"es the de$tor# =y acceptin! the instru"ent >an offer? for value% you are alterin! the ter"s of the offer% and it $eco"es a counteroffer# Acceptance -f an acceptance "odifies

the ter"s or adds new ones% it !enerally operates as a counteroffer# =lac Fs +th &he ri!ht to $e the creditor is what you !et when you A;V an instru"ent that is issued and transferred for value% li e a ta, $ill% penal action indict"ent% or speedin! tic et# &hese issues are all $ased on violations of statutes# Dishonor has value in the pu$lic# Violation of statutes has value in the pu$lic# &he violation of the statute is the presu"ed $asis >consideration? for issuin! the instru"ent% $ut if you have not pro"ised to perfor" under those statutes% you are not o$li!ated% and the issuer has no way of supportin! his de"and instru"ent# -t is issued without consideration# -t is issued $ased on a presu"ption that every 1#S# citiNen has pled!ed alle!iance to the 1nited States and to its private laws 0 statutes# -t is a $luff# &he river card has already $een turned# You have the winnin! hand# You can call the issuerFs $luff# You can chec # You can raise# You can fold# -t is your choice# You have the $utton# &he co""ercial syste" of the 1nited States is $ased on the Baw Merchant# &hat law is not neutralH it is not set up to $e fair# -t is set up to facilitate collection for creditors% especially forei!n creditors# -t deals with de$tors and creditors% even when there is no de$torLcreditor relationship# &he only thin! that has to $e deter"ined in "ost situations is 2 who is the de$tor and who is the creditor# 4nce that is .a!e 9 of 8*

deter"ined% additional facts are usually irrelevant and i""aterial# -n the 1nited States% every "an is dee"ed to $e a 1#S# citiNen% and every 1#S# citiNen is dee"ed to a de$tor# A;V is one way of esta$lishin! that you are a creditor and not a de$tor# -f you are !oin! to use the Baw Merchant to settle disputes with the 1nited States% a fir" understandin! of the Baw Merchant is necessary# -f you have co""ercial ri!hts% the trier of facts in a co""ercial dispute will proceed cautiously to avoid denyin! you co""ercial due process# 'o""ercial due process is not "uch "ore than ti"e and opportunity to co"plete an ad"inistrative re"edy and produce a counterclai"# -f you donFt now what your ad"inistrative re"edies are% you pro$a$ly donFt have any co""ercial ri!hts to e,ercise# As one who represents a person in the 1nited States% ie# a 1#S# citiNen% you have due process ri!hts throu!h the soverei!nFs statutes# As a "an in the several states% you have due process ri!hts throu!h your 'reatorFs natural order of thin!s# .roperly applied% co""ercial re"edies incorporate the natural order of thin!s# You can choose to use a soverei!nFs statutes or co""ercial re"edies% $ut they should not $e used si"ultaneously# &hey are li e oil and water# &hey do not "i,# -f you are !oin! to use co""ercial re"edies% inCection of statutory ri!hts will ill your co""ercial due process re"edies# &he ter"s of the offer and acceptance "a e the law that will $e enforced# @ven thou!h you "i!ht choose to use co""ercial re"edies% you still need to use the person you represent in the pu$lic to access the co""ercial re"edies# &hey have $een statutiNed in State law# You can use the"% $ut you cannot cite the source# &he statutes use the natural order of thin!s as the $asis for their code sections% and then incorporate the private policy code sections

into the sa"e set of pu$lished statutes# -f you use the cite >1'' < 2 < < < or << 1S' P < < < <?% you have reverted $ac to $ein! a 1#S# citiNen ta in! a $enefit fro" the statutes# -f you de"onstrate the principle in the code section without citin! it% you "aintain your separation# &he person you represent in the pu$lic acKuires the co""ercial ri!hts% $ut you interCect your ri!hts throu!h the natural order of thin!s% and "aintain your unaliena$le ri!hts# You !et to use the person% instead of it usin! you# A person can acKuire co""ercial ri!hts throu!h several "eans# Accordin! to the definition of value a$ove% he can acKuire the" 0 a? in return for credit% $? as security% c? throu!h a delivery pursuant to a contract% or d? in return for any consideration# @ach of su$sections >a? throu!h >d? deals with a different scenario# &he last one >d? is a !eneral catchall that covers anythin! that "i!ht not have $een addressed $y the first three# &his definition is one of the "ost confusin! in the co""ercial code% and is one of the "ost i"portant to understand# A ri!ht is defined as a re"edy# De$torsF re"edies often include defenses a!ainst foreclosure on the e,press or i"plied ter"s of an e,press or i"plied a!ree"ent for which security was !iven# Defenses are often !iven to de$tors as .a!e ; of 8*

consideration $y creditors% and defenses are often !iven to creditors as consideration $y de$tors# Money and thin!s are not needed under this co""ercial syste" where interest in thin!s li e real estate% $an accounts% and $odies serve as consideration# For e,a"ple% a creditor "ay si!n an a!ree"ent !ivin! possession of a product to a de$tor $efore the de$tor has paid for the product# -n that case% the de$tor has defenses if his creditor later accuses hi" of ta in! the product without payin! for it# -n the sa"e transaction% the de$tor "ay !ive defenses throu!h the a!ree"ent to his creditor% if the de$tor later clai"s the product he received was not what he ordered# &he written a!ree"ent identifies what the de$tor actually ordered# &he a!ree"ent will specify the ter"s of the a!ree"ent and the defenses each party !ives to the other# &hose defenses are ri!hts that will result in a re"edy if one of the parties is later wron!ly accused of a $reach# &he people have co""ercial re"edies if they are accused of a $reach of so"e un nown contract# &he accuser "i!ht clai" a security interest in an antecedent clai" a!ainst property supposedly pled!ed as security in e,chan!e for value that was supposedly !iven $y the accuser# &hat ind of clai" would have to $e issued for value% $ecause the accuser would have no written a!ree"ent as the $asis for his clai"# Gis clai" would $e a new offer# Ge would $e tryin! to !et you to Coin in a new contract $y i"plyin! that an antecedent contract e,isted# Since it does not e,ist% the issuer of the new offer has to $e $luffin!# A;V is $ased on contract law# -f you thin there is a presu"ption of a pree,istin! contract throu!h which you are presu"ed to $e a de$tor that has supposedly pled!ed property and your li$erty as security for so"e presu"ed value !iven $y the 1nited States% it "i!ht $e very

i"portant for you to ne!otiate so"e $etter ter"s in a counteroffer# -f the issuer of the instru"ent for value does not counter your counteroffer% you are in a "uch $etter position# -f you have a record of a valid contract that contains ter"s in your favor and can $e enforced in co""erce% you have re"edies# -f you donFt% the 1nited States "ay $e entitled to enforce a different a!ree"ent# @ven if you have an a!ree"ent advanta!eous to you% your actions "ay i"ply a waiver and your consent to a$ide $y a less advanta!eous a!ree"ent# .ree,istin! or antecedent clai"s can $e created $y a!ree"ent $etween the actual parties% $ut when the 1nited States is a party% all a!ree"ents incorporate an attach"ent to the national de$t 0 an antecedent clai" other creditors have a!ainst the 1nited States# -t is li e a pro!ra" runnin! in the $ac !round on your co"puter# &he presu"ption that all 1#S# citiNens have pled!ed alle!iance to the 1nited States and its statutes% is enou!h to esta$lish an antecedent clai" in favor of the 1nited States# 1#S# citiNens cannot Kuestion the national de$t# &hey are called upon to $e sureties for that de$t% and they usually lose when a court proceedin! is initiated a!ainst the" for violation of statutes# &his is done on the principle that the 1nited States is "ore li ely to pay its de$t if it can collect fro" its de$tors# 1nited States courts ta e Curisdiction of cases where a de$tor to the 1nited States is $ein! char!ed with violation of 1nited States statutes# @ven thou!h a 1#S# citiNen does not have a direct o$li!ation to the creditors of the 1nited States% throu!h the principle of novation% 1#S# citiNen !enerally a!ree to $e lia$le without nowin! they .a!e 8 of 8*

have done so# A person can transfer his ri!hts and o$li!ations to another party throu!h a!ree"ent# A owes =# A or = can as ' to ta e on AFs o$li!ation# -f ' a!rees% and A and = are !iven notice that ' has a!reed to owe = what A owes =% the novation is co"plete% and A is relieved of the o$li!ation of payin! =# &he 1#S# citiNen is ' in this e,a"ple# A is the 1nited States% and = is the creditors of the 1nited States# &he co""ercial code is first and fore"ost concerned a$out repay"ent of the national de$t as a pree,istin! contract with an antecedent clai"# &he secondary function of the co""ercial code is to provide an orderly "ethod of dealin!s $etween other de$tors and creditors# 1nited States 'ode >statutes? violations are clai"s used $y creditors of the 1nited States to collect internal revenue fro" 1#S# citiNens to pay the national de$t# &here can $e clai"s stac ed on clai"s# -t is not unco""on for a totally dischar!ed de$t to $e renewed $y a creditor without the nowled!e of the de$tor# 1nited States statutes are desi!ned to transfer private ri!hts fro" the private to the pu$lic for pu$lic use 0 to pay the national de$t# @very evidence of de$t in the 1nited States has value# .ersons in the 1nited States carry on co""ercial transactions $y !ivin! and receivin! value# Value has nothin! to do with thin!s% until there is a $reach of an a!ree"ent% when an interest in a thin! is transferred fro" the de$tor to the creditor# 4n the private side% a thin! is an o$Cect that casts a shadow# 4n the pu$lic side% only the shadow can $e seen# 4n the pu$lic side% the shadow is !iven value# -nterest in the thin! is the value# -t is not the thin!# Value 0 1'' /2)*/ 1'' /2)*/# Ieneral definitions ;;# Value# @,cept as otherwise provided with respect to ne!otia$le instru"ents and $an collections >sections 929*9% ;2)/* and ;2)//? a person !ives value for

ri!hts if he acKuires the"J >a? -n return for a $indin! co""it"ent to e,tend credit or for the e,tension of i""ediately availa$le credit whether or not drawn upon and whether or not a char!e2$ac is provided for in the event of difficulties in collectionH or >$? As security for or in total or partial satisfaction of a pree,istin! clai"H or >c? =y acceptin! delivery pursuant to a pree,istin! contract for purchaseH or >d? Ienerally% in return for any consideration sufficient to support a si"ple contract# Su$section >a? of /2)*/>;;? can $e read fro" the perspective of either a lender or a $orrower as the one e,tendin! credit# =oth parties receive ri!hts fro" the a!ree"ent# 4nly the people have the ener!y needed to create "oney in the 1nited States% and in todayFs syste"% credit and security interests circulate as "oney# 'reation of "oney re"ains in the sa"e place it always was 0 with the people# =efore /:99% the people du! the !old and silver out of the earth% too it to an assayer to have it coined $y authoriNed a!ents of the 1nited States% and spent or loaned their coins into circulation# Since /:99% the people si!n notes on their own credit% have that credit converted into currency $y authoriNed a!ents of the 1nited States% and spend it into circulation# After si!nin! notes on their own credit% the people usually !et into another unintended contract and a!ree to !ive a security interest in so"ethin! as value on a contract they donFt need and donFt even want to enter# Article / Section 5 'lause .a!e 3 of 8*

) authoriNes the 'on!ress to $orrow "oney on the credit of the 1nited States# &he 1nited States in that clause necessarily "ust reference the several states% as the !overn"ent has no "eans of securin! credit on its own# &he people co"pose the several states# &hat clause authoriNes the 'on!ress to $orrow "oney on the credit of the people# =oth parties receive value in a transaction% and $oth parties receive ri!hts# =oth parties !ive value% and $oth parties !ive ri!hts# Value usually "eans so"e ind of consideration# Article 9 of the co""ercial code further clarifies value when ne!otia$le instru"ents are involved% $ut the "ore !eneral definition is in Article /)*/# &he ne,t section contains "any e,a"ples of e,chan!es of value for ri!htsH and conversely e,chan!es of ri!hts for value# Value is a co"plicated concept% so several e,a"ples are !iven to help to clarify# Value is su$tle% so notice the su$tleties of the e,a"ples# &he specific value for each e,a"ple is $olded# &he followin! interpretations for su$sections >a? throu!h >d? deal with persons and credit under pu$lic policy throu!h the Baw Merchant# 1'' /2)*/# Ieneral definitions ;;# Value# @,cept as otherwise provided with respect to ne!otia$le instru"ents and $an collections >sections 929*9% ;2)/* and ;2)//? a person !ives value for ri!hts if he acKuires the"J >a? -n return for a $indin! co""it"ent to e,tend credit or for the e,tension of i""ediately availa$le credit whether or not drawn upon and whether or not a char!e2$ac is provided for in the event of difficulties in collectionH A person !ives value to another party in e,chan!e for interest in the other partyFs property# Ge acKuires ri!hts >interest? in return for !ivin! a $indin! co""it"ent to e,tend credit% or !ivin! a $indin! co""it"ent for the availa$ility of credit to the party !ivin! the person the ri!hts#

&hose ri!hts "i!ht $e in the title to real property% or for capacity to sue to !et the title to real property throu!h court order# &hose ri!hts "i!ht $e in $enefits provided $y the 1nited States# &hey "i!ht $e in a distri$ution fro" the trust created $y the 'onstitution# -t does not "atter if the party !ivin! the ri!hts draws on that co""it"ent to e,tend credit# -t does not "atter if a char!e2$ac is provided if the party receivin! the credit and !ivin! the ri!hts has difficulty in collectin! the credit# &he whole "oney syste" of the 1nited States is $ased on e,tensions of credit# Al"ost every thin! transaction in the pu$lic is $ased on credit# &here is constantly an e,chan!e of value for ri!hts% and ri!hts for value happenin! in the 1nited States# &his results in transfers of di!its fro" one account to another# Qpu$lic to pu$licR >a? A person >$orrower? !ives value >ri!ht to foreclose? >asset on the $an Fs $oo s? for ri!hts >fro" creditor? >use of pu$lic credit? if he >$orrower? !ets those ri!hts >use of pu$lic credit? in return for his >$orrower? co""it"ent to e,tend credit >pro"issory note?# >a? A person >lender 6 creditor? !ives value >use of pu$lic credit? >to de$tor? for ri!hts >fro" de$tor? >to foreclose? if he >lender 6 creditor? !ets those ri!hts >to foreclose? in return for his >lender 6 creditor? co""it"ent to e,tend >pu$lic? credit >to a $orrower 6 de$tor?# .a!e + of 8*

.erson =orrower Bender !ives Value ri!ht to foreclose use of pu$lic credit for Ri!hts in Return for use of pu$lic credit pro"issory note ri!ht to foreclose e,tension of pu$lic credit Qprivate to pu$licR >a? A person >$orrower? !ives value >private "anFs credit via si!nature on a note? for ri!hts >fro" creditor? >use of currency? if he >$orrower? !ets those ri!hts >use of currency? in return for his >$orrower? co""it"ent to e,tend >private? credit >to the lender fro" the "an who represents the $orrower?# >a? A person >lender 6 de$tor? !ives value >lia$ility on its $oo s? for ri!hts >use of private credit? if he >lender? !ets those ri!hts >use of private credit? in return for his >lender? co""it"ent to e,tend >pu$lic? credit >to the de$tor?# Qprivate to pu$licR .erson =orrower Bender !ives Value "anFs si!nature lia$ility on its $oo s for Ri!hts in Return for use of currency e,tension of private credit use of private credit e,tension of pu$lic credit &here are two different actions happenin! in these scenarios# 4ne is pu$lic to pu$lic% and the other is private to pu$lic# 7othin! can happen on the pu$lic side until so"eone on the private side si!ns so"ethin!# &he si!nature can $e advanta!eous to the "an or not# -t is up to hi"# &he "an is an acco""odatin! party who receives nothin! for lendin! his na"e or credit to the pu$lic event% unless he ne!otiates ter"s that are favora$le to hi"# -f the 1nited States presents the ter"s and they are accepted without rene!otiation% the "an is Cust an acco""odatin! party and can e,pect to receive no ri!hts in return for the value he !ives $y lendin! his na"e and credit to the 1nited States# A $an cannot lend its own credit# When a $an e,tends credit% it has to use so"eone elseFs credit and e,tend it to a third party# -t is not a loan >= to '?H it is a len!thenin! of the process >A to = to '?# &he credit co"es

fro" A >a "an 2 lender? in the private% throu!h ' >1#S# citiNen 0 a!ent for A?% to = >$an 2 lender? in the pu$lic% to ' >1#S# citiNen 2 $orrower? in the pu$lic# &he $orrower is $oth a de$tor and a creditor on the sa"e transaction# &he "an cannot !o into the pu$lic% so the 1#S# citiNen has to represent the "an in the pu$lic# &he 1#S# citiNen needs hands to si!n instru"ents% so the "an has to represent the 1#S# citiNen and supply the ener!y# &he "an will $e presu"ed to $e an acco""odatin! party unless he ne!otiates a contract that has ter"s "ore favora$le to hi"# -f the "an per"its his si!nature to $e used with no ter"s for pay"ent to hi"% he Cust waives his ri!hts# &he 1#S# citiNen is $oth the transferor and the transferee on instru"ents in the pu$lic# -nstru"ents that are issued and transferred for value are reKuests for a "anFs private credit# &hey are credit applications# Ge can endorse the" properly and $e a creditor% or stand silent and $e a de$tor# -t is up to hi"# .a!e 5 of 8*

&he pu$lic to pu$lic value on the previous interpretations is the ri!ht to foreclose >an asset on the $an Fs $oo s? and the use of pu$lic credit% in return for a pro"issory note and the e,tension of pu$lic credit# &he private to pu$lic value on the previous interpretations is the "anFs si!nature on the note and the lia$ility on the $an Fs $oo s% in return for an e,tension of private credit to facilitate the e,tension of pu$lic credit# &here can $e no pu$lic credit without !ettin! credit fro" the private side first# &he people in the several states are the only ones who have credit% $ecause they are the only ones with ener!y that does not $elon! to so"eone else# Fictions have no ener!y of their own# Since "oney of e,chan!e is not used in the "odern co""ercial syste"% credit is the "ediu" of e,chan!e throu!h "oney of account# Money of account is di!its on accountin! led!ers# All loans in the pu$lic necessarily "ust $e "ade on the private credit of the people# &he people have to supply private credit that pu$lic lenders e,tend to $orrowers in the pu$lic# 7o wonder the lenders always say they are e,tendin! credit# &hey are e,tendin! the peopleFs credit fro" the private side into the pu$lic and returnin! it to a fiction represented $y one of the people# Value is !iven on $oth sides# Value is accepted on $oth sides# &his /2)*/ definition is in Article / of the co""ercial code% so it does not apply to Article 9 ne!otia$le instru"ents% $ut it is necessary to understand the duplicity of value to understand A;V# &he followin! interpretations of /2)*/>a? deal with a pu$lic person created $y the 1nited States as the de$tor and the 1nited States as the creditor% as well as the 1nited States as the de$tor and a private "an as the ulti"ate creditor throu!h the pu$lic person he represents# &hese are still dealin! with persons and credit under pu$lic policy#

Qpu$lic to pu$licR >a? A person >1nited States? !ives value >certificated security 6 $irth certificate 6 1#S# citiNenship? for ri!hts >to use 1#S# citiNen as surety? if he >1nited States? !ets those ri!hts >to use 1#S# citiNen as surety? in return for his >1nited States? co""it"ent to e,tend >pu$lic? credit >and $enefits? >to the 1#S# citiNen?# >a? A person >1#S# citiNen? !ives value >pled!e to 1nited States? for ri!hts >to operate in co""erce in 1nited States? if he >1#S# citiNen? !ets those ri!hts >to operate in co""erce in 1nited States? in return for his >1#S# citiNen? co""it"ent to e,tend >pu$lic? credit >to $e a surety? >to 1nited States?# Qpu$lic to pu$licR .erson !ives Value for Ri!hts in Return for 1nited States $irth certificate use of private credit pu$lic credit and $enefits 1#S# citiNen pled!e to the 1#S# co""erce in the 1#S# $ein! a surety for the 1#S# Qprivate to pu$licR >a? A person >1nited States? !ives value >certificated security 6 $irth certificate 6 1#S# citiNenship? for ri!hts >!et private credit? if he >1nited States? !ets those ri!hts >to use private credit? in return for his >1nited States? co""it"ent to e,tend >pu$lic? credit >distri$ution fro" trust to the "an throu!h the 1#S# citiNen?# >a? A person >1#S# citiNen? !ives value >"anFs private credit? >to 1nited States? for ri!hts >to operate in co""erce in 1nited States? if he >1#S# citiNen? !ets those .a!e : of 8*

ri!hts >to operate in co""erce in 1nited States? in return for his >1#S# citiNen? co""it"ent to e,tend >private? credit >of the "an who represents the 1#S# citiNen? >to 1nited States?# Qprivate to pu$licR .erson !ives Value for Ri!hts in Return for 1nited States $irth certificate !et private credit e,tension of pu$lic credit 1#S# citiNen "anFs private credit co""erce in the 1#S# e,tension of private credit 4n the pu$lic side% the $irth certificate represents value as security for a pree,istin! clai" the 1nited States has a!ainst a 1#S# citiNen# 4n the private side it is security for a pree,istin! clai" the "an has a!ainst the political State for usin! his description without payin! for it# -t is an antecedent clai" the "an can present as a counterclai" when the 1nited States $rin!s a clai" a!ainst the person the "an represents# &he $irth certificate secures the o$li!ation the State% as an a!ent for the 1nited States% has to the "an% since no pay"ent has ever $een "ade to the "an% and technically cannot $e "ade# &he inches and pounds description of the $a$y on the application for the $irth certificate constituted a sy"$olic delivery of the $a$y into the 1nited States# What happens in the 1nited States D stays in the 1nited States# &he $a$y and the "an cannot !o into the 1nited States% $ut the person na"ed on the $irth certificate can# &he 1nited States cannot !o into the private states% $ut the "an representin! the person na"ed on the $irth certificate can# &he $a$y !rew into a "an% and the ri!hts the $a$y had to pay"ent for use of his description carry on to the "an# -f the "an does not do so"ethin! with that certificated security >$irth certificate?% it is considered a$andoned# A$andon"ent is waste% so the 1nited States will use the $irth certificate to prevent waste% until the "an decides to use it# Su$section >$? can

also $e read fro" several different perspectives# =oth parties in each scenario !ive value and ri!hts% and receive value and ri!hts throu!h the a!ree"ent# &he followin! interpretations deal with individuals and corporations# 1'' /2)*/# Ieneral definitions ;;# Value# @,cept as otherwise provided with respect to ne!otia$le instru"ents and $an collections >sections 929*9% ;2)/* and ;2)//? a person !ives value for ri!hts if he acKuires the"J >$? As security for or in total or partial satisfaction of a pree,istin! clai"H 1sually a person !ives value when he is e,chan!in! the" for ri!hts he is acKuirin! as security for that one transaction# &hose ri!hts "i!ht $e in the title to real property% or capacity to sue% or for perfor"ance# Accordin! to su$section >$?% a person >1nited States? can !ive value >$enefits? for ri!hts >pled!e? he >1nited States? is acKuirin! fro" a 1#S# citiNen% as security for satisfaction of a clai" that already e,ists >national de$t?# &he ri!hts the 1nited States !ets fro" the 1#S# citiNen secure pay"ent or perfor"ance on that pree,istin! clai" the international $an ers have a!ainst the 1nited States and its sureties# &he person !ivin! the value >1nited States? has supposedly already received a pro"ise of so"e sort fro" the 1#S# citiNen# 7ow% the person >1nited States? is !ivin! value a!ain to !et "ore ri!hts that he will acKuire .a!e /* of 8*

as "ore security for total or partial satisfaction of that pree,istin! clai" >national de$t?# A ta, $ill is considered value% as is a li$el of infor"ation for a Kuasi2 cri"inal case a!ainst a 1#S# citiNen for violation of 1nited States statutes# &he 1nited States is !ivin! value $y issuin! an instru"ent for value# &hat instru"ent carries a security interest in the instru"ent that is issued# &hat can $e considered to $e value# -n e,chan!e for !ivin! the 1#S# citiNen a security interest in the instru"ent% the 1nited States is loo in! for ri!hts in the property owned $y the 1#S# citiNen# -t is also loo in! for a ri!ht to seiNe the $ody# All of this is done to collect revenue fro" the 1#S# citiNen as a surety# -f the "an who represents the 1#S# citiNen does not reco!niNe the value that is $ein! !iven% that waiver does not ne!ate the ri!hts the 1nited States is acKuirin! in the transaction# -n a nor"al situation% the party !ivin! the ri!hts receives value throu!h the transaction# A ri!ht is a re"edy# -f the party who !ave the ri!hts is later accused of not perfor"in!% the ri!ht he !ave as security when he received the value can $e used to seiNe the property to satisfy the ter"s of the a!ree"ent# -n su$section >$? a pree,istin! clai" "a es an appearance# &he 1nited States already pro"ised to repay the international lenders% $ut if it doesnFt pay% the international lenders can use 1nited States statutes to collect fro" 1#S# citiNens# =oth parties !ive value and $oth receive ri!hts in each transaction# &he value !iven can $e a$solutely anythin! that is sufficient to support a si"ple contract in the Curisdiction where the a!ree"ent is "ade# &he ri!hts !iven can $e anythin! to secure the o$li!ation incorporated in the a!ree"ent% includin! defenses a!ainst clai"s "ade $y the parties a!ainst each other# Qpu$lic to pu$licR >$? A person >creditor 6 corporation?

!ives value >use of credit "ort!a!e? for ri!hts >to foreclose and defenses? if he >creditor? acKuires the ri!hts >to foreclose and defenses? as security for satisfaction >pay"ent? of a pree,istin! clai" >national de$t?# &he de$torFs pro"ise to return credit is a second pro"ise# &he first pro"ise is a pled!e to not Kuestion the national de$t# >$? A person >de$tor 6 1#S# citiNen? !ives value >pro"ise? for ri!hts >use of credit and defenses? if he >1#S# citiNen? acKuires the ri!hts >use of credit and defenses? as security for satisfaction >e,tension of credit? of a pree,istin! clai" >$eneficial interest in the trust created $y the 'onstitution?# &he approval of credit application is a second pro"ise# &he first pro"ise is the constitutional oath the .resident too # Qpu$lic to pu$licR .erson corporation 1#S# citiNen Qprivate to pu$licR !ives Value use of credit pro"ise for Ri!hts to foreclose and defenses use of credit and defenses as Security for national de$t $eneficial interest >$? A person >creditor 6 1#S# citiNen? !ives value >"anFs si!nature on an application? for ri!hts >to use pu$lic credit? if he >1#S# citiNen? acKuires the ri!hts >to use pu$lic credit? as security for satisfaction >distri$ution fro" the trust? of a pree,istin! clai" >"anFs $eneficial interest in the trust?# >$? A person >de$tor 6 corporation? !ives value >use of pu$lic credit? for ri!hts >defenses? if he >corporation? acKuires the ri!hts >defenses? as security for .a!e // of 8*

satisfaction >trust distri$ution? of a pree,istin! clai" >"anFs $eneficial interest in the trust?# Qprivate to pu$licR .erson 1#S# citiNen corporation !ives Value "anFs si!nature use of pu$lic credit for Ri!hts use of pu$lic credit defenses as Security for distri$ution fro" the trust $eneficial interest in trust &he followin! interpretations deal with creditors of the 1nited States and the 1nited States >$ac ed $y 1#S# citiNens as sureties for the 1nited States for the national de$t?# >$? A person >de$tor 6 corporate 1nited States? !ives value >new reor!aniNation plan to pay? for ri!hts >defenses a!ainst foreclosure? as security >pro"ise not to foreclose now? for satisfaction >partial perfor"ance? of a pree,istin! clai" >international $an ersF ri!ht to foreclose on the 1nited States?# >$? A person >creditor 6 international $an ers? !ives value >approval of a new reor!aniNation plan for e,tension of ti"e to pay? for ri!hts >to foreclosure later? as security >pro"ise not to foreclose now? for satisfaction >new pay"ent plan? of a pree,istin! clai" >ter"s of loan a!ree"ent 6 national de$t?# .erson 1nited States 'reditors of 1#S# !ives Value reor!aniNation plan approval of plan for Ri!hts defenses foreclose later as Security for partial perfor"ance pro"ise not to foreclose Satisfaction in this su$section can refer to the statutes the 1nited States created for its creditors to use to "ore e,peditiously collect throu!h forfeiture actions# -t can also refer to 1nited States courts created for its creditors to use to su""arily conde"n property for confiscation to satisfy the ter"s of the reor!aniNation plan the 1nited States !ave to its creditors pro"isin! perfor"ance on a pree,istin! clai" >national de$t?# &he followin! interpretations deal with the 1nited States as the a!ent and the people as the principalsH and with the 1nited

States as the trustee and the people as the $eneficiaries# >$? A person >corporate 1nited States? !ives value >certificated security 6 $irth certificate? for ri!hts >to create "oney on the si!nature of the "an 6 $orrow fro" the people? as security >pro"ise not to deny or dispara!e ri!hts of the people? for satisfaction >ac nowled!e"ent of o$li!ation to people? of a pree,istin! clai" >$eneficial interest in the trust created $y the 'onstitution?# .erson 1nited States !ives Value $irth certificate for Ri!hts $orrow fro" people as Security for :th Article of =ill of Ri!hts .a!e /) of 8*

>$? A person >officer in the federal !overn"ent? !ives value >Article V- oath? for ri!hts >to hold an office? as security >pro"ise to support this constitution? for satisfaction >perfor"ance? of a pree,istin! clai" >peopleFs $eneficial interest in the trust created $y the 'onstitution?# .erson officer !ives Value Article V- oath for Ri!hts to hold office as Security for $eneficial interest >$? A person >.resident? !ives value >Article -- oath? for ri!hts >to $e 'o""ander in 'hief? as security >pro"ise to preserve% protect and defend the 'onstitution? for satisfaction >perfor"ance? of a pree,istin! clai" >peopleFs $eneficial interest in the trust created $y the 'onstitution?# .erson .resident !ives Value Article -- oath for Ri!hts to hold office as Security for $eneficial interest >$? A person >a state% ie# 4hio% etc#? !ives value >office in the federal !overn"ent? for ri!hts >to $e part of the union of A"erican states 6 federal 1nited States? as security >pro"ise to a$ide $y ter"s of 'onstitution? for satisfaction >perfor"ance on ter"s of 'onstitution? of a pree,istin! clai" >pro"ise to pay creditors of the 'onfederacy?# .erson A state !ives Value federal office for Ri!hts to $e part of union as Security for pay"ent of national de$t >$? A person >a state% ie# 4hio% etc#? !ives value >'onstitution? for ri!hts >to $e reco!niNed internationally? as security >pro"ise to pay creditors of the 'onfederacy? for satisfaction >ac nowled!"ent of international law? of a pree,istin! clai" >need for a plan to pay international creditors?# .erson A state !ives Value 'onstitution for Ri!hts reco!nition as a state as Security for pay"ent of de$ts >$? A person >state citiNen Q$y Mo"R? !ives value >si!nature on application for $irth certificate? for ri!hts >to $e $eneficiary on the trust? as security >pro"ise? for satisfaction >distri$ution fro" the trust? of a

pree,istin! clai" >$eneficial interest in the trust created $y the 'onstitution?# .erson state citiNen !ives Value si!nature for Ri!hts $eneficial interest as Security for distri$utions fro" trust Su$section >c? deals with $uyers and sellers# 7otice that $oth su$section >$? and >c? refer to a pree,istin! arran!e"ent# >$? $rin!s in a pree,istin! clai" that necessarily results fro" a pree,istin! contract# >c? addresses delivery on a pree,istin! contract# 4n the pu$lic side% creditors on the national de$t have a see"in!ly priority position in the co""ercial code# &he only ri!ht hi!her than that of the international creditors is that enCoyed $y the people in the several states# &he people have the first and fore"ost position in eKuity in the 1nited States# As $eneficiaries of the trust .a!e /9 of 8*

created $y the 'onstitution% and as $eneficiaries of the trust created $y .resident Roosevelt in /:99% the people >throu!h the persons they represent in the 1nited States?% have priority stoc in corporate 1nited States# 1'' /2)*/# Ieneral definitions ;;# Value# @,cept as otherwise provided with respect to ne!otia$le instru"ents and $an collections >sections 929*9% ;2)/* and ;2)//? a person !ives value for ri!hts if he acKuires the"J >c? =y acceptin! delivery pursuant to a pree,istin! contract for purchaseH ,,,,,,,,,,, >c? A $uyer >de$tor? !ives value >pro"ise or actual pay"ent? for ri!hts >receipt 6 defenses? if he >de$tor? acKuires the ri!hts >receipt 6 defenses? $y acceptin! delivery >of product? on a pree,istin! contract for purchase# >c? A seller >creditor? !ives value >pro"ise or actual delivery? for ri!hts >receipt 6 defenses? if he >creditor? acKuires the ri!hts >receipt 6 defenses? $y acceptin! delivery >of pro"ise or actual delivery? on a pree,istin! contract for purchase# .erson !ives Value $uyer delivery of pro"ise or pay"ent .erson seller !ives Value delivery of product for Ri!hts receipt for Ri!hts receipt $y Acceptin! Delivery of product $y Acceptin! Delivery of pro"ise or pay"ent &he ter"s $uyer and seller have a $road scope of application in the co""ercial code# >c? A $uyer >1#S# citiNen? !ives value >pled!e? for ri!hts >citiNenship? if he >1#S# citiNen? acKuires the ri!hts >citiNenship? $y acceptin! delivery >of $enefits? on a pree,istin! contract for purchase >application for $irth certificate?# >c? A seller >1nited States? !ives value >citiNenship? for ri!hts >to use 1#S# citiNen as surety? if he >1nited States? acKuires the ri!hts >to use 1#S# citiNen as surety? $y acceptin! delivery >of pled!e? on a pree,istin! contract for purchase >application for $irth certificate?# .erson 1#S# citiNen .erson 1nited States !ives

Value pled!e !ives Value citiNenship for Ri!hts citiNenship $y Acceptin! Delivery of $enefits for Ri!hts $y Acceptin! Delivery citiNen to $e surety of pled!e -n a forfeiture case% the defendant can $e dee"ed to $e the $uyer% and the prosecutor can $e dee"ed to $e the seller# >c? A $uyer >defendant? !ives value >plea S si!nature? for ri!hts >civil li$erty? if he >defendant? acKuires the ri!hts >civil li$erty? $y acceptin! delivery >of char!es on indict"ent? on a pree,istin! contract for purchase >application for citiNenship and residency?# >c? A seller >1nited States? !ives value >civil li$erty? for ri!hts >to conde"n defendantFs property? if he >1nited States? acKuires the ri!hts >to conde"n .a!e /; of 8*

defendantFs property? $y acceptin! delivery >of plea S si!nature? on a pree,istin! contract for purchase >application for citiNenship and residency?# .erson defendant .erson 1nited States !ives Value plea S si!nature !ives Value civil li$erty for Ri!hts civil li$erty $y Acceptin! Delivery of indict"ent for Ri!hts $y Acceptin! Delivery to conde"n property of plea S si!nature -n all penal actions for violations of statutes% the national de$t is the pree,istin! contract for purchase that influences the conscience of the Cud!e in "a in! his decisions# -n those cases% the defendant is a 1#S# citiNen who cannot Kuestion the national de$t# Ge is dee"ed to $e the surety for the $uyer >1nited States?% and the prosecutor represents the seller >international lenders?# A 1#S# citiNen who refuses to $e a surety can $e viewed as !ivin! aid and co"fort to ene"ies of the 1nited States# &hat is the definition of treason# 4nce the 1#S# citiNen is found to $e in treason% he can $e viewed as a resident# .enal actions are a!ainst residents# -t is the property of residents that can $e seiNed and conde"ned and forfeited >confiscated?# &he $oo 9: -RS Ar!u"ents that DonFt Wor and Why e,plains this process in "uch "ore detail# -t can $e found on www#lulu#co"# >c? A $uyer >1#S# citiNen 6 surety 6 defendant? !ives value >plea S si!nature? for ri!hts >rei"$urse"ent? if he >1#S# citiNen? acKuires the ri!hts >rei"$urse"ent? $y acceptin! delivery >of char!es on indict"ent 6 $ill for pay"ent? on a pree,istin! contract >national de$t? for purchase >loan of credit to the 1nited States?# >c? A seller >international lenders? !ives value >e,tension of credit to 1nited States? for ri!hts >to seiNe property of 1nited States? if he >international lenders? acKuires the ri!hts >to seiNe property of 1nited States? $y acceptin! delivery >of plea S si!nature of surety? on a

pree,istin! contract >national de$t? for purchase >loan of credit to the 1nited States?# .erson 1#S# citiNenLsurety .erson -nt# lenders !ives Value plea S si!nature for Ri!hts rei"$urse"ent $y Acceptin! Delivery of indict"ent !ives Value for Ri!hts $y Acceptin! Delivery e,tension of credit to seiNe property of plea S si!nature of surety Su$section >d? deals with anythin! that is not addressed in >a?% >$?% or >c?# 1'' /2)*/# Ieneral definitions ;;# Value# @,cept as otherwise provided with respect to ne!otia$le instru"ents and $an collections >sections 929*9% ;2)/* and ;2)//? a person !ives value for ri!hts if he acKuires the"J >d? Ienerally% in return for any consideration sufficient to support a si"ple contract# >d? A de$torL$uyer or creditorLseller !ives value >any consideration? for ri!hts >interest in property and defenses? if he acKuires ri!hts >interest in property and .a!e /8 of 8*

defenses? in return for anythin! of value that constitutes consideration sufficient to support a si"ple contract reKuirin! perfor"ance $y one or $oth parties# .erson Any person !ives Value any consideration for Ri!hts interest in property in Return for any consideration &he definition of value in /2)*/>;;? does not actually define value# -t "erely !ives e,a"ples of what circu"stances "i!ht incorporate value# &o recap fro" the a$ove interpretations% value appears to $e or to i"ply so"e ind of a pro"ise to provide so"ethin! or to do so"ethin!J e,tension of credit% private "anFs credit via si!nature on a note% asset on $oo s% lia$ility on $oo s% pled!e to 1nited States% use of credit% pay"ent% new reor!aniNation plan to pay% approval of a new reor!aniNation plan for e,tension of ti"e to pay% Article V- oath% Article -- oath% office in the federal !overn"ent% 'onstitution% pro"ise or actual pay"ent% pro"ise or actual delivery% pled!e% citiNenship% security interest in property% civil li$erty% plea and si!nature% e,tension of credit% any consideration sufficient to support a si"ple contract# &hey are all $eneficial to so"eone or so"ethin!% and are therefore valua$le# &his list is $y no "eans e,haustive# 'onstitutional 4aths &he foundational a!ree"ent $ehind every co""ercial and political event in the 1nited States is the 'onstitution# -t is pri"arily an offer "ade $y the states to those who want to $e part of the federal or national !overn"ents% and secondarily an offer "ade $y the states to those who want to do $usiness with the federal or national !overn"ents# &his was a very dan!erous docu"ent# -t created a potentially hu!e co""ercial "achine that had the power to do untold har" to the people# -t had to provide a "eans to pay creditors so the states could $e reco!niNed internationally for co""ercial

purposes# At the sa"e ti"e% it had to secure the peopleFs ri!hts% so the co""ercial "achine would not eat the life out of the people# &he only offers "ade $ac to the people to secure their ri!hts are the two oaths reKuired $y the 'onstitution# &hese two oaths are the condition put in the a!ree"ent ratified $y the states% to assure the people who !et to $enefit fro" the 'onstitution $y holdin! offices% eep their co""ercial "achine away fro" the people in the several states# 4ne is the oath reKuired in Article V- of "e"$ers of the le!islatures% and all e,ecutive and Cudicial officers of the 1nited States and of the several states# Article 3 Section / 'lause 9 &he Senators and Representatives $efore "entioned% and the Me"$ers of the several State Be!islatures% and all e,ecutive and Cudicial 4fficers% $oth of the 1nited States and of the several States% shall $e $ound $y 4ath or Affir"ation% to support this 'onstitutionH $ut no reli!ious &est shall ever $e reKuired as a Kualification to any 4ffice or pu$lic &rust under the 1nited States# &he other is the oath reKuired in Article -- of the .resident# Article ) Section / 'lause 5 =efore he enter on the @,ecution of his 4ffice% he shall ta e the followin! 4ath or Affir"ationJ 22 O- do sole"nly swear >or affir"? that - will faithfully e,ecute .a!e /3 of 8*

the 4ffice of .resident of the 1nited States% and will to the $est of "y A$ility% preserve% protect and defend the 'onstitution of the 1nited States#O &here are no Article V- oaths that can $e found for any "e"$ers of the le!islatures >state or federal?% or e,ecutive and Cudicial officers of the 1nited States or of the several states# &hey all have 1nited States 'ode &itle 8 oaths# &he .resident cannot ta e the &itle 8 oath of office# Ge already has another oath to the people# Ge and others are dee"ed to $e Kualified to hold and enCoy any 4ffice of honor% &rust or .rofit under the 1nited States# 7otice that only individuals who are elected or appointed to an office of honor or profit in the civil service or unifor"ed services% are reKuired to have the &itle 8 oath# &hey do not hold offices of trust# &he .resident does# 4nly "e"$ers of the le!islatures of the states and the 1nited States% and e,ecutive and Cudicial officers% who are $ound $y the Article V- oath% can hold offices of trust# &hose who ta e the &itle 8 oath of office can hold offices of honor or profit under the 1nited States# An oath is different than an oath of office# 8 1S' P 999/# 4ath of office An individual% e,cept the .resident% elected or appointed to an office of honor or profit in the civil service or unifor"ed services% shall ta e the followin! oathJ -% A=% do sole"nly swear >or affir"? that - will support and defend the 'onstitution of the 1nited States a!ainst all ene"ies% forei!n and do"esticH that - will $ear true faith and alle!iance to the sa"eH that ta e this o$li!ation freely% without any "ental reservation or purpose of evasionH and that - will well and faithfully dischar!e the duties of the office on which - a" a$out to enter# So help "e Iod# Aud!es have the &itle 8 oath of office% as well as another one found in &itle )5# &itle )5% Sec# ;89 says 0 @ach Custice or Cud!e of

the 1nited States shall ta e the followin! oath or affir"ation $efore perfor"in! the duties of his officeJ -% Q7AM@R% do sole"nly swear >or affir"? that - will ad"inister Custice without respect to persons% and do eKual ri!ht to the poor and to the rich% and that - will faithfully and i"partially dischar!e and perfor" all the duties incu"$ent upon "e as Q4FF-'@RR under the 'onstitution and laws of the 1nited States# So help "e Iod# &he only constitutional oath a$le to $e found is the oath the .resident ta es% which is word for word the sa"e as the reKuired te,t in the 'onstitution# Ge does not ta e the oath of office in &itle 8# As lon! as there is one officer with an oath reKuired $y the 'onstitution >not an oath of office reKuired $y the 'on!ress?% the people still have a trustee for the trust on which the people are the $eneficiaries# &hat $eneficial interest is what !ives people the ri!ht to A;V instru"ents that are issued for value# &hey have an antecedent clai" fro" a pree,istin! contract# &heir clai" is a ri!ht to enCoy freedo" with li$erty# -t is $ased on 'onstitutional !uarantees# Since /:99% the people also have a ri!ht to a distri$ution fro" another trust created $y .resident Fran lin D# Roosevelt# Since /:99% all property is held $y the state# &hat "eans the state has the le!al title to all su$stance in the states% $ut the people have eKuita$le title .a!e /+ of 8*

throu!h their $eneficial interest in that trust# &a in! control of the !old in /:99 would have $een unconstitutional if the new trust had not $een created# &he .residentFs oath is an offer to the people in the several states# -t "i!ht $e prudent for people to accept his oath# -t is not an oath that is issued for valueH it is an oath "ade in !ood faith $y the "an# &he principles of offer and acceptance apply to this very critical pre"ise# -f the people have not accepted that oath% how can they e,pect the "an who "ade it to $e wor in! for their $enefit? As far as he is concerned% it "ay appear that none of the people wants hi" to $e their trustee# Since /:99 the only "oney in circulation in the 1nited States is credit $orrowed fro" the people# &he co""ercial code adopted $y every political State of the 1nited States provides for value to $e whatever consideration is needed to support a "ere si"ple contract# &he .residentFs oath is consideration sufficient to support the si"ple contract the .resident >e,ecutive trustee? has with the people >$eneficiaries?# Ge does not have an oath of office# &hat is different than an oath# All le!islative% e,ecutive% and Cudicial officers perfor"in! under hi" in his capacity as 'o""ander in 'hief% have oaths of office# Ge has a constitutional oath# Value is anythin! reco!niNed as a pled!e or the result of a pled!e# &he $irth certificate is the result of the .residentFs oath# Without that one oath% the $irth certificate would Cust $e evidence of the o$li!ation every 1#S# citiNen owes to the 1nited States# Without that one oath% the $irth certificate would not $e evidence of the o$li!ation the 1nited States owes to the people# 4n the pu$lic side% the $irth certificate represents value% and is evidence of a pled!e $y a 1#S# citiNen to $e a surety for the 1nited States# 4n the pu$lic side% it is security for the

pled!e of alle!iance to the 1nited States and its statutes% "ade $y 1#S# citiNens# 4n the private side% it is a receipt% and is evidence of a pro"ise "ade $y the .resident to the people# 4n the private side% it is security for the pro"ise of distri$utions fro" the trust to the people as $eneficiaries# -t is a receipt for the use of the $a$yFs physical description that was sy"$olically delivered $y an infor"ant >Mo"? to the 1nited States# &he setoff resultin! fro" acceptin! an instru"ent for value is a distri$ution fro" the trust# Setoff 6 distri$ution# Acceptance When you accept for value% you are acceptin! whatever consideration the 1nited States has offered to you as evidence of an o$li!ation it has to you as a $eneficiaryH as well as whatever consideration is offered on the instru"ent that is $ein! transferred to you throu!h the 1#S# citiNen you represent# &he 1nited States is hu"$lin! itself $y as in! you to !ive it assistance# -t is applyin! for credit on every instru"ent that is issued or transferred for value# -f you Cust receive one of these instru"ents without acceptin! it for value and returnin! it for value% the presu"ption is that you intend to pay it# You can pay it with a chec % or you can pay it with your prepaid account# -t is up to you% $ut you have to pay it i""ediately% or you will $e dee"ed to $e in dishonor# -f you A;V% you can use a distri$ution fro" the trust to pay the instru"ent# -f you Cust retain it or ar!ue a$out the e,istence or a"ount of the reKuest% you will pay it with a chec % tan!i$le property% or your $ody# .a!e /5 of 8*

Did the 1nited States offer a $irth certificate to you? Did you receive it? Did you accept it for value and return it as a security? -f you do not accept it for value and deposit it as an asset% you have voluntarily waived ri!hts to a distri$ution that is availa$le to you# -n a purely co""ercial syste"% ri!hts are re"edies# .arties to a "odern co""ercial transaction need re"edies in the event one of the" $reaches the ter"s of the a!ree"ent# &he $irth certificate is a re"edy% and represents an antecedent clai" you have a!ainst the 1nited States# -t is also evidence of a pree,istin! contract# -t represents the prepaid account you have availa$le to you for setoffs# Acceptance is an a!ree"ent and leads to a $indin! contract# -f you donFt set the ter"s of that $indin! contract% the 1nited States will# Acceptance# Acceptance $y silence# Acceptance of an offer not $y e,plicit words $ut throu!h the lac of an offereeFs response in circu"stances in which the relationship $etween the offeror and the offeree Custifies $oth the offerorFs e,pectation of a reply and the offerorFs reasona$le conclusion that the lac of one si!nals acceptance# M 4rdinarily% silence does not !ive rise to an acceptance of an offer% $ut this e,ception arises when the offeree has a duty to spea # =lac Fs +th -f an offeree has a duty to spea throu!h an e,istin! relationship% his silence is acceptance# =ecause of a presu"ption of the e,istence of a relationship% the offeror has a ri!ht to e,pect a reply fro" the offeree# When you send co""unications to officers of the 1nited States% you are $asin! the" on your presu"ption that they have a duty to respond# &hey do not respond $ased upon their presu"ption that they are not reKuired to respond% $ecause you are presu"ed to also $e an e"ployee of the 1nited States# When they send co""unications to

you% they are $asin! the" on their presu"ption they you have a duty to respond% $ecause you are the one representin! that e"ployee of the 1nited States# You !enerally do not respond properly $ased upon your presu"ption that you are not reKuired to respond# &his is all a "atter of perspective# -f you are actin! li e a 1#S# citiNen when you send your co""unications% they do not have to respond% and their silence is not acceptance# -f you are actin! li e one of the people who are $eneficiaries on the trusts esta$lished $y the 'onstitution and $y .resident Roosevelt% they do have a duty to respond% and their silence is acceptance of the ter"s of the offer you "a e in your co""unication# A "an can refuse to approve the application for credit inherent in instru"ents issued for value $y the 1nited States% $ut that "i!ht i"ply the "an is an ene"y of the 1nited States# &hat is not !ood# -t "i!ht $e $etter for the "an to approve these credit applications throu!h acceptance for value and return for value# =y si!nin! and processin! the" properly% the "an can avoid a tradin! with the ene"y char!e% and at the sa"e ti"e fulfill a presu"ed "oral o$li!ation to aid and assist the 1nited States in its ti"e of e"er!ency# Since /:99% the people have had a "eans $y which they can have everythin! they want as $eneficiaries of the trust created $y .resident Roosevelt# A;V is a "eans $y which the people can earn that $eneficial position% if they want to# &hey are not reKuired to earn it% $ut they can if they want to# &hat is a personal choice# 4ffer and Acceptance and 'ounteroffer .a!e /: of 8*

&o for" a $indin! contract with the 1nited States throu!h offer and acceptance% so"eone "ust initiate the ne!otiations# @ither they will initiate% or you will# &he one who "a es the offer is hu"$lin! hi"self and honorin! the other party throu!h the offer of so"ethin! as consideration for the purpose of !ettin! consideration fro" the other party# 'onsideration can $e "oney% interest in property% or perfor"ance >ener!y?% or anythin! that will support a si"ple contract# -n "odern co""ercial transactions% !old% silver% and thin!s are not value% $ut pro"ises can $e value# -nterest in thin!s is value# &he consideration on $oth sides "ust $e eKual for the transaction to $e $alanced# Value on one side 6 value on the other side# Your co""unication can esta$lish $y your actions >not your words? that you are one of the people# -t should contain the instru"ent that was issued and transferred to you for value% after you have accepted it for value# -t should say what consideration you are offerin! >A;V instru"ent? and what you are reKuestin! as consideration in return >setoff 6 distri$ution fro" the trust?# .u$lic and private do not "i,% so a reKuest for a distri$ution fro" the trust would $e li e as in! for s dueodhs# &he pu$lic does not now anythin! a$out a distri$ution fro" the trust% $ut it does now a$out setoff% and securities% and entitle"ent holders% etc# Your co""unication should contain the ter"s of an a!ree"ent that will $e a win2win situation# -t should as the" to do so"ethin! responsive to you as one of the people% not as a 1#S# citiNenH $ut it cannot contain too "uch truth# -t should not contain anythin! that connects you to $enefits !ranted $y the 1nited States# &hose $enefits "i!ht $e use of 1nited States statutes% use of 1nited States courts% use of 1nited States Cud!esF opinions% use of 1nited States currency% use

of 1nited States licenses% use of 1nited States officers% use of 1nited States civil ri!hts% use of 1nited States rules and re!ulations% use of 1nited States for"s% use of 1nited States $onds% or use of 1nited States insurance% to na"e a few# Since /:99 A"erican co""on law is not availa$le to the people throu!h the courts% $ut co""ercial re"edies are availa$le throu!h the .ost 4ffice# Your co""unication should not contain anythin! that draws fro" co""on law re"edies# &he co""ercial re"edies contain the principles of the co""on law that is needed to settle the account# &he only syste" of co""ercial re"edy availa$le now is the law of nations% which is $ased on a!ree"ent usin! the Baw Merchant# 1nited States courts enforce a!ree"ents usin! the Baw Merchant# You have the power to ne!otiate a!ree"ents that are advanta!es to you% or you can let the 1nited States set the ter"s of the a!ree"ents# &hat is a personal choice# Your co""unication should state the ter"s of the a!ree"ent you are offerin! to the other party% who "ust have a dele!ation of authority to represent the 1nited States# Your co""unication should $e directed to so"eone who is authoriNed to $ind the 1nited States# Bow level e"ployees of a corporation !enerally are not authoriNed to $ind the corporation they representH Cust as low level e"ployees of the 1nited States are not authoriNed to $ind the 1nited States# &he .resident can $ind the 1nited States% and he has first level a!ents who have dele!ations of authority to do that on his $ehalf# &hey are the heads of at least three of the e,ecutive depart"ents 0 Depart"ent of Go"eland Security >le!islative?% Depart"ent of the &reasury >e,ecutive?% and Depart"ent of Austice >Cudicial?# &his is a "ini2 !overn"ent within a .a!e )* of 8*

!overn"ent corporation# -t !overns under "ilitary rules usin! ad"iralty courts that i"ple"ent the Baw Merchant to satisfy the clai"s creditors have a!ainst de$tors# Boo for the Depart"ent of Go"eland Security fla! of Curisdiction at $order crossin!s# -t has a dar $lue $ac !round with the circular seal of that depart"ent in the center# Since none of the "e"$ers of the le!islatures or e,ecutive and Cudicial officers of the 1nited States has the oath reKuired $y Article V- of the 'onstitution% the only way they would have a duty to you is throu!h the oath of the .resident% the e,ecutive trustee on the trust created $y the 'onstitution and the trust created $y .resident Roosevelt# Gis position as .resident >Article ) Section /? co"es in the 'onstitution $efore his position as 'o""ander in 'hief >Article ) Section )?# Gis oath is reKuired in Section /% not Section )# -f you act li e a surety for the 1nited States instead of a $eneficiary of the trust% his officers have no duty to spea % and their silence is not acceptance# -f you act li e a surety for the 1nited States% you have a duty to spea % and your silence is considered to $e acceptance# When the 1nited States tar!ets you to !ive it a loan% you can /? not respond i""ediately and pay later% )? refuse the instru"ent $ecause it is defective% or 9? use your setoff as a distri$ution fro" the trust# You cannot use the setoff if you are holdin! the $irth certificate in a filin! ca$inet# -f all you have done is ta e the $irth certificate% and have not paid >perfor"ed? when as ed to pay% you have waived your $eneficial interest in the trust and have a!reed to $e lia$le as a surety# &hat is a personal choice# Acceptance for Value 6 &a en for Value -ssuin! an instru"ent is not the sa"e as issuin! an instru"ent for value# Acceptin! an instru"ent is not the sa"e as

acceptin! an instru"ent for value# Ienerally% the issuer of an instru"ent is the one who has the duty to pay# -f an instru"ent is issued for value% it appears its issuer is not actually a person entitled to enforce it% and "ay not even $e a holder in due course of another enforcea$le instru"ent# Ge has no standin! to de"and pay"ent or perfor"ance% $ut $y issuin! an instru"ent for value% he "i!ht $e a$le to open a new account throu!h the transfereeFs unKualified ta in! of the instru"ent# -f the issuer can !et the transferee to ta e the instru"ent with no conditions on the ta in!% the transferee is waivin! the defects in the instru"ent he is ta in!# &he "ain defect is that there is no consideration attached to the offer to contract# &here is no value in it at the point it is issued# &he issuer is loo in! for the transferee to provide the value# &he issuer is loo in! for the transferee to provide the consideration for $oth sides of the transaction# =y "erely ta in! >acceptin!? the instru"ent% the transferee $eco"es an acco""odation party# Ge receives no ri!hts% no defenses% and no value for his a!ree"ent to lend his na"e and his credit to the transaction# Ge does not realiNe that there is a hidden value in the instru"ent that he can use to his advanta!e if he accepts it for value and returns it# -f the issuer succeeds in creatin! a new account >a!ree"ent? with the transferee% he "i!ht later $e a$le to close that account throu!h a forced pay"ent or collection throu!h a penal action in an ad"inistrative proceedin!# &he issuer has defenses if he issues the instru"ent for value% that he would not have if he had Cust issued the instru"ent# Ge has no authority to issue the instru"ent% so he has to issue it for value# Ge is !ivin! a su$tle notice $y issuin! it for value that the transferee has no le!al duty .a!e )/ of 8*

to pay or to contract# -f the issuer were entitled to enforce the instru"ent% his instru"ent would refer to a pree,istin! contract in detail# Since the pree,istin! contract presu"ed to support this new si"ple contract is the application for the $irth certificate% or a pled!e of alle!iance to the 1nited States% or an application for a social security nu"$er% or an application for any nu"$er of other $enefits !ranted $y the 1nited States% the new instru"ent "ust $e issued for value# -f he issues it referrin! to a none,istent contract as its $asis% he would not have defenses Ge would $e actin! outside his dele!ation of authority# -t appears for value "ay $e translated into to !et value or to !et consideration# @,a"pleJ &he child acted out for attention% ie# to !et attention# &he "an wor ed for "oney% ie# to !et "oney# &he issuer issues the instru"ent for value% ie# to !et value# &he =lac Fs ;th definitions indicate another word for acceptance is ta in!# Acceptance# &he ta in! and receivin! of anythin! in !ood part% and as it were a tacit a!ree"ent to a precedin! act% which "i!ht have $een defeated or avoided if such acceptance had not $een "ade# =lac Fs ;th Acceptance is tric y# 7o one is reKuired to contract if he does not want to# Since there is a presu"ption that every "an has previously a!reed e,pressly or tacitly to $e a surety for the 1nited States% a na ed acceptance appears to reco!niNe that precedin! act% whether it actually e,ists or not# &he presu"ption can $e defeated or avoided $y not acceptin! >or ta in!? the offer# 7ot acceptin! is also tric y# -f the presu"ption of suretyship is allowed to stand unre$utted% non2acceptance $eco"es acceptance# Acceptance puts the lia$ility on the surety# A re$uttal "ust $e throu!h actions% not words# Acceptance for value and return for value is a re$uttal that overco"es the

presu"ption# Refused for cause without dishonor does not overco"e the presu"ption% $ut it does address defects in the instru"ent# -f an instru"ent is refused for cause% it "ust address the ri!ht points% or the co""unication will $e seen as a dishonor# -t is an option% $ut it reKuires "ore understandin! of statutes and rules of court than "ost people want to learn# -n /:33 the 4 laho"a Supre"e 'ourt e,plained the i"portance of applyin! necessary ele"ents to confir" that an instru"ent has $een ta en for value# &he first reKuire"ent is that the instru"ent $e ta en for value# -t is clear that the defendantFs chec s were ta en $y the plaintiff for value# D Section 929*9 provides that a holder ta es for value when it acKuires a security interest in the instru"ent otherwise than $y le!al process# D -n this analysis of the evidence we have concluded that under the 'o""ercial 'ode% supra% in 4 laho"a the plaintiff too the chec s for value as a "atter of law# D &he Cury should have $een instructed as to each of these ele"ents% and should have $een advised that plaintiff had satisfied the first ele"ent of ta in! for value# So"e of the instructions !iven $y the court indicated that ta in! for value was an issue% and the instructions went further and stated that the $an would $e ta er for value to the e,tent it had a security interest in the chec s# D &he ele"ent of ta in! for value was very "aterial to the plaintiffFs case# .eoples =an of Aurora v# Gaar% ;)/ .#)d 5/+ >/:33? .a!e )) of 8*

&his case was a$out ne!otia$le instru"ents% so Article 9 of the co""ercial code controls the "eanin! of value# &he !eneral definition of value in Article / does not apply !enerally to Article 9 7e!otia$le -nstru"ents# A ne!otia$le instru"ent can $e a pro"ise >a note? si!ned $y a Ma er% or it can $e an order >a draft? si!ned $y a Drawer# &he person who is entitled to enforce the instru"ent is the one who decides if it is a pro"ise or an order% unless its ter"s reKuire it to $e one or the other# &his is a personal choice# 1'' 92/*;# 7e!otia$le instru"ent @# An instru"ent is a OnoteO if it is a pro"ise and is a OdraftO if it is an order# -f an instru"ent falls within the definition of $oth OnoteO and OdraftO% a person entitled to enforce the instru"ent "ay treat it as either# 1'' 92/*9# Definitions A# -n this chapterJ 9# ODrawerO "eans a person who si!ns or is identified in a draft as a person orderin! pay"ent# 8# OMa erO "eans a person who si!ns or is identified in a note as a person underta in! to pay# &he 4 laho"a court referred to the 4 laho"a co""ercial code as its source for deter"inin! if the chec s had $een ta en for value# As with the !eneral definition of value !iven at /2)*/>;;? of the co""ercial code% it will reKuire close scrutiny to understand the various applications of 929*9# A $asic principle of the natural order of thin!s is that contracts are not valid if consideration is lac in!# =efore /:99 !old and silver% thin!s% and pro"ises of perfor"ance >ener!y? were consideration# 'onsideration was and still is anythin! sufficient to support a si"ple contract# A si"ple contract does not have to $e written% $ut can $e# -f a contract is written and is not under seal% it is !enerally a si"ple contract# A contract under seal% it is not a si"ple contract# A si!nature is not reKuired on a si"ple contract# -f you ta e !old% silver%

and thin!s away fro" the list of what is consideration% the only thin! left to $e consideration for a "odern2day contract is a pro"ise# 1'' 929*9 4fficial 'o""ent &he distinction $etween value and consideration in Article 9 is a very fine one# Whether an instru"ent is ta en for value is relevant to the issue of whether a holder is a holder in due course# -f an instru"ent is not issued for consideration the issuer has a defense to the o$li!ation to pay the instru"ent# 'onsideration is defined in su$section >$? as any consideration sufficient to support a si"ple contract# &he definition of value in Section /2)*/>;;?% which doesnFt apply to Article 9% includes any consideration sufficient to support a si"ple contract# &hus% outside Article 9% anythin! that is consideration is also value# A different rule applies in Article 9# Su$section >$? of Section 929*9 states that if an instru"ent is issued for value it is also issued for consideration# &he 4fficial 'o""ent says 0 -f an instru"ent is not issued for consideration the issuer has a defense to the o$li!ation to pay the instru"ent# &he reverse of that .a!e )9 of 8*

state"ent is 0 -f an instru"ent -S issued for consideration the issuer has 74 defense to the o$li!ation to pay the instru"ent# Articles /% )% ;% 8% 3% +% 5% : Article 9 value 6 consideration issued for value 6 issued for consideration &he issuer on a de"and fro" the 1nited States is actin! as an a!ent of the 1nited States# &he issuer on such an instru"ent is the 1nited States# -f the 1nited States issues an instru"ent for value% the 1nited States has no defense to the o$li!ation to pay the instru"ent# &hat only applies% however% if the transferee properly endorses the instru"ent and returns it to the issuer# &he $an er for the 1nited States is the Secretary of the &reasury# Ge or his a!ent should receive the endorsed and returned instru"ent# At that point% it is treated li e a chec and can $e deposited to settle an account in the accrual $oo eepin! syste"# Acceptance

and Acceptance for Value are not the sa"e thin!# Acceptin! an instru"ent without a Kualified endorse"ent waives all defects there "ay $e in the instru"ent% includin! the value% or lac of value% that co"es with it# Re"e"$er 2 the 4fficial 'o""ents for 929*9 say 0 -f an instru"ent is not issued for consideration the issuer has a defense to the o$li!ation to pay the instru"ent# &he reverse of that state"ent is 0 -f an instru"ent -S issued for consideration the issuer has 74 defense to the o$li!ation to pay the instru"ent# -f there is no value to support a de"and instru"ent% it has to $e issued to !et value# A !eneral acceptance of such an instru"ent successfully transfers the lia$ility the instru"ent carries to the acceptor# @ven if there is no value in the instru"ent for the acceptor to rely on% the acceptor is still lia$le# Ge has no defenses# Ge "ust pay it hi"self# -s he !oin! to pay it with a chec % or pay it with his prepaid account? -f the acceptor can see that

the value is the co""it"ent of the issuer to pay the instru"ent% then there is value in the instru"ent 222222 as lon! as the instru"ent is accepted for that valueTT Acceptin! an instru"ent for value and returnin! it is notice to the issuer that the endorser is not providin! new value% $ut is convertin! the issuerFs o$li!ation to pay the instru"ent into the value% there$y "a in! the instru"ent ne!otia$le# &he instru"ent $eco"es the pay"ent# At the point the instru"ent is issued for value% it is not a ne!otia$le instru"ent# At that point the definition of value in Article / applies# After it is received $y the tar!et% it $eco"es ne!otia$le# At that point the definition of value chan!es to fit Article 9# &he instru"ent% $ein! ne!otia$le% can $e enforced $y either party dependin! on what the transferee does with it# -f he Cust holds it or ar!ues a$out it% the issuer >1nited States? is entitled to enforce the instru"ent# -f he A;V% he is entitled to enforce the instru"ent# &hat is a personal choice# -t is $etter to $e a holder in due course of an instru"ent than the lia$le party on an instru"ent# A holder in due course is entitled to enforce the instru"ent# 4ne can $e a holder of an instru"ent >a hot potato? without $ein! a holder in due course# An instru"ent issued for value is a hot potato to a holder# A holder has lia$ility# A holder in due course has ri!hts% $ut cannot acKuire that position on an instru"ent .a!e ); of 8*

issued and transferred for value% unless he ta es the instru"ent for value as said in >929*)>A?>)?>a? $elow% and returns it for value# -t is still a hot potato# &o $e a holder in due course% the holder "ust "eet all the ele"ents listed in 929*)# 929*)# Golder in due course A# Su$Cect to su$section ' of this section and section 92/*3% su$section D% Oholder in due courseO "eans the holder of an instru"ent ifJ /# &he instru"ent when issued or ne!otiated to the holder does not $ear such apparent evidence of for!ery or alteration or is not otherwise so irre!ular or inco"plete as to call into Kuestion its authenticityH and )# &he holder too the instru"entJ >a? For valueH >$? -n !ood faithH >c? Without notice that the instru"ent is overdue or has $een dishonored or that there is an uncured default with respect to pay"ent of another instru"ent issued as part of the sa"e seriesH >d? Without notice that the instru"ent contains an unauthoriNed si!nature or has $een alteredH >e? Without notice of any clai" to the instru"ent descri$ed in section 929*3H and >f? Without notice that any party has a defense or clai" in recoup"ent descri$ed in section 92 9*8% su$section A# 7e!otia$ility An instru"ent is not necessarily ne!otia$le when it is issued% and the one who is holdin! it is not necessarily a holder in due course# All of the si, reKuire"ents listed in 929*)>A?>)? "ust $e "et for one to $e a holder in due course# &he first is that the instru"ent $e ta en for value# Accordin! to the 4 laho"a case% 1'' 929*9 says a holder ta es for value when it acKuires a security interest in the instru"ent otherwise than throu!h a Cudicial proceedin!# Ma e a note of this 0 -t is the holder who acKuires a security interest in the instru"ent% -F he ta es the instru"ent for value# -t is not the issuer who has the security interestH it is the holder# &he issuer has the lia$ility# &he

holder can waive the security interest with a $lan endorse"ent% or accept it with a Kualified endorse"ent# With a Kualified endorse"ent% the holder is acceptin! the security interest% not the lia$ility# Audicial court orders can transfer ri!hts in property% creatin! a security interest in the title to the su$Cect property% $ut that is not how it wor s with an instru"ent that is issued for value# An order for a Cudicial court2created security interest is not the type of instru"ent that a transferee would ta e for valueH $ut% an order for an e,ecutive court2created security interest is a type of instru"ent that a transferee would ta e for value# 1nited States courts are not Cudicial courtsH they are territorial courts and were created throu!h Article / Section 5 'lause : $y the power !ranted to the 'on!ress to constitute &ri$unals inferior to the supre"e 'ourt# &heir orders do not result in security interests throu!h Cudicial proceedin!s# A chec is ne!otia$le when it is transferred to a payee# -t is a note $ecause it is the Ma erFs pro"ise to pay the .ayee# -t is also an order to a third party% so it is a .a!e )8 of 8*

draft si!ned $y a Drawer# A na"ed third party% the .ayer% on a ne!otia$le instru"ent has a duty to pay it if he is a party to a pree,istin! arran!e"ent with the Drawer to do so# 4n a nor"al chec % a $an is the .ayer# &he Drawer is the party orderin! the pay"ent on a draft# &he .ayee ne!otiates the chec $y endorsin! it and presentin! it to a $an for deposit# -f the .ayee and the Drawer $an at the sa"e $an % the $an where the chec is deposited can also $e the .ayer# &he .ayee is usually a holder in due course# -f the chec is lost% a person who finds it is not a holder in due course and is not entitled to enforce the instru"ent# &he one who endorses it ta es on the lia$ility if the $an where it is deposited cannot collect on it# Ge has recourse a!ainst the Drawer# A chec is not an instru"ent that the .ayee would ta e for value% $ut the $an where it is deposited "i!ht ta e it for value% in the event it $elieves there "ay $e difficulty in collectin! on it# -f you endorse a chec without recourse% you are !ivin! notice that you do not a!ree to ta e on the lia$ility% $ut you "ay not $e a$le to convince a $an to accept it with that Kualified endorse"ent# -f you endorse a chec with Cust your si!nature and present it to a $an for deposit% you are !ivin! your ri!hts as holder in due course over to the $an # You are also a!reein! to ta e on the lia$ility for the ta, on that instru"ent# An -41 is not ne!otia$le% $ecause there is no third party# An -41 is a pro"ise to pay% and is si!ned $y a Ma er# &he holder of an -41 can only present it for collection to the Ma er# 4ther instru"ents that are notes >pro"ises? are not necessarily ne!otia$le either# 1nited States 7otes >pro"ises? were ori!inally ne!otia$le $ecause the holder could ta e the" to any federal reserve $an >third party? and redee" the" for !old or silver# Federal

Reserve 7otes are o$li!ations of the 1nited States that are not ne!otia$le# &hey are pro"ises to pay# &hey are o$li!ations that are not redee"a$le# See /) 1S' ;// as a"ended# Federal Reserve 7otes are considered to $e a $enefit 1#S# citiNens !et to use within the 1nited States# A pro"ise can $e value# Sufferin! can $e value# A $enefit can $e consideration sufficient to support a si"ple contract# 1sin! Federal Reserve 7otes is considered ta in! advanta!e of a $enefit >consideration? in e,chan!e for ri!hts the 1nited States has to enforce the ter"s of a pree,istin! citiNenship contract >a pled!e?# &hat is the i"plied $asis for its a!ents to issue $ills >instru"ents? to 1#S# citiNens% $ut they have to $e issued for value# &he ter"s of that pled!e are the hidden $asis for issuin! instru"ents for value# &here is a default presu"ption that every 1#S# citiNen has "ade a pled!e to the 1nited States and its statutes# 4ther than the issuerFs o$li!ation to pay an instru"ent that is issued for value% there is no value in the instru"ent% when it is issued# -t is not ne!otia$le when it is issued# -t is see in! a ne!otia$le instru"ent# An issuer has a defense for issuin! instru"ents without consideration% if they are issued for value% and a pro"ise previously "ade $y the transferee >1#S# citiNen? is due and has not $een perfor"ed# &he pay"ent on the national de$t is always due and has not $een perfor"ed# -f an e"ployee of the 1nited States transfers a $ill >instru"ent? for value to a 1#S# citiNen% the "an who represents hi" "i!ht reco!niNe that the $ill has $een issued for value so he can accept it for value and return it for value to close the account on $ehalf of the 1#S# citiNen# &he 1#S# citiNen has a le!al duty to pay the $ill% and the "an has a "oral duty to close the account# Ge can close the account if he first .a!e )3 of 8*

accepts for value the $ill that was issued for value# When he does that% he has provided sufficient consideration that is needed to $alance the i"plied consideration that was provided $y the issuer# -t is li e for li e# Ge is actually providin! the consideration for $oth sides of the transaction% ie# the accrual $oo eepin! syste"# &he instru"ent that is issued for value is the de$it side of an

accrual account loo in! for the credit side# @verythin! is $ac wards# 1sually you "a e a deposit >credit? to your chec in! account $efore you write a chec >de$it? a!ainst the account# You start with the credit and then you can authoriNe a de$it $y writin! a chec # -n the co""ercial syste" used in the 1nited States% the de$it appears to co"e first and you have to supply the credit to "a e the de$it possi$le# &he instru"ent is the credit% and your endorse"ent "a es it the de$it# -f you accept that credit for value and return it with a proper endorse"ent% the instru"ent $alances the account# -f you !ive it a $lan endorse"ent $y Cust holdin! it% you have to send the issuer another instru"ent as the credit# &o $e safe% one who receives an instru"ent that has $een issued for value has to !et rid of it as soon as possi$le# Whoever is holdin! it% is lia$le for it# -t is a hot potato# -f the holder fails to reco!niNe that it was issued for value and !ives it a $lan endorse"ent% he has $eco"e the responsi$le party replacin! the issuer# Ge $eco"es the issuer and transferor with the o$li!ation% and the ori!inal issuer $eco"es the transferee# Ge has to supply the consideration to fund the instru"ent and close the account# Ge can do this $y writin! a chec on an open $an account with sufficient funds and sendin! his chec with the $ill to the issuer# Ge can "ini"iNe or eli"inate that lia$ility $y !ivin! the instru"ent a Kualified endorse"ent >A;V? and !ivin!

notice that the one ta in! the instru"ent fro" hi" has no recourse a!ainst hi" if the instru"ent ends up $ein! uncollecti$le# -t is uncollecti$le until he !ives it so"e value# -t was issued for value% ie# to !et value% and it does !et value when it is properly endorsed# &he Kuestion is 0 who is entitled to enforce the instru"ent? 0 the ori!inal transferor or the ori!inal transferee? &his is a personal choice# Without Recourse Mort!a!e co"panies endorse pro"issory notes issued $y $orrowers with the words 0 Without recourse pay to the order of A=' Mort!a!e 'o"pany 0 a$ove the endorse"ent si!nature# &hat is a Kualified endorse"ent# -f A=' can !et a third party to accept that paper under the conditions of the endorse"ent% the third party cannot !o to A=' to enforce the instru"ent# Mort!a!e co"panies are al"ost always affiliated with a $an that will accept this ind of paper# Without recourse !ives notice of non2acceptance of lia$ility on the instru"ent# -f the third party ever wants to seiNe the security supportin! the instru"ent% it "ust s ip A=' and !o to the $orrower who issued the instru"ent to A='% who too the instru"ent in !ood faith and transferred it to the third party% who also too it in !ood faith# &he security that $ac s the instru"ent stays attached to the instru"ent# A;V is a Kualified endorse"ent# Addin! the words 0 without recourse 0 ta es you out of the picture as a responsi$le party# You are not an acco""odatin! party if you use without recourse in your endorse"ent# .a!e )+ of 8*

When an instru"ent is issued for value and accepted for value without recourse and returned for settle"ent and closure of the account% the third party >the Secretary of the &reasury 6 $an er? has no recourse a!ainst the endorser# 4ne "i!ht thin that is !ood% $ut there is one "ore thin! to consider# &he people in the several states for"ed a society $uilt on service# -f you do not want to $e part of that service plan% you can ta e yourself out of the transaction throu!h the without recourse endorse"ent# -f you want to $e of service to the 1nited States% and $e seen as an ally% it "i!ht $e !ood to a!ree to $e responsi$le to aid and assist the 1nited States in acKuirin! funds to pay its de$t# -t is up to you% $ut $e fully infor"ed and now e,actly who you want to $e $efore you endorse an instru"ent that is issued or transferred for value# &his is a personal choice# 1'' 92;/8# 4$li!ation of indorser A# Su$Cect to su$sections =% '% D and @ of this section and to section 92;/:% su$section D% if an instru"ent is dishonored% an indorser is o$li!ed to pay the a"ount due on the instru"ent accordin! to the ter"s of the instru"ent at the ti"e it was indorsed% or if the indorser indorsed an inco"plete instru"ent% accordin! to its ter"s when co"pleted% to the e,tent stated in sections 92//8 and 92;*+# &he o$li!ation of the indorser is owed to a person entitled to enforce the instru"ent or to a su$seKuent indorser who paid the instru"ent under this section# =# -f an indorse"ent states that it is "ade Owithout recourseO or otherwise disclai"s lia$ility of the indorser% the indorser is not lia$le under su$section A of this section to pay the instru"ent# ;+29;/:# -nstru"ent Si!ned for Acco""odation# >d? -f the si!nature of a party to an instru"ent is acco"panied $y words indicatin! una"$i!uously that the party is !uaranteein! collection rather

than pay"ent of the o$li!ation of another party to the instru"ent% the si!ner is o$li!ed to pay the a"ount due on the instru"ent to a person entitled to enforce the instru"ent only if >i? e,ecution of Cud!"ent a!ainst the other party has $een returned unsatisfied% >ii? the other party is insolvent or in an insolvency proceedin!% >iii? the other party cannot $e served with process% or >iv? it is otherwise apparent that pay"ent cannot $e o$tained fro" the other party# An acco""odation party >1#S# citiNen who accepts an instru"ent that is issued and transferred for value? is presu"ed to !uarantee collection% as well as pay"ent of the o$li!ation of another party to the instru"ent# &he acco""odation party is only o$li!ated to pay the instru"ent if one of the four criteria is "et# 4ne of the" is that the other party >the one o$li!ated on the instru"ent 6 1nited States? is insolvent or in an insolvency proceedin!# &he issuer usually has the o$li!ation to pay the instru"ent# Since he would $e payin! hi"self if the instru"ent is issued and transferred for value% and then accepted for value and returned for value% the circuity of the transaction results in a de$it and a credit# &hat "a es for a $alanced account# Without the transfereeFs $lan endorse"ent% the proCect does not wor # Bia$ility is not transferred# &he issuer of an instru"ent that is issued for value has defensesH $ut if it is A;V and returned for .a!e )5 of 8*

value% the issuer has no defenses# &he issuer does not need defenses% if he closes the account% $ut if he does not want to !ive up% he could issue a second instru"ent for value to see if the endorser on the first one "i!ht chan!e his "ind and a!ree to ta e lia$ility on the second one# An instru"ent issued for value could $e a ta, $ill% or a co"plaint% or a penal action indict"ent on which the 1nited States is the issuer and the lia$le party# -ssued or &ransferred for Value 0 1'' 929*9 1nder the definition of value in /2)*/>;;?% a person !ives value for ri!hts if he acKuires ri!hts throu!h several "eans listed in the su$sections# A person !ives value in return for any consideration sufficient to support a si"ple contract# 1nder Article 9 dealin! with ne!otia$le instru"ents% an issuer does not have to !ive value if he issues an instru"ent for value# 1'' 929*9 4fficial 'o""ent &hus% outside Article 9% anythin! that is consideration is also value# A different rule applies in Article 9# Su$section >$? of Section 929*9 states that if an instru"ent is issued for value it is also issued for consideration# 1'' 929*9# Value and consideration A# An instru"ent is issued or transferred for value ifJ /# &he instru"ent is issued or transferred for a pro"ise of perfor"ance% to the e,tent the pro"ise has $een perfor"edH )# &he transferee acKuires a security interest or other lien in the instru"ent other than a lien o$tained $y Cudicial proceedin!H 9# &he instru"ent is issued or transferred as pay"ent of% or as security for% an antecedent clai" a!ainst any person% whether or not the clai" is dueH ;# &he instru"ent is issued or transferred in e,chan!e for a ne!otia$le instru"entH or 8# &he instru"ent is issued or transferred in e,chan!e for the incurrin! of an irrevoca$le o$li!ation to a third party $y the person ta in! the instru"ent# =# 'onsideration "eans any

consideration sufficient to support a si"ple contract# &he drawer or "a er of an instru"ent has a defense if the instru"ent is issued without consideration# -f an instru"ent is issued for a pro"ise of perfor"ance% the issuer has a defense to the e,tent perfor"ance of the pro"ise is due and the pro"ise has not $een perfor"ed# -f an instru"ent is issued for value as stated in su$section A% the instru"ent is also issued for consideration# &his section e,plains how an instru"ent is issued for value and transferred for value# &here is no co""a $efore the or% so or can "ean and or or# &he issuer is the party who is lia$le on an instru"ent until he can transfer his lia$ility to another party# 1'' 92/*8# -ssue of instru"ent A# O-ssueO "eans the first delivery of an instru"ent $y the "a er Qon a note 0 pro"iseR or drawer Qon a draft2orderR% whether to a holder or nonholder% for the purpose of !ivin! ri!hts on the instru"ent to any person# .a!e ): of 8*

&he issuer of an instru"ent intends to !ive ri!hts on the instru"ent to another person# &hat other person "i!ht $e you if you endorse it properly# 1'' 929*9 e,plains how the person you represent in co""erce in the 1nited States can start out $ein! a tar!et and end up $ein! the one entitled to enforce the instru"ent# 1'' 92/*9# Definitions A# -n this chapterJ 9# ODrawerO "eans a person who si!ns or is identified in a draft as a person orderin! pay"ent# 8# OMa erO "eans a person who si!ns or is identified in a note as a person underta in! to pay# An instru"ent can $e issued and transferred for value to a holder $y a drawer >if it is an order?% or $y a "a er >if it is a pro"ise?# &he transferee has to decide if the instru"ent is an order or a pro"ise# -f he understands his options% it would $e $etter for hi" to "a e the instru"ent a pro"ise# &hen the issuer has an o$li!ation to pay# &he currency of the 1nited States is $ased on pro"ises% which are a!ree"ents# 1nited States courts enforce a!ree"ents# =oth parties can proceed on the $asis of a si"ple contract# A si"ple contract does not have to $e written% and does not reKuire a si!nature# &he transfereeFs si!nature will $e presu"ed if it is not actually !iven# -f you want to contract with so"eone% you can send hi" an offer to contract to see if he wants to contract with you and if he accepts your ter"s# -f he does not want to contract% he can return your offer and decline to contract# &hat is called nonassu"psit% or - do not underta e# Assu"psit is an i"plied a!ree"ent to contractH thus% a si"ple contract# -f he does want to contract with you $ut not on the ter"s you proposed% he can return the contract with different ter"s for your si!nature# You can ter"inate the ne!otiation $y non2 assu"psit at that point or propose different ter"s and return the contract for his

si!nature# -f one party decides to ter"inate the ne!otiations% he Cust returns the contract with no si!nature# &hat is the scenario if the parties do not already have an o$li!ation to contract# -f the transferee has an o$li!ation $ased on a pree,istin! contract >si!ned or not?% he has a duty to respond and "ay have a duty to respond in a certain way# &he lowest position is the one who has a duty to pay $ecause of a pree,istin! a!ree"ent# &hrou!h citiNenship% you are presu"ed to $e in that position as a surety for the 1nited States on the national de$t% throu!h a presu"ed pro"ise of perfor"ance on a si"ple contract# A ta, $ill can $e an instru"ent issued for value and delivered with the intent of transferrin! the lia$ility of the national de$t to the transferee# A civil co"plaint and a penal action indict"ent are also instru"ents that can $e handled the sa"e way# &hey are all loo in! for so"eone to accept lia$ility# &he followin! e,plains the first su$section of 1'' 92 9*9# 1'' 929*9# Value and consideration A# An instru"ent is issued or transferred for value ifJ /# &he instru"ent is issued or transferred for a pro"ise of perfor"ance% to the e,tent the pro"ise has $een perfor"edH .a!e 9* of 8*

=# D -f an instru"ent is issued for a pro"ise of perfor"ance Qto a 1#S# citiNenR% the issuer Q1nited StatesR has a defense to the e,tent perfor"ance of the pro"ise is due and the pro"ise has not $een perfor"ed# -f an instru"ent is issued for value as stated in su$section A% the instru"ent is also issued for consideration# Su$section = says the issuer has a defense if he issues an instru"ent for value and the pro"ise is due and has not $een perfor"ed% $ut if he issues it for value and the pro"ise has not $een perfor"ed $ecause it is not due% he has no defense# -f he issues an instru"ent and there is no pro"ise% he has no defense# -f a stran!er is sent an instru"ent that is issued for value% and he does not pay it% he is not in default $ecause he has no duty to pay it# -f a surety is sent an instru"ent that is issued for value% and he does not pay it% he is in default and is in $reach of his a!ree"ent to $e surety# -f perfor"ance is due and has not $een perfor"ed% the a!ent issuin! and transferrin! the instru"ent for value has a ri!ht to pursue collection# -f you are presu"ed to $e a surety for the 1nited States throu!h 1#S# citiNenship% and if an a!ent for the 1nited States sends you a $ill% what are your options? -f you act li e a surety% you have to pay# -f you do not thin you are a surety% you can refuse it for cause% $ut if you have done thin!s in the past that "a e it loo li e you are a surety% refusal for cause is not the $est option# -f you are a stran!er and you pretend to $e a surety and pay the instru"ent usin! a security you have re!istered with a fiduciary in the 1nited States% you are not in default# 929*9 says An instru"ent is issued or transferred for value if the instru"ent is issued or transferred for a pro"ise of perfor"ance% to the e,tent the pro"ise has $een perfor"ed# -t sounds li e the instru"ent is a receipt for

perfor"ance of a pro"ise that has already $een done# Why would one ar!ue a$out receivin! a receipt? &his is a $ifurcated state"ent# &he first part says the instru"ent is issued for value% ie# to !et value# &he value $ein! sou!ht is a new pro"ise of perfor"ance# &he second part of the state"ent ad"its a pro"ise has already $een perfor"ed# 1nder the fiction that you have previously set up the person you represent as a surety% the 1nited States is puttin! the $est construction on the instru"ent# &he issuer is assu"in! the pro"ise of suretyship that has already $een "ade will $e perfor"ed on this new reKuest# 7ow it is ti"e to put up or shut up# &he principle of suretyship is not difficult to understand# =ein! a surety is not a one way street li e $ein! an acco""odatin! party# An acco""odatin! party lends his na"e and his credit to another person% $ut !ets nothin! in return# 4ne who a!rees to $e a surety for another party would receive an asset fro" the one as in! the surety for this service# For e,a"ple% an officer "ay need two sureties $efore he can co""ence his official duties# Ge would find two people who a!reed to $e his sureties# &hey would si!n a docu"ent >perhaps a $ond? as sureties for the officer# &he officer would !ive the sureties an asset% li e a deed of trust% as a security for the" in the event they would $e reKuired at so"e ti"e to pay a de$t for the officer# -f the officer were a ta, collector% and he died% all of his accounts would have to $e settled# -f there were no "oney in his accounts to payover the ta,es he had collected% his personal property would $e used to settle that de$t# &he 1nited States and its creditors do not want to spend the ti"e or "oney to liKuidate the dead officerFs .a!e 9/ of 8*

personal property% so they Cust !o to the sureties to collect# &he sureties are reKuired to pay i""ediately# &hen the sureties% as holders in due course of the deed of trust% have the ri!ht to enforce the deed# &hey can sell the real property connected to that deed of trust% so they can $e rei"$ursed# &he dead officerFs heirs cannot clai" a ri!ht to that property% $ecause the deed of trust the sureties hold is an enforcea$le instru"ent# Sureties for the 1nited States have the sa"e options# Since the sureties are fictions% the people who represent those sureties can opt to use their pre2paid account to pay when they receive instru"ents that are issued and transferred to the" for value# &hey do not have to pay with their pu$lic deeds% accounts% and cash of the persons they represent# -f they do pay with pu$lic currency% they have the ri!ht to $e rei"$ursed# -f they opt to use their pre2paid account% they use the Secretary of the &reasury to setoff the de$t# @ither way% the surety stays in honor and perfor"s accordin! to his pro"ise# You have to "a e a choice# 7o action is a choice to $e a surety% and to pay with pu$lic deeds% accounts% or cash# Do you want to try to prove you are not a 1#S# citiNen and a surety for the de$t the 1nited States owes its creditors? - a" not that person% is a defense "any people have tried to use in the past with little success# Do you want to try to prove >as a presu"ed 1#S# citiNen and surety for the national de$t? that you donFt have to pay the instru"ent? Would it $e easier to help the" close that account? Suretyship is a fiction# -t is $ased on an i"plied pro"ise# -f you were $orn on the land in Montana% you are one of the $eneficiaries on the trusts created $y the 'onstitution and .resident Roosevelt# Do you want to try to prove that in one of their penal action courts? &hat "i!ht $e too "uch truth for a fiction

court to deal with# &hat is also a defense that has $een tried with little success# &he o$li!ation the 1nited States owes to you is $ased on a pro"ise that is $etter than an i"plied pro"ise# You have a certified copy of the security that ac nowled!es the o$li!ation the 1nited States owes to you# -t evidences a pro"ise even thou!h the ter"s are i"plied and not actually e,pressed on the face of the $irth certificate# Would it $e easier to use one i"plied pro"ise to set off another i"plied pro"ise? -f you accept their offer for value and return it for value% at least you have not !iven the" an i"plied !eneral acceptance of lia$ility# -f you are !oin! to accept their offer% would it $e $etter to do it on your ter"s? Fi!htin! with the" has not resulted in "uch success in the past# -s it possi$le it will $e easier to close the account $y !oin! alon! with their i"plied contract >pro"ise?% $rin!in! in another i"plied contract >pro"ise?% and lettin! the" use you to close their $oo s? &his is a personal choice# &he second su$section of 92 9*9 deals with a security interest that is inherent in every instru"ent that is issued and transferred for value# 1'' 929*9# Value and consideration A# An instru"ent is issued or transferred for value ifJ )# &he transferee acKuires a security interest or other lien in the instru"ent other than a lien o$tained $y Cudicial proceedin!H .a!e 9) of 8*

&he transferee is the person to who" the instru"ent is delivered# -t is the transferee who has the option of acKuirin! a security interest in the instru"ent that was delivered to hi"# A hundred years a!o if a "an $orrowed )** dollars fro" a $an % he would receive )** dollars of silver or its eKuivalent in $an notes# &hat would $e the $an Fs consideration# &he "an would si!n a note and !ive it to the $an # &hat would $e the "anFs consideration# &he $an acKuired a security interest in a thin! 0 "ay$e the "anFs far"% not throu!h Cudicial proceedin!% $ut throu!h the intentional action of the "an# -f the "an did not repay the )** dollars% his note would $e evidence of the pro"ise that he had $reached# &he $an could send the "an a de"and for pay"ent# &hat de"and for pay"ent would 74& $e an instru"ent issued for value% $ecause the $an actually had the "anFs written and intentional pro"ise# &he "an did 74& acKuire a security interest in the de"and instru"ent fro" the $an # &he "an could 74& accept that de"and for value and return it for value to settle the account# -n todayFs co""ercial syste"% when Mr# &a, Man >an a!ent for the 1nited States? sends a 1#S# citiNen a de"and for pay"ent% he does not have a "anFs intentional written pro"ise to pay# Ge has to issue the instru"ent for valueH and the transferee auto"atically acKuires a security interest in the instru"ent# &his security instru"ent is not o$tained $y Cudicial proceedin!# Assu"in! the transferee accepts the instru"ent and does not pay it% the 1nited States $eco"es the transferee and acKuires a security interest in the instru"ent# &he positions switch# -t is assu"ed the transferee has !iven it a $lan endorse"ent via his unKualified acceptance >his silence? and then issued the instru"ent $ac to the 1nited States# &he new issuer is o$li!ated to pay the

instru"ent# -f he had reco!niNed the instru"ent as one that was issued for value% he would have nown he had to A;V and return it for value to !ive notice he intended to enforce his security interest in that instru"ent# @ven when the 1nited States !ets a Cud!"ent in its favor fro" a 1nited States court% it does not acKuire a security interest throu!h Cudicial proceedin!# 1nited States courts are e,ecutive courts and have no authority to issue Cudicial orders# -f an appeal on an ad"inistrative order $ased on an instru"ent that had $een issued for value and A;V were properly $rou!ht in an actual Cudicial court% the Cudicial court would have to rule in favor of the petitioner% $ut that will not happen# &here are ad"inistrative procedures to settle these cases $efore they !et to a Cudicial court# So"e '-D offices are appeals offices% and the officers who wor there have the authority to investi!ate the facts of a co""ercial settle"ent% and actually do the accrual $oo eepin! and close the accounts# -f the appeals office does not close

the account% or if it closes the account $ut does not !ive notice to the parties and the pu$lic% there is a hi!her office that can handle an appeal fro" an appeals office action or inaction# @very a!ency of the 1nited States has an -nspector Ieneral who has a duty to detect and prevent fraud% waste% and a$use# -f the facts of your settle"ent !et to his office% his position as a direct appointee of the .resident reKuires hi" to assure there is no fraud% no waste% and no a$use# &he $oo 9: -RS Ar!u"ents that DonFt Wor and Why e,plains -nspector Ieneral functions in "ore detail# -t can $e found on www#lulu#co"# .a!e 99 of 8*

A corporation issuin! a stoc certificate% $ond% or other security is o$li!ated to pay the instru"ent# &he corporation >issuer? is lia$le to pay accordin! to the ter"s of the certificate% $ond% or other security% which are instru"ents that "i!ht $e ne!otia$le% or they "i!ht $e non2ne!otia$le% at the ti"e they are issued# -f an instru"ent is intended to $e ne!otia$le% a third party "ust enter the process# A pro"issory note for a "ort!a!e is issued $y a $orrower% who is the "a er# -t appears to $e a two2party instru"ent% li e an -41# &he "a er usually does not e,pect his note to $e ne!otiated% $ut it is# Ge is "a in! a pro"ise and !ivin! the le!al description of the land he is $uyin! as security for his pro"ise# Ge necessarily "ust already have an interest in the le!al description throu!h the purchase a!ree"ent% for hi" to $e a$le to pled!e that le!al description on a deed of trust% as security for his pro"issory note# &he deed of trust is an unnecessary co"ponent of the loan process% $ecause the pro"issory note is sufficient to fund the loan# &he pro"issory note is !iven $y the $orrower to the lender% which $eco"es the transferee and acKuires a security interest in the note and in the le!al description pled!ed as security# &he lender is not o$tainin! a security interest throu!h Cudicial process# -t acKuires the security interest in the instru"ent throu!h voluntary transfer $y the $orrower# &he security interest is the value# &he pro"ise is value# &he su$seKuent pay"ents are value# &he su$seKuent seiNure of the property in foreclosure is value# &he $orrower is supplyin! all the value# &he "a er on the pro"issory note is e,pectin! to receive value fro" the lender% and the lender is e,pectin! to receive ri!hts in the property $ein! pled!ed as security for the loan# &he lender ne!otiates the note and transfers its ri!hts and o$li!ations

in the note to a $an >a third party? that ta es the note for value alon! with ri!hts in the security# &he definition of value in Article / of the 1'' used that process as one of the e,a"ples of value# 1'' /2)*/>;;? D a person !ives value for ri!hts if he acKuires the"J >$? As security for or in total or partial satisfaction of a pree,istin! clai"H =oth parties to an instru"ent !ive value and !et ri!hts# A lender !ives value to the $orrower in the for" of $an in! services% in e,chan!e for ri!hts the lender receives in the pro"issory note# &he $orrower !ives value to the lender in the for" of a "anFs si!nature% in e,chan!e for ri!hts to use currency in the pu$lic# &he $irth certificate is an instru"ent that !ives value in e,chan!e for ri!hts# -t is also an instru"ent that is issued $ased on value received% and represents ri!hts that are !iven $ac in e,chan!e# Ri!hts in the $irth certificate as a security are only availa$le to the "an on the pu$lic side% $ut he needs a fiduciary on the pu$lic side to hold the security for hi"# &he "an cannot use the $irth certificate on the pu$lic side# Ge is su$stance% and the pu$lic side is fiction# Ge cannot !o there# &he $irth certificate is an instru"ent that is seen fro" two different perspectives# Fro" the pu$lic side% the $irth certificate is a security interest in the la$or of the 1#S# citiNen the certificate represents% $ased on the 1#S# citiNenFs pled!e to the 1nited States# Fro" the private side% the $irth certificate is a security interest in distri$utions fro" the trusts esta$lished $y the 'onstitution and $y .resident Roosevelt in /:99# 4n the pu$lic side% the 1nited States has an antecedent clai" a!ainst the 1#S# citiNenFs la$or throu!h the pree,istin! contract >pled!e?# 4n the private side% the "an .a!e 9; of 8*

has an antecedent clai" a!ainst the 1nited States throu!h the pree,istin! contract >'onstitution and the Article V- and Article -- oaths?# Mort!a!e notes disclose the e,istence of an antecedent clai" with the words For a loan - have received D in the first line of the $orrowerFs written pro"ise# &he $orrower has not received a loan at that point% $ut nonetheless he is pro"isin! to pay on so"e pree,istin! loan >national de$t? on every "ort!a!e note he si!ns# A "an !ives value throu!h his si!nature on a note% in e,chan!e for ri!hts to future setoff# Ge acKuires his ri!ht to future setoff as security for or in partial satisfaction of a pree,istin! clai" he has throu!h his position as $eneficiary on the trusts created $y the 'onstitution and .resident Roosevelt# -t is this $eneficiary position that you are usin! when you A;V# &here is no value in an instru"ent that is issued for value when it is issued# -t is issued to !et value# An instru"ents that are issued for value is very different than the ind of instru"ent you si!n as a $orrower# You are providin! value in your instru"ent at least twice# You are !ivin! the other party a written pro"ise to pay and puttin! up security >le!al description?% and you are ad"ittin! you have already received a loan# -n an instru"ent that is issued for value $y the 1nited States% there is no e,press pro"ise to pay you% and there is no security !iven to you when you receive it# &he only way you can "a e that instru"ent paya$le to you is to A;V so you can enforce your security interest in that instru"ent# When an instru"ent is issued $y an a!ent of the 1nited States $ased only on an i"plied pro"ise% it has to $e issued for value% or the issuer would have no defenses a!ainst a clai" of fraud or a$use# &he transferee has a security interest in the instru"ent if the issuer cannot produce an antecedent clai" $ased

on a pree,istin! contract% which the issuer cannot do# -f he could% it would not $e issued for value# -f the instru"ent is not accepted for value% and then returned for value% the transferee waives his security interest in the instru"ent and waives his position as holder in due course with the ri!ht to enforce the instru"ent# &he issuer has the lia$ility until so"eone else ta es on the lia$ility# &hat is supposed to $e the transferee% if the a!entFs plan wor s# &ransfer "eans "ovin! so"ethin! $y a transferor to a transfereeH fro" one place to another place# -n co""erce% a transferor is usually atte"ptin! to transfer his lia$ility to the transferee% which is fine if he is also transferrin! the security interest alon! with the lia$ility# -n the 1nited States% it is presu"ed the transferee >1#S# citiNen? has an o$li!ation on a pree,istin! contract >pled!e? to pay an instru"ent as the result of another party >international $an ers? havin! a direct or indirect antecedent clai" a!ainst the transferee# -t could even $e a pree,istin! clai" a!ainst the transfereeFs >1#S# citiNenFs? creditor >1nited States?# &his is where pu$lic and private $eco"e haNy# When the 1nited States is dealin! with its sureties >1#S# citiNens?% you are loo in! at a pu$lic relationship controlled $y pu$lic policy# &he people are not under pu$lic policy# France is not under pu$lic policy of the 1nited States either# When the federal 1nited States is dealin! with the country of France% the relationship is !overned $y the laws of nature# -t is $y private a!ree"ent# When corporate 1nited States is dealin! with corporate France% the relationship is !overned $y the Baw Merchant# &hat is also $y private .a!e 98 of 8*

a!ree"ent% $ut under a different set of laws# When the 1nited States is dealin! with its creditors% you are loo in! at a private relationship $etween corporate 1nited States and other corporate persons that supposedly "ade loans to corporate 1nited States# &he Baw Merchant !overns co""ercial actions a"on! corporate nations# -t is pu$lic law% $ut the law of the individual contracts corporate 1nited States has with those other corporate persons% is private law# When the national 1nited States is dealin! with its corporate su$divisions >State of <<<?% that relationship is !overned $y pu$lic law# &he law of the contracts corporate 1nited States has with its corporate su$divisions is ad"inistered $y pu$lic policy# &he law of the relationship the national 1nited States has with its officers% a!ents% and e"ployees is controlled $y pu$lic law throu!h statutes# &he law of the relationship $etween the federal !overn"ent and the people in the several states is the 'onstitution# &his is a private arran!e"ent# &he people cannot have pu$lic contracts with corporate 1nited States# &hey already have a private arran!e"ent that puts the people as $eneficiaries% and the .resident as the e,ecutive trustee# &hese are all relationships that are !overned $y so"e ind of lawH often a law that is not even considered $y one of the parties# .eople 0 people 6 private law >a!ree"ents? Several States 0 people 6 private law >state constitutions? Federal 1nited States 0 people 6 private law >Article V- oaths? 1#S# citiNens 0 people 6 private law >a!ree"ents? 'orporate 1nited States 0 people 6 private law >a!ree"ents? -nternational lenders 0 people 6 no relationship Federal 1nited States 0 several states >4hio? 6 private law >'onstitution? Federal 1nited States 0 other countries 6 private law >treaties? 'orporate 1nited States 0

international lenders 6 private law >a!ree"ents? Federal 1nited States 0 forei!ners 6 private law >law of nature and natureFs Iod? 7ational 1nited States 0 1#S# citiNens 6 pu$lic law >statutes? 7ational 1nited States 0 "e"$ers States >State of 4hio? 6 pu$lic law >statutes? 'orporate 1nited States 0 other nations 6 pu$lic law >international Baw Merchant? 7ational 1nited States 0 forei!ners 6 pu$lic law >international Baw Merchant? &echnically% a 1#S# citiNen has no direct o$li!ation to the international $an ers% so their presu"ed clai" a!ainst the 1#S# citiNen is initially a failure# -f the 1nited States can !et its surety >1#S# citiNen? to ac nowled!e the clai" $ein! "ade $y the international creditors% throu!h the process of novation% the o$Cective can $e acco"plishedH the o$Cective $ein! that the 1#S# citiNen has voluntarily ta en on the lia$ility of the national de$t# &hat is !oin! to $e in the capacity of /? an acco""odation party% or )? a surety# Sureties have ri!htsH acco""odatin! parties donFt# &hat would $e a political election% and only the person can "a e that choice# Since you are representin! a 1#S# citiNen% it is your choice# When the transferee receives an instru"ent issued and transferred for value% he has options# Ge can /? accept it and pay it% )? refuse it for cause and return it% or 9? accept it for value and return it as pay"ent# &he transferee !ets an i"plied security interest >consideration? that he can enforce a!ainst the security the issuer is supposed to $e passin! on to the transferee# =y operation of law% the instru"ent "ust carry the issuerFs o$li!ation to pay it# .a!e 93 of 8*

1'' 929*9 4fficial 'o""ent -f an instru"ent is not issued for consideration the issuer has a defense to the o$li!ation to pay the instru"ent# 1'' 929*9 4fficial 'o""ent &hus% outside Article 9% anythin! that is consideration is also value# A different rule applies in Article 9# Su$section >$? of Section 929*9 states that if an instru"ent is issued for value it is also issued for consideration# &o avoid fraud% the instru"ent has to $e issued for value# -t !ives the transferee >a 1#S# citiNen? a security interest in the instru"ent# &he only piece of paper a "an has the is proof of the security interest he has is the $irth certificate# -t has no value on the private side% $ut it does on the pu$lic side if he deposits with an appropriate $an er% who can then $e the "anFs securities inter"ediary% and the "an can $e the entitle"ent holder# &his is e,plained in 1'' Article 5 in the 8** series# &he followin! insert is ta en fro" Wi ipedia% an online dictionary# 4peration of law 2 &he phrase O$y operation of lawO is a le!al ter" that indicates that a ri!ht or lia$ility has $een created for a party% irrespective of the intent of that party% $ecause it is dictated $y e,istin! le!al principles# D @vents that occur $y operation of law do so $ecause courts have deter"ined over ti"e that the ri!hts thus created or transferred represent what the intent of the party would have $een% had they thou!ht a$out the situation in advanceH or $ecause the results fulfilled the settled e,pectations of parties with respect to their propertyH or $ecause le!al instru"ents of title provide for these transfers to occur auto"atically on certain na"ed contin!encies# Ri!hts that arise $y operation of law often arise $y desi!n of certain contin!encies set forth in a le!al instru"ent# Ri!hts or lia$ilities created $y operation of law can also $e created involuntarily% $ecause a contin!ency occurs for which a party has

failed to plan >e#!# failure to write a will?H or $ecause a specific condition e,ists for a set period of ti"e >e#!# adverse possession of property or creation of an ease"entH failure of a court to rule on a "otion within a certain period auto"atically defeatin! the "otionH failure of a party to act on a filed co"plaint within a certain ti"e causin! dis"issal of the case?H or $ecause an e,istin! le!al relationship is invalidated% $ut the parties to that relationship still reKuire a "echanis" to distri$ute their ri!hts >e#!# under the 1nifor" 'o""ercial 'ode% where a contract for which $oth parties have perfor"ed partially is voided% the court will create a new contract $ased on the perfor"ance that has actually $een rendered and containin! reasona$le ter"s to acco""odate the e,pectations of the parties?# =ecause title to property that arises $y operation of law is usually contin!ent upon proof of certain contin!encies% and title records "ay not contain evidence of those contin!encies% le!al proceedin!s are so"eti"es reKuired to turn title that arises $y operation of law into "ar eta$le title# .a!e 9+ of 8*

Your 4rder that the $irth certificate $e deposited $y a securities inter"ediary "a es it a security# -t appears that the $irth certificate is not an actual security until it passes to a second holder% ie# fro" the issuer >State of <<<? to the Depart"ent of 'o""erce of the 1nited States# &he 1nited States uses the certificate until you decide you want to use it# You have the priority ri!ht to it as a security for the o$li!ation the 1nited States has to you# -t was issued to you# 1'' 52/*)>a?>/8? Security% e,cept as otherwise provided in Section 52/*9% "eans an o$li!ation of an issuer or a share% participation% or other interest in an issuer or in property or an enterprise of an issuerJ >i? which is represented $y a security certificate in $earer or re!istered for"% or the transfer of which "ay $e re!istered upon $oo s "aintained for that purpose $y or on $ehalf of the issuerH >ii? which is one of a class or series or $y its ter"s is divisi$le into a class or series of shares% participation% interests% or o$li!ationsH and >iii? whichJ >A? is% or is of a type% dealt in or traded on securities e,chan!es or securities "ar etsH or >=? is a "ediu" for invest"ent and $y its ter"s e,pressly provides that it is a security !overned $y this Article# Depositin! the $irth certificate >security? "a es the secretary of the treasury a securities inter"ediary# 1'' 52/*)>a?>/;? Securities inter"ediary "eans >i? a clearin! corporationJ or >ii? a person% includin! a $an or $ro er% that in the ordinary course of its $usiness "aintains securities accounts for others and is actin! in that capacity# Ge is holdin! so"ethin! of value >a financial asset 6 $irth certificate 6 security? in a securities account for you# 1'' 528*/ >a? Securities account "eans an account to which a financial asset is or "ay $e credited in accordance with an a!ree"ent under which the person "aintainin! the

account underta es to treat the person for who" the account is "aintained as entitled to e,ercise the ri!hts that co"prise the financial asset# >$? @,cept as otherwise provided in su$section >d? and >e?% a person acKuires a security entitle"ent if a securities inter"ediaryJ >/? indicates $y $oo entry that a financial asset has $een credited to the personFs securities accountH >)? receives a financial asset fro" the person or acKuires a financial asset for the person and% in either case% accepts it for credit to the personFs securities accountH or >9? $eco"es o$li!ated under other law% re!ulation% or rule to credit a financial asset to the personFs securities account# .a!e 95 of 8*

Gis acceptance of your financial asset "a es you an entitle"ent holder with a securities entitle"ent# 1'' 52/*)>a?>:? Financial asset% e,cept as otherwise provided in Section 52/*9% "eansJ >i? a securityH >ii? an o$li!ation of a person or a share% participation% or other interest in a person or in property or an enterprise of a person% which is% or is of a type% dealt in or traded on financial "ar ets% or which is reco!niNed in any area in which it is issued or dealt in as a "ediu" for invest"entH or >iii? any property that is held $y a securities inter"ediary for another person in a securities account if the securities inter"ediary has e,pressly a!reed with the other person that the property is to $e treated as a financial asset under this Article# 1'' 52/*)>a?>/+? Security entitle"ent "eans the ri!hts and property interest of an entitle"ent holder with respect to a financial asset specified in .art 8# 1'' 52/*)>a?>+? @ntitle"ent holder "eans a person identified in the records of a securities inter"ediary as the person havin! a security entitle"ent a!ainst the securities inter"ediary# 4fficial 'o""ent =ecause "any of the rules of .art 8 i"pose duties on securities inter"ediaries in favor of entitle"ent holders% the definition of entitle"ent holder is% in "ost cases% li"ited to the person specifically desi!nated as such on the records of the inter"ediary# &he last sentence of the definition covers the relatively unusual cases where a person "ay acKuire a security entitle"ent under Section 528*/ even thou!h the person "ay not $e specifically desi!nated as an entitle"ent holder on the records of the securities inter"ediary# You can !ive hi" another $ond written a!ainst the security >$ond 6 $irth certificate? he is holdin!# A pro"issory note can $e written a!ainst the $ond that is written a!ainst the security# Such a pro"issory

note would $e an order fro" the entitle"ent holder to the securities inter"ediary to use the security he is "aintainin! for a specific purpose# 1'' 52/*)>a?>5? @ntitle"ent order "eans a notification co""unicated to a securities inter"ediary directin! transfer or rede"ption of a financial asset to which the entitle"ent holder has a security entitle"ent# 1'' 528*8# Duty of Securities -nter"ediary with Respect to .ay"ents and Distri$utions# >a? a securities inter"ediary shall ta e action to o$tain a pay"ent or distri$ution "ade $y the issuer of a financial asset# A securities inter"ediary satisfies the duty ifJ .a!e 9: of 8*

>/? the securities inter"ediary acts with respect to the duty as a!reed upon $y the entitle"ent holder and the securities inter"ediaryH or >)? in the a$sence of a!ree"ent% the securities inter"ediary e,ercises due care in accordance with reasona$le co""ercial standards to atte"pt to o$tain the pay"ent or distri$ution# >$? A securities inter"ediary is o$li!ated to its entitle"ent holder for a pay"ent or distri$ution "ade $y the issuer of a financial asset if the pay"ent or distri$ution is received $y the securities inter"ediary# Since securities inter"ediaries have o$li!ations to entitle"ent holders% the securities inter"ediaries "ust have capacity to act# &hat is done under the pre"ise that a securities inter"ediary is declared in the co""ercial code to $e a purchaser for value# &he indirect holdin! syste" of the 1nited States would not function as e,pected if the securities inter"ediary did not have capacity to act# Without the ri!hts of an owner or a purchaser% the securities inter"ediary would $e powerless to act in the intended "anner# 1'' 52//3 Securities -nter"ediary as .urchaser For Value A securities inter"ediary that receives a financial asset and esta$lishes a security entitle"ent to the financial asset in favor of an entitle"ent holder is a purchaser for value of the financial asset# 4fficial 'o""ent &his section is intended to "a e e,plicit two points that% which i"plicit in other provisions% are of sufficient i"portance to the operation of the indirect holdin! syste" that they warrant e,plicit state"ent# First% it "a es clear that a securities inter"ediary that receives a financial asset and esta$lishes a security entitle"ent in respect thereof in favor of an entitle"ent holder is a purchaser of the financial asset that the securities inter"ediary received# Second% it "a es clear that $y esta$lishin! a

security entitle"ent in favor of an entitle"ent holder a securities inter"ediary !ives value for any correspondin! financial asset that the securities inter"ediary receives or acKuires fro" another party% whether the inter"ediary holds directly or indirectly# D -n "any cases a securities inter"ediary that receives a financial asset will also $e transferrin! value to the person fro" who" the financial asset was received# &hat% however% is not always the case# .ay"ent "ay occur throu!h a different syste" than settle"ent of the securities side of the transaction% or the securities "i!ht $e transferred without a correspondin! pay"ent% as when a person "oves an account fro" one securities inter"ediary to another# @ven thou!h the securities inter"ediary does not !ive value to the transferor% it does !ive value $y incurrin! o$li!ations to its own entitle"ent holder# Althou!h the !eneral definition of value in Section /2)*/>;;?>d? should $e interpreted to cover the point% this section is included to "a e this point e,plicit# .a!e ;* of 8*

-f the transferee actually is a party to a pree,istin! contract% he "ust pay it or refuse it for cause% due to so"e defect in the collection process# @ven if he is presu"ed to $e a party to a pree,istin! contract% he has the option of rene!otiatin! the ter"s of that contract% or introducin! a new contract# -f he Cust accepts the instru"ent and does not ti"ely /? pay it or )? refuse it for cause and return it% he is in default# &he reason he can refuse it for cause and return "i!ht $e that there is so"e dou$t as to whether the transferee is actually lia$le for an antecedent clai" on a pree,istin! contract# &here is also so"e dou$t that the proper procedures were used to transfer the de$t to the transferee# 4ption / reKuires the transferee to part with possessions% such as cash% di!its in a $an account% or titles to thin!s# 4ption ) reKuires the transferee to understand a !reat deal a$out court procedures and the a$ility to thin on his feet if he participates in a court proceedin!# 4ption ) is very useful to those who have learned the "echanics of the ad"inistrative courts# -t is also useful if the transferee starts an i""ediate dialo!ue with the issuer as soon as the instru"ent is delivered# &he focus for this option "ust $e on due process# -t cannot present ar!u"ents a$out the e,istence of the o$li!ation or the a"ount of the o$li!ation% $ut can present Kuestions a$out proper collection procedures# 4ption 9 reKuires nowled!e of who you are and how to enforce your ri!hts# -f the instru"ent is issued for value% it can $e accepted for value $ecause it co"es with a security interest $uilt into the instru"ent# -f the transferee accepts the instru"ent for value and returns it for value% he is ac nowled!in! the instru"ent was issued for value# Ge is infor"in! the issuer that he intends to rene!otiate the ter"s of the i"plied si"ple contract >that he is a surety? or

introduce ter"s for a new contract# 4n a new contract% the issuer can $e "ade to ac nowled!e that he is lia$le for the instru"ent he issued# -f the issuer has defenses% he will $e 4U# An issuerFs defenses nor"ally would $e the record of the antecedent clai" on the pree,istin! contract% $ut he "i!ht have to produce it# Since it is a si"ple contract% it will $e difficult to produce# &he evidence of that si"ple contract is si!ned applications for the $irth certificate% for the social security nu"$er% for licenses% for passports% for per"its% for $an accounts% etc# -f the pree,istin! clai" resulted fro" an i"plied contract that the transferee is a surety% the issuer will not want to produce it# -f the 1nited States issues and transfers an instru"ent for value% it runs the ris of havin! it returned for value% puttin! the lia$ility $ac on the 1nited States% which has no choice $ut to close the account# -t has no actual antecedent clai" $ased on a pree,istin! contract# &he issuance of an instru"ent with nothin! to $ase it on% nor"ally would $e a violation of co""ercial principles and would $e fraud% $ut under Article 9% an instru"ent can $e issued for value to avoid the nor"al penalty for fraud# -t is the transfereeFs choice as to how it will all turn out# Ge deter"ines if the instru"ent is a pro"ise or an order% if it is ne!otia$le or non2ne!otia$le% and if it is a pay"ent or a security for an antecedent clai" he has a!ainst the issuer% or if it is a security for an antecedent clai" the issuer has a!ainst hi"# Gis endorse"ent will infor" the issuer of what he intends to do# Ge has the option of acceptin! it for value and settlin! the account to close the $oo s# Ge can even send an additional pro"issory note with the return of the instru"ent he has accepted for value# -t would not hurt for hi" to do .a!e ;/ of 8*

this% so the 1nited States does not suffer $ecause of the actions of one of its a!ents# -f he refuses the instru"ent for cause and returns it% it is possi$le one of those a!ents will cause the 1nited States to suffer a financial loss# -t "i!ht $e $etter to $e seen as one who aids and assists the 1nited States in its ti"e of e"er!ency% rather than one who does not# Su$section 9 of 929*9 deals with options the transferee has when an instru"ent is issued for value and transferred for value to hi"# 1'' 929*9# Value and consideration A# An instru"ent is issued or transferred for value ifJ 9# &he instru"ent is issued or transferred as pay"ent of% or as security for% an antecedent clai" a!ainst any person% whether or not the clai" is dueH 1'' 929*9 says an instru"ent is issued or transferred for value if it is issued or transferred /? as if it were a pay"ent of% or )? as if it were a security for% an antecedent clai" a!ainst any personH and it does not "atter if the clai" is due# &he antecedent clai" a!ainst any person can $e and usually is% the clai" international lenders have a!ainst the 1nited States# 1#S# citiNens are sureties for that de$t% and the 1nited States is the principal# When a surety is called upon to pay his principalFs de$t% a de"and for pay"ent has already $een "ade of the principal# For whatever reason the principal did not pay when the de"and was "ade% so the attention then turns to the sureties# &he sureties are reKuired to pay i""ediately# Since 1#S# citiNens have not e,pressly si!ned on as sureties for the 1nited States% de"and can only $e "ade for value# &he 1nited States actin! for its creditors% can "a e de"ands for value% ie# for loans# When the surety >transferee? receives a de"and for value% the de"and needs an endorse"ent to "a e it ne!otia$le# &he issuer is loo in! for the transferee to supply the

endorse"ent# &hat can $e a $lan endorse"ent or a Kualified endorse"ent# &he choice is yours# &he instru"ent can $e issued or transferred for value as a pay"ent or as a security# &he endorser decides which it is# &he antecedent clai" can $e a!ainst any person% not necessarily a!ainst the transferee# &hat any person can $e the 1nited States for the national de$t if the transferee is a surety for the 1nited States# -f the transferee a!rees to $e surety% he has an o$li!ation to pay the instru"ent i""ediately# -f the transferee !ives the instru"ent to the "an who represents hi"% he can use the co""ercial rules to A;V the instru"ent and return it for value and for closure of the account# @ither way% the transferee has an o$li!ation to do so"ethin! with the instru"ent# Iivin! value fro" /2)*/ is not the sa"e as transferrin! for value fro" 929*9# &he transferor >issuer? in 9*9 usually wants to !et a valua$le consideration $ac for an instru"ent he issues for value% and he wants a new contract on which he or the person he represents is the creditor# An issuer for value has no pree,istin! contract and no antecedent clai" that authoriNes hi" to issue an instru"ent% so he issues it for value and delivers it to so"eone >the tar!et? with the hope that the receiver will accept it without conditions# &he one who receives an instru"ent issued for value does not have to accept the lia$ility attached to it% unless he has an o$li!ation to .a!e ;) of 8*

accept the lia$ility# -f there is no o$li!ation% the transferee can view the instru"ent as a pay"ent% and return it with a proper endorse"ent to pay the instru"ent and to close the account# &he instru"ent pays the instru"entT &he issuer pays the issuerT 'onfusin!% isnFt it? &he instru"ent can also $e an offer to contract% and no one is reKuired to contract if he does not choose to do so# &he presu"ption that everyone is o$li!ated to enter these contracts is $ased on an i"plied si"ple contract# &hat is not a very stron! position# When an instru"ent issued for value is received and retained% it is accepted as thou!h the receiver has !iven it a $lan endorse"ent% and the transfer of lia$ility has $een successful# A $lan endorse"ent waives all the defects% and the "ain defect in an instru"ent issued for value is that there is no security attached to it# -f it were not for the inherent security interest in the instru"ent itself% the whole proCect would $e fraud# &he issuer is not !ivin! valueH he is see in! value# &he issuer is not !ivin! considerationH he is see in! consideration# &hese a$nor"alities can $e cured if the transferee !ives it a Kualified endorse"ent as a pay"ent and returns the pay"ent for closure of the account# After acceptance throu!h a $lan endorse"ent% the issuerFs consideration is presu"ed% and the endorser is lia$le on the instru"ent# A co""it"ent >i"plied or e,press? $y the transferee >to ta e on the lia$ility? throu!h a !eneral acceptance would $e a valua$le consideration on his part% and would result in a $indin! contract# Ge is then o$li!ated on the instru"ent to "a e i""ediate pay"ent# Su$section ; of 929*9 deals with ne!otia$le instru"ents# &he issuer is see in! a ne!otia$le instru"ent in return for the instru"ent he is transferrin! to the transferee# -n "ost cases% the transferee does not now that the

instru"ent itself is !oin! to $e "ade ne!otia$le# &he transferee is the only one who can decide what endorse"ent is !oin! to $e one the instru"ent# 1'' 929*9# Value and consideration A# An instru"ent is issued or transferred for value ifJ ;# &he instru"ent is issued or transferred in e,chan!e for a ne!otia$le instru"entH or 1'' 929*9>A?>;? says an instru"ent is issued or transferred for value if it is issued or transferred in e,chan!e for a ne!otia$le instru"ent# &he issuer wants to e,chan!e his instru"ent for a ne!otia$le instru"ent# You can send hi" a chec % which is ne!otia$le# You can retain his instru"ent% which is an acceptance waivin! the defects and !ivin! it a $lan endorse"ent% which "a es the instru"ent ne!otia$le# You can return his instru"ent as a pay"ent with a proper endorse"ent% which "a es it ne!otia$le# &he issuer !ets what he wants% sort of# At the ti"e an instru"ent is issued for value% it has no value until the transferee endorses it# When you endorse it with a $lan endorse"ent $y "ere acceptance% you have turned it into a ne!otia$le instru"ent% and you are the new issuer# &he initial issuer now has a security interest in your ne!otia$le instru"ent% and he can ne!otiate .a!e ;9 of 8*

it for pay"ent# Ge is entitled to enforce the instru"ent% instead of you# When an instru"ent is Cust issued >chec or pro"issory note?% it has value $ecause it contains an order or a pro"ise and is $ac ed $y a security% so"e sort of pro"ise# 'hec s are $ac ed $y di!its in an account that represent Federal Reserve 7otes% which are o$li!ations of the 1nited States# .ro"issory notes are $ac $y the pro"ise of future la$or# -n the case of a chec % the value is the pro"ise on the part of the issuer and the order to a third party to pay it# -f you cannot tell on the face of the instru"ent if it is a pro"ise or an order% it can $e treated as either# When the payee receives a chec % it is a pro"ise# When he ne!otiates it $y endorsin! it and deliverin! to a $an % it is an order# -f the chec is ne!otiated at the $an on which it is written% and there are sufficient di!its in the account to cover the chec % that $an can ta e the instru"ent% and does not have to ta e it for value# -f the chec is ne!otiated at a different $an % the $an can ta e the instru"ent for value% $ecause it does not now if the chec is !ood# -t does not now if it can collect on the chec # -f the $an !ives its depositor cash i""ediately upon deposit% the $an "ay not $e a$le to collect fro" the "a erFs $an # -t would then have to retrieve the value of the chec fro" its depositor# &o avoid such pro$le"s% the $an will usually !ive notice that the funds will not $e availa$le to its depositor until the $an has collected on the chec fro" the "a erFs $an # -n that case% the $an would $e ta in! the instru"ent for value# -t would $e see in! value% and would not $e "a in! a co""it"ent to honor the chec unconditionally# -f so"eone Cust accepts an instru"ent issued $y an a!ent of the 1nited States for value and does not i""ediately pay it% he is in default# -f he

were to accept it for value and return it to the issuerFs $an er >Secretary of the &reasury? with a Kualified endorse"ent >not a $lan endorse"ent?% the issuer would have no recourse a!ainst the one who endorsed and returned the instru"ent# &he Kualified endorse"ent is 0 Accepted for Value @,e"pt fro" Bevy si!nature Date <<<< @,e"ption -dentification 7u"$er /)9;83+5: Deposit to the 1#S# &reasury and char!e the sa"e to <<<<<<<<< # &he value of the instru"ent can $e char!ed to A4G7 G D4@ /)92;823+5: if it is the $irth certificate# &he value can $e char!ed to a cler of court for case V <<<<# -t can $e char!ed to the 'o""issioner of -nternal Revenue Service for account V /)9;82 3+5: if it is a ta, $ill# @lectric $ills have the $an routin! nu"$ers and a"ount of the voucher printed in "a!netic in ri!ht on the $otto" of the $ills# &he utility co"panies are actually sendin! you the voucher to pay the $ill with the state"ent every "onth# @ven so% they "i!ht decide to turn off your service if you do not send the" a than you chec in addition to returnin! the voucher with your proper endorse"ent# -RS also sends the voucher on the final de"and $efore lien or levy# A voucher can $e a written record of e,penditure% dis$urse"ent% or co"pleted transaction% or it can $e a written authoriNation or certificate% especially one e,chan!ea$le for cash or representin! a credit a!ainst future e,penditures# -t would need to $e endorsed $efore su$"ittin! it as a credit# A $lan endorse"ent puts the lia$ility on the endorser# A Kualified endorse"ent puts the lia$ility on the issuer# 1ntil so"eone !ives an endorse"ent% an instru"ent issued for value is not ne!otia$le# -f the transferee "a es the instru"ent ne!otia$le as a security with a .a!e ;; of 8*

$lan endorse"ent% the transferee "ust pay it# Ge can !ive it a Kualified endorse"ent $y acceptin! it for value% to "a e it a pay"ent# When it is su$seKuently presented to a third party >$an er?% it is an order fro" the "a er to the third party to pay it# &he instru"ent issued for value $eco"es the very pay"ent that pays it# -f the transferee !ives it a $lan endorse"ent >$y his silence? and does not return it with his chec % he "a es the instru"ent his pro"ise and also "a es the instru"ent ne!otia$le as a security# Whoever has a ri!ht to enforce it can ne!otiate it# -f the transferee has no idea what to do with it% he "i!ht inadvertently "a e it a security and co""it hi"self to pay it# -t is his choice# &here is a price for i!norance# -!norance is not stupidityH it is lac of nowled!e# -f an instru"ent is issued and transferred for value% the person who is the transferee can "a e it the issuerFs note >pro"ise? and the transfereeFs draft >order?# &he transferee can $e the one entitled to enforce the instru"ent if he !ives it a proper endorse"ent# -f he does not% the transferor is the person entitled to enforce the instru"ent% and he will enforce it# A case desi!ned to seiNe property of a 1#S# citiNen is called a penal action# -t is not civil% and it is not cri"inal# -t is $ased on violation of statutes that were i"ple"ented to facilitate collections fro" 1#S# citiNens to pay the national de$t# Bi$els of infor"ation are used to o$tain arrest warrants fro" the cler s of e,ecutive courts so the proceedin! can $e co""enced# &hese are not casesH they are proceedin!s# &he $oo 9: -RS Ar!u"ents that DonFt Wor and Why e,plains this process in "uch "ore detail# -t can $e found on www#lulu#co"# When an indict"ent >true $ill?% which is actually a li$el of infor"ation% or other $ill is presented to a 1#S# citiNen $y the

1nited States% an o$li!ation on a pree,istin! clai" a!ainst the 1nited States >national de$t? is $ein! transferred to the transferee >surety 2 defendant or de$tor?# &he $ill is issued for value# &he endorser is e,pected to create the "oney% $oth for the pay"ent or for the security# &he 1nited States wants the 1#S# citiNen to supply the value# &here is no actual security% antecedent clai"% or pree,istin! contract $ehind it# 7o "oney is needed if the transferee treats it as a pay"ent and sends it to the issuerFs $an er with a Kualified endorse"ent# &his puts the endorser in the driverFs seat and "a es hi" the party entitled to enforce the instru"ent# 4n the other hand% no "oney is needed if the transferee treats it as a security $y !ivin! it a $lan endorse"ent and eepin! >holdin!? it# &his puts the issuer or his principal in the driverFs seat and entitles the principal to enforce the instru"ent# Since /:99% the only "oney in circulation is "oney of account that is created on de"and at the ti"e it is needed to satisfy an i""ediate need# -f a $ill is issued with nothin! to secure it% it has to $e issued for value% $ecause the "oney to pay it >pro"ise to $ac it? has not $een created# -f the transferee receives a $ill and does not pay it i""ediately% he is in default# So"e say the reason it cannot $e paid is $ecause no chec to pay it was included with the $ill# &he instru"ent is the chec if it is ta en as a pay"ent% "ade ne!otia$le with a proper endorse"ent% and turned into a draft >issuerFs order?# -f the transferee accepts it for value and returns it to the issuerFs $an er >Secretary of the &reasury? as pay"ent to $alance the $oo s and close the account% he is not in default# Since it was issued for value% and transferred for value% .a!e ;8 of 8*

it can $e accepted for value# &o $e a holder in due court% the endorser "ust ta e >accept? the instru"ent for value# See 929*)# Golder in due course a$ove# 1nder Article 9% if an instru"ent is issued for value% it is also issued for consideration# &he issuer either !ives the consideration throu!h the instru"ent% or issues the instru"ent for value to receive the consideration fro" the transferee# When an instru"ent is accepted >ta en? for value% it can $e returned to pay the $ill% and the transaction is finished# All the reKuired $oo $oo eepin! entries for an accrual

eepin! syste" can $e "ade $ased on the offer for value and the acceptance eepin! cannot $e done if the $ill is not returned with an eeper has an

for value# &his $oo

appropriate endorse"ent thou!h# -f the $ill is not returned% the $oo

un$alanced account# All accounts "ust $e closed at the end of the $usiness day in an accrual syste"# An un$alanced account necessitates entries into the accounts paya$le and accounts receiva$le led!ers# -f you are the cause of a paya$le% you are also responsi$le for the receiva$le% so your retention of the instru"ent is dee"ed to $e a $lan endorse"ent# -f you do not $alance that account% an e,ecutive court will do it for you# &hat usually results in a statutory penalty $ein! applied a!ainst you throu!h the 1#S# citiNen you represent# Su$section 8 of 929*9 deals with irrevoca$le o$li!ations# &he transferee is e,pected to enter that o$li!ation voluntarily and ta e on the lia$ility of $oth the instru"ent and the pay"ent needed on the national de$t# 1'' 929*9# Value and consideration A# An instru"ent is issued or transferred for value ifJ 8# &he instru"ent is issued or transferred in e,chan!e for the incurrin! of an irrevoca$le o$li!ation to a third party $y the person ta in! the instru"ent# An instru"ent can $e issued or

transferred in e,chan!e for the incurrin! of an irrevoca$le o$li!ation to a third party $y the person ta in! the instru"ent# &his is a very easy to understand section# -f the issuer >1nited States? issues or transfers an instru"ent for value on $ehalf of a third party >international creditors?% and if he >1nited States? is fulfillin! a pro"ise >reor!aniNation plan? on an antecedent clai" >national de$t? the third party >international creditors? has a!ainst the issuer >1nited States?% his >1nited States? purpose is to e,chan!e the instru"ent for an irrevoca$le o$li!ation >the 1#S# citiNenFs? to that third party >international creditors? $y the person ta in! the instru"ent >1#S# citiNen?# -f the transferee >1#S# citiNen? has an o$li!ation to the issuer >1nited States?% and the issuer >1nited States? can provide the third party >international creditors? with an irrevoca$le o$li!ation $y the transferee >1#S# citiNen?% the issuer >1nited States? has a defense $ecause of the !ivin! of value >1#S# citiNenFs irrevoca$le o$li!ation? to the third party >international creditors?# &he transfereeFs >1#S# citiNen? o$li!ation >value? to the issuer >1nited States? is transferred to the third party >international creditors? as value >pay"ent on the national de$t?# &he issuer >1nited States? is entitled to enforce an instru"ent >pled!e? it supposedly previously received fro" the 1#S# citiNen# &he transferee on an instru"ent issued and transferred for value is the one who decides if .a!e ;3 of 8*

the instru"ent is a pay"ent or a security# &he definition of ne!otia$le instru"ent says% a person entitled to enforce the instru"ent "ay treat it as either# 1'' 92/*;# 7e!otia$le instru"ent @# An instru"ent is a OnoteO if it is a pro"ise and is a OdraftO if it is an order# -f an instru"ent falls within the definition of $oth OnoteO and OdraftO% a person entitled to enforce the instru"ent "ay treat it as either# When an issuer of a ne!otia$le instru"ent delivers it to a 1#S# citiNen represented $y a nowled!ea$le "an% it is the transferee >1#S# citiNen? who is entitled to enforce the instru"ent# Since he has $een as ed to ta e on the lia$ility% he is the one who decides if the instru"ent is a pro"ise >note? or an order >draft?# Ge is the one who has the ri!ht to endorse the instru"ent# An issuer of an instru"ent for value is !a"$lin! when he delivers an instru"ent to a transferee# -f it !ets in the hands of a nowled!ea$le "an% the issuer "i!ht end up $ein! the lia$le party instead of the transferee# Since a!ents of the 1nited States who have authority to issue and transfer instru"ents for value are $onded% their issuance of these $ills will not affect their personal holdin!sH $ut if a nowled!ea$le "an accepts it for value and returns it for closure and settle"ent of the account% and the a!ent is ne!li!ent or a$usive% his $ond "ay not cover his willful default# Gis only recourse is to try to !et you to chan!e your "ind and waive your settle"ent# -f you do not really now what you have done% it will $e easy for hi" to help you waive your settle"ent and revert $ac to $ein! lia$le on the instru"ent that you turned into a ne!otia$le instru"ent# &hat instru"ent >as a security? can then $e transferred to a third party as a for" of satisfaction $y the 1nited States% usin! you as the responsi$le party# An instru"ent that is a pro"ise or an order can $e

issued for value $y an a!ency or instru"entality of the 1nited States% an individual% or a corporation and delivered to another person% who is presu"ed to have previously "ade a pled!e to $e lia$le for such instru"ents# -t is not the instru"ent that deter"ines if it is a pro"ise or an order% and a pay"ent or a security# Whether the instru"ent is a pro"ise or an order is up to the one who endorses it# Whether it is !oin! to $e used as a pay"ent on a pree,istin! clai"% or as a security for a pree,istin! clai" is also up to the one who endorses it# -t is !oin! to $e ne!otia$le% $ut when it is issued% it is not nown who is !oin! to $e the lia$le party on it when it is ne!otiated# @ndorsin! a chec issued as a pro"ise and as an order is not done for value# 4nly instru"ents that are issued and transferred for value can $e accepted for value# A chec does not fall into that cate!ory% $ut the way it is endorsed does deter"ine if the ne!otiation of the chec will $e a ta,a$le event to the endorser% or not# -f it is endorsed in $lan and deposited anywhere in the 1nited States% a ta, is owed# &he person receivin! it creates a record of the creation of a new security at the $an where it was deposited# &hat record confir"s the person "a in! the deposit has realiNed an undenia$le ascension to wealth over which he has control% and that transaction is a ta,a$le event# A $lan endorse"ent is one that only e,hi$its the si!nature of the endorser and does not contain special ter"s# An instru"ent with a $lan endorse"ent $eco"es a $earer instru"ent and can $e enforced $y anyone who has it# -f it is !iven to a $an throu!h a deposit% the $an $eco"es the person entitled to enforce the .a!e ;+ of 8*

instru"ent# 1sin! a chec as an e,a"ple% if it is endorsed in $lan and deposited% its value should $e included as inco"e on a ta, return# &hat sa"e chec could $e endorsed with a Kualified endorse"ent indicatin! the chec is e,chan!ed for credit on account or is e,chan!ed for Federal Reserve 7otes that have no redee"a$le value accordin! to /) 1S' ;//# &he endorse"ent words are chosen $y the endorser# &hey "i!ht $e 0 Deposited as credit on account or e,chan!ed for Federal Reserve 7otes with no redee"a$le value# -f the $an has a pro$le" with that wordin!% it "i!ht $e chan!ed to 0 Deposited as credit on account or e,chan!ed for Federal Reserve 7otes pursuant to /) 1S' ;// as a"ended# &he a"end"ent that is i"portant is the one that re"oved the redee"a$ility fro" the statute# -nterest in .roperty Since the 1nited States "oney syste" is $ased on interest in property rather than su$stance% the co""ercial !oal is to !et a security interest in so"ethin! that has valueH not to ta e possession of a thin!# 4wnership carries lia$ilities# -nterest in property does not# -t is "ore efficient co""ercially to have a security interest in property than to own it# A security interest is not !iven unless there is an o$li!ation that necessitates such an action# &hat "eans there is a de$t involved when there is a security interest# When one applies for credit% he si"ultaneously !ives a security interest in a thin! that has value# &he thin! can $e a title to land or a car% title to a deposit account at a $an % a pro"ise of future perfor"ance% or a co""it"ent on future la$or# &he security for the credit can $e i"plied% and constitutes consideration# &his i"plies the e,istence of a contract% even thou!h it "ay $e a si"ple contract and you "ay not have intended to enter a contract# Default on i"plied contracts can result in

conseKuences anywhere fro" seiNure of pled!ed property >titles or even a $ody?% to ne!ative infor"ation on a credit report# &he $lan endorse"ent of a transferee% who does not do anythin! with an instru"ent that was issued or transferred to hi" for value% is assu"ed# At so"e point he is a holder and is lia$le% $ut the lia$ility is not enforcea$le until there is an endorse"ent% which can $e on another piece of paper that is attached $y a connective note% or can Cust $e presu"ed accordin! to co""ercial law# So"eone other than the transferee can even si!n it on $ehalf of the transferee# &his is not done unless the transferee is ar!uin! or continually o$Cectin! to $ein! $illed# &echnically% the transferee is in default% so his ne!li!ence or diso$edience can $e cured $y so"eone else% $ut there is usually an additional price to pay at that point# An actual endorse"ent that fits the co""ercial reKuire"ents "i!ht even $e on a paper used in a penal action proceedin!% called &er"s and 'onditions of Release# -t is a special $ond used in penal action courts when the defendant still refuses to ta e responsi$ility to close the account# 1'' 92)*9 &ransfer of instru"entH ri!hts acKuired $y transfer '# 1nless otherwise a!reed% if an instru"ent is transferred for value and the transferee does not $eco"e a holder $ecause of lac of indorse"ent $y the transferor% the transferee has a specifically enforcea$le ri!ht to the unKualified indorse"ent of the transferor% $ut ne!otiation of the instru"ent does not occur until the indorse"ent is "ade# .a!e ;5 of 8*

&his is a confusin! section of the co""ercial code# &he positions of the transferor and the transferee switch when the ori!inal transferee fails to respond# &he "ere act of retainin! an instru"ent i"plies its !eneral acceptance and its reissuance with a $lan endorse"ent# &his turns the ta$les# -t turns the ori!inal transferee into the new issuerLtransferor and the Ma er or Drawer on the instru"ent# &he ori!inal issuer $eco"es the transferee# For e,a"ple accordin! to 92)*9% the 1#S# citiNen who received the instru"ent and was ori!inally the transferee with an auto"atic security interest in the instru"ent that was issued and transferred for value% $eco"es the new issuer and the transferor if he Cust receives it and retains it# &he 1nited States a!ent that ori!inally issued it for value and had the lia$ility to pay it% $eco"es the new transferee with a security interest in the instru"ent# &he new transferee has a specifically enforcea$le ri!ht to the unKualified indorse"ent of the transferor# All the 1nited States has to do is !et the 1#S# citiNen to si!n so"ethin!% anythin!% that is related to that instru"ent# -t could $e the !reen card on a certified "ail envelope% or a pay"ent a!ree"ent with the -RS% or a &er"s and 'onditions of Release $ond in an e,ecutive court proceedin!# Settle"ent Gandlin! ne!otia$le instru"ents is Cust the first step of settlin! co""ercial accounts in the 1nited States# Article 9 of the co""ercial code is the !uide$oo for dealin! with ne!otia$le instru"ents of all inds# Re!istration and $ondin! throu!h the Secretary of the &reasury as your fiduciary and securities inter"ediary and settin! off co""ercial char!es is needed to actually settle the accounts# Direction for re!isterin! a security interest is found in Article : and the duties and ri!hts of parties to securities are covered in Article 5# Unowin! what

A;V "eans is Cust the $e!innin!# MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM MM A;V Recap Acceptance for value is purely a co""ercial re"edy# -t is not the only re"edy# Acceptance for value is $ased on contract law and international law# @ven si"ple contracts "ust have consideration fro" $oth sides to $e valid# =an ruptcy law and insolvency law overshadow all co""ercial de$ts in the 1nited States# &he .resident is the only officer of the 1nited States who has a constitutionally reKuired oath# .eople are $eneficiaries of the trust created $y the 'onstitution# &he .resident is the e,ecutive trustee of that trust# Acceptance for value is different than acceptance# Value can $e /? A co""it"ent to e,tend credit )? As security for satisfaction of a pree,istin! clai" 9? Acceptance of deliver on a pree,istin! contract ;? Any consideration sufficient to support a si"ple contract Mere acceptance waives defects# Acceptin! an instru"ent for value !ives the acceptor options# .a!e ;: of 8*

&he issuer of an instru"ent has the lia$ility on the instru"ent# An instru"ent issued or transferred for value is /? for a pro"ise of perfor"ance% to the e,tent the pro"ise has $een perfor"edH )? to acKuire a security interest or other lien in the instru"ent other than a lien o$tained $y Cudicial proceedin!H 9? as pay"ent of% or as security for% an antecedent clai" a!ainst any person% whether or not the clai" is dueH ;? in e,chan!e for a ne!otia$le instru"entH or 8? in e,chan!e for the incurrin! of an irrevoca$le o$li!ation to a third party $y the person ta in! the instru"ent# 4ne of an acceptorFs options is to accept for value and return for value to the issuerFs $an er# Article 5 of the co""ercial code directs the handlin! of securities in the 1nited States# A securities inter"ediary has o$li!ations to entitle"ent holders# 'onsideration "eans any consideration sufficient to support a si"ple contract# An issuer of an instru"ent for value has no defense to the o$li!ation to pay the instru"ent# &he issuer has a defense if perfor"ance of the pro"ise is due and the pro"ise has not $een perfor"ed# An instru"ent issued or transferred for value is also issued for consideration# A person !ives value to receive ri!hts# Ge can acKuire ri!hts 0 >a? -n return for a $indin! co""it"ent to e,tend credit or for the e,tension of i""ediately credit >$? As security for or in total or partial satisfaction of a pree,istin! clai"H or >c? =y acceptin! delivery pursuant to a pree,istin! contract for purchaseH or >d? Ienerally% in return for any consideration sufficient to support a si"ple contract# Acceptance for value is the sa"e as ta en for value# -nstru"ents issued for value have no value in the" until they are endorsed# A $lan endorse"ent "a es the endorser lia$le on the instru"ent# A proper Kualified endorse"ent can "a e an endorser a holder in due

course# An endorser is not reKuired to ta e on the lia$ility of the instru"ent# An endorser has the option of li"itin! or precludin! recourse a!ainst hi"self# An endorser decides if an instru"ent is a pro"ise or an order# An endorser decides if an instru"ent is ne!otia$le or non2ne!otia$le# An endorser decides if an instru"ent is a pay"ent or a security# -nterest in property esta$lishes a clai" that "ay $e enforcea$le $y a holder in due course# -nterest in property does not carry lia$ilities of ownership of property# .a!e 8* of 8*