Texas:This is a good common sense result. If the instrument is sold to an entity in California and delivered there, then California law determines that transaction. When subsequently sold to a Minnesota investor, then Minnesota law would control. Why would Texas law determine the negotiation of an instrument by a California entity to a Minnesota entity?
I think that you are muddling several choice of law concepts.
Historically, the place a contract was made controlled the law by which a contract would be interpretted, though this could be displaced by the agreement of the parties to another jurisdiction with an actual interest in the instrument.
So, for example, a promissory note executed in Texas would usually, by default, be interpretted under Texas law, absent some other contrary provisions within the instrument itself.
The mortgage, deed of trust or other mortgage security instrument is another separate instrument which is executed usually concurrently to and in the same place as the promissory note. But the mortgage, deed of trust or other mortgage security instrument is distinguished in that it usually secures a piece of real property which has a location fixed in a particular jurisdiction.
Now the jurisdiction with law controlling the interpretation of the promissory note might or might not be the same as the jurisdiction giving the law to be used in interpretation of the mortgage, deed of trust or other mortgage security instrument.
Most standard FNMA/FHLMC mortgages, deeds of trust or other mortgage security instruments will include some language to the effect "Governing Law ... This security instrument shall be governed by federal law and the law of the jurisdiction where the Property is located." By contrast, most standard FNMA/FHLMC promissory notes LACK a similar choice of law provision. (Take out your instruments and READ THEM. I think you will find this to be the case!)
Imagine a scenario where a mortgage loan securing a property located in Texarkana, Texas, was actually closed at a title company with offices situated on the other side of State Line Boulevard in Texarkana, Arkansas. Under such circumstances, the promissory note might be controlled by Arkansas law (the place of execution), while the deed of trust would be controlled by Texas law (due to the express provision in the instrument).
Even so, this usually hardly matters, as the Uniform Commerical Code IS sufficiently uniform nationally as to both its provisions and the cases interpretting those provisions that no one would tend to raise the issue and, if raised, it would usually NOT alter the outcome of a decision.
What you seem to be missing here is that simply because the law to be used to interpret the promissory note and/or the law to be used to interpret and enforce the mortgage, deed of trust or other mortgage secrity instrument is FIXED at closing, this is NOT the case when an owner of the promissory note negotiates the promissory note to another entity.
The negotiation of the note is a separate commerical transaction. True, the law of negotiation is also controlled by the UCC. But since negotition requires both indorsement and delivery, for well over a century courts almost everywhere recognize that it is the delivery of the instrument which completes the negotiation and thus completes the transaction.
For this reason, courts have held that the law of the place of delivery controls the interpretation of the negotiation itself.
This does not alter the fact that the terms of the instrument will ontinue to be controlled by the law of the place made.
Although this is how the law is conceived and applied, as a practical matter, almost all large institutional investors use institutional custodians situated in New York State as a repository for the instruments. So even as a financial institution in California sells the instrument to a Minnesota institution, what really happens is the note is delivered from the New York vault of one institutional custodian to another across the street or even a different subvault of the very same bank!
Now this anomaly as to choice of law as to the negotiation turns out to be VERY IMPORTANT, because the various states have VERY DIFFERENT RULES relating to the use of allonges!
In New York, an allonge cannot be used unless the space on the instrument itself is already used up and there is no room for an additional indorsement thereon, which is almost NEVER the case with mortgage promissory notes!
The provisions of UCC 9 you cite, while interesting, turn out to be almost totally irrelevant and will not get the mortgage investor or servicer past the simple fact that the place of delivery is going to control the negotiation. The specification in the security instrument will usually control the interpretation of the security instrument and the place of making will usually control the promissory note itself.
Interestingly, another provision of the UCC which is often cited by mortgage investors to slip out from under the negotiation requirements -- provisions pertaining to the rights of a transferee -- do not help the mortgage plaintiff either. If the plaintiff is relying upon its role as transferee, it becomes the transferee upon delivery. Whoops! New York law would usually apply to this, as well.
I would add that this section of the UCC has been misunderstood and misused by the mortgage industry and was misapplied by the Florida courts in the Taylor case. Unfortunately, the appellant in Taylor never made the argument that it was New York law that should control the indorsement and delivery. Oh, well!
Please bear in mind that I am NOT an attorney and this is NOT LEGAL ADVICE!