promissory note with deed of assignment

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A Deed of Trust can be Assigned Apart from the Note, and that often occurs just before a foreclosure. But What Does That Mean? Not Much, the Deed of Trust is Inseparable from the Note

Notes and Deeds of Trust are often assigned to different parties. The question posed is what happens if the Deed of Trust alone is assigned ? A typical assignment of the Deed of Trust alone will purport to assign “all beneficial interest under that certain Deed of Trust dated xyz..” But the long-established law in California is clear: the beneficial interest under a Deed of Trust is held by the party who holds the Note (or is entitled to enforce it), without regard to the assignment of the Deed of Trust .

The subject was again addressed by the California Courts in Domarad v. Fisher & Burke, Inc. (1969) 270 Cal. App. 2d 543 ). The Court noted that a deed of trust is a mere incident of the debt it secures and that an assignment of the debt carries with it the security. “The deed of trust is inseparable from the debt and always abides with the debt, and it has no market or ascertainable value, apart from the obligation it secures and that a deed of trust has no assignable quality independent of the debt, it may not be assigned or transferred apart from the debt, and an attempt to assign the deed of trust without a transfer of the debt is without effect. (emph. added)”

In Stockwell v. Barnum ((1908) 7 Cal. App. 413) the Court stated that this Code “is wholly foreign to deeds of trust, which, instead of creating a lien only, as in the case of a mortgage, passes the legal title to the trustee, thus enabling him in executing the trust to transfer to the purchaser a marketable record title. It is immaterial who holds the note. The transferee of a negotiable promissory note, payment of which is secured by a deed of trust whereby the title to the property and power of sale in case of default is vested in a third party as trustee, is not an incumbrancer to whom power of sale is given…” Stockwell @ 417.

And more recently “it has been established since 1908 that this statutory requirement that an assignment of the beneficial interest in a debt secured by real property must be recorded in order for the assignee to exercise the power of sale applies only to a mortgage and not to a deed of trust.” ( Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118 , 122.)

Why is that? There is a technical difference between the two security instruments. The mortgage only involves two parties –the borrower who grants the power of sale to the lender, and the lender who then holds the beneficial interest in the mortgage plus the power of sale. A deed of trust, on the other hand, involves three parties: the borrower, the lender, and the trustee who is granted conditional title to the encumbered property as well as the power of sale.

Thus, the deed of trust may thus be assigned one or multiple times over the life of the loan it secures. But if the borrower defaults on the loan, only the current beneficiary may direct the trustee to undertake the nonjudicial foreclosure process. “[O]nly the ‘true owner’ or ‘beneficial holder’ of a Deed of Trust can bring to completion a nonjudicial foreclosure under California law.” Yvanova v. New Century Mortgage (62 Cal. 4th 919) (2016)

An Alternative The Commercial Code also provides a mechanism for recording an assignment of the security if there has been an off-record transfer of the note but no recorded assignment of the deed of trust or mortgage. The buyer of the note can record a copy of the transfer agreement whereby the note was acquired, together with a sworn statement that a default has occurred, and in that event may proceed with a nonjudicial foreclosure. ( Cal. Com. Code, § 9607, subd. (b))

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• The Legally Invalid Assignment Defense to Foreclosure

People who are facing the possibility of a foreclosure on their home may want to investigate the history of their mortgage. If the assignment to the foreclosing party is not valid, this may be a viable defense to a foreclosure. In some states, you can demand that the foreclosing party produce a written assignment of the mortgage. If it does not have an assignment or failed to record it as required by state law, this may result in the dismissal of the foreclosure action. Recording rules may require that the foreclosing party record the assignment before starting the foreclosure.

Courts in other states are more lenient in their review of assignments. Since the mortgage is closely associated with the promissory note, the foreclosing party may be allowed to enforce the promissory note even if it cannot produce a valid assignment of the mortgage. You should seek legal guidance in your state to determine whether this defense may be viable.

Homeowners who believe that they may have a defense based on an invalid assignment may wish to consult with a knowledgeable foreclosure lawyer, since this defense can become complicated. Justia offers a lawyer directory to simplify researching, comparing, and contacting attorneys who fit your legal needs.

The Relationship Between Mortgages and Promissory Notes

The mortgage and the promissory note are the two key documents attached to a loan for buying a home. Some purchases involve a deed of trust rather than a mortgage, but they are functionally equivalent in this context. While the promissory note is your guarantee to repay the loan, the mortgage gives the lender the right to foreclose if you do not repay the loan as arranged. The mortgage also identifies the property that will serve as security for the loan. Thus, the two documents work together in establishing the lender’s rights.

The Role of Mortgage Assignments in Loan Transfers

A bank or other lender often will sell a mortgage to another party, which will collect payments and pursue the homeowner if they fail to keep up with the mortgage. To transfer the loan, the original lender will endorse the promissory note to the new owner of the mortgage. This is because collection efforts hinge on owning the promissory note. If the foreclosing party cannot produce the promissory note, the homeowner will have a defense to the foreclosure.

Meanwhile, the new owner will record the assignment of the mortgage. This includes transferring the right to foreclose, as provided by the mortgage, to the new owner. The assignment will provide the amount of the mortgage and the names of the homeowner, the original lender, and the new owner of the mortgage. It also will contain a description of the property attached to the mortgage and the date when the mortgage took effect.

An invalid assignment defense may only be a temporary solution until the new owner records an assignment in their name.

The mortgage industry uses a tool known as the Mortgage Electronic Registration System (MERS) to keep track of assignments. MERS may be a nominee for the lender, or it may receive the mortgage as an assignment. If MERS is the current assignee, it cannot pursue a foreclosure because it does not have an interest in the promissory note. MERS simply serves as an agent for the current owner of the mortgage and assists in creating a record for transfers of the mortgage. This allows banks to more easily transfer loans among them without creating a new assignment each time. You may have a defense against a foreclosure action if MERS is listed as the owner of the mortgage. However, this likely will be only a temporary solution until the new owner records an assignment in their name.

Last reviewed October 2023

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Can You Assign a Promissory Note

“Can you assign a promissory note?” is a request you need to make to someone who promises to pay you a certain amount of money at a later date. 3 min read updated on February 01, 2023

“Can you assign a promissory note?” is a request you need to make to someone who promises to pay you a certain amount of money at a later date. While it is not as formal as a contract, a promissory note is legally binding, meaning that the promisee is entitled to take legal action if the promisor fails to make the specified payment.

What Is a Promissory Note?

A promissory note refers to a written document stating that a certain amount of money will be paid to someone by a specified date. Generally, it is not necessary for the note to be recorded officially. The borrower is required to sign the note, but the lender may choose not to sign it. A promissory note is a legally binding note that is often used between parties who know each other personally, and it is totally customizable.

Using a Promissory Note to Pledge Collateral

Collateral refers to property pledged to ensure that a loan will be repaid. Take the following measures when collateral is pledged with a promissory note:

• If you are the lender, make sure the borrower upholds the terms stated in the promissory note. Also, the interest specified in the note must be legal.
• If you are the borrower, issue the promissory note to the institution or individual that needs it to obtain a loan for you. This should be done with an addendum stating the assignment of your rights or the completion of the assignment paperwork required by the lender.

Theoretically, a lender will only be willing to accept a promissory note as a form of collateral if you have satisfied at least part of the promise stated in the note. This means that you must have already paid back some money in accordance with the terms of your promissory note.

Using an Assignment of Deed of Trust

The purpose of a trust deed investment is to generate a greater return on your money on top of the amount you will otherwise receive from a certificate of deposit or savings account. If you are planning to make these types of investment, it is essential that you know how to use an assignment of deed of trust .

In California and many other states, the repayment of a promissory note is secured with a deed of trust against real property. Essentially, a trust deed investment involves the purchase of a promissory note, which is required to be secured by a deed of trust as part of the transaction.

When you obtain a loan to buy real estate, you will have to use a promissory note. The terms for repaying the loan, including the interest rate and monthly payment amount, will be stated in the promissory note. A deed of trust will be used to ensure that the promissory note will be repaid when it is recorded against the property purchased with the loan.

A lender may sell a promissory note. This usually happens between banks, but it can be done by any person who wishes to buy the promissory note as a form of investment. When a lender sells a promissory note, the deed of trust that secures the note will also be sold with it.

Difference Between Mortgage Assignment and Note Endorsement

When you are applying for a loan to purchase a home, the lender may require you to sign a promissory note and a mortgage or a deed of trust. In the event that your loan is sold to another party, these documents will be transferred to the new owner with an assignment and an endorsement. The new owner will have the right to receive payments and foreclose if you fail to make payments.

In casual conversations, people often use the word “mortgage” to refer to a home loan. A mortgage or a deed of trust is an essential document included as part of the process of securing a home loan. It is a form of security instrument. A promissory note , on the other hand, specifies the details and terms of the loan and obligates the borrower to repay the loan.

If you want to know whether or not you can assign a promissory note, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Understanding the Assignment of Mortgages: What You Need To Know

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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.

Written by Attorney Todd Carney .  Updated November 26, 2021

If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage. 

No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.

Assignment of Mortgage – The Basics

When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.

Home Loan Documents

When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.

When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.

Using MERS To Track Transfers

Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.

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Assignment of Mortgage Requirements and Effects

The assignment of mortgage needs to include the following:

The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers. 

The borrower’s name.

The mortgage loan’s original amount.

The date of the mortgage and when it was recorded.

Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.

Notice Requirements

The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.

Mortgage Terms

When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.

Taxes and Insurance

If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.  

If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.

Let's Summarize…

In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change. 

Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.

Attorney Todd Carney

Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

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Promissory Note Transfer Contract

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A promissory note transfer contract refers to a legally binding agreement that facilitates a transfer of rights and obligations related to a borrower or lender. It is a written report that promises to pay money to a chosen event at a decided destiny date or upon request. Let us know more about the contract, its key components, and its importance.

Essential Elements of a Promissory Note Transfer Contract

To apprehend the transfer procedure higher, it's important to familiarize oneself with the important components of a promissory document. These components include:

• The principal amount and interest rate
• Maturity date and repayment terms
• Default provisions and remedies
• Signatures and notarization

Importance of Promissory Note Transfer Contracts

Transferring ownership of a promissory note without a formal contract can lead to confusion and potential legal issues. The importance of a promissory note transfer contract lies in the following:

• Ensuring a legally valid transfer
• Establishing clarity and certainty for all parties involved
• Protecting the interests of the transferor and transferee
• Preserving the enforceability of the promissory note

Nicholas M.

Benefits of a Promissory Note Transfer Contract

A Promissory Note Transfer Contract offers several benefits to the transferor and transferee involved in the transfer process. Some key benefits include:

• Legal Validity: Having a transfer contract in place, the transfer of ownership rights and obligations associated with the promissory note is legally recognized and enforceable.
• Clarity and Certainty: The transfer contract establishes clear terms and conditions , ensuring both parties understand their rights, obligations, and responsibilities.
• Risk Mitigation: Transfer contract helps mitigate potential risks and uncertainties by addressing warranties, representations, and disclosures related to the promissory note, protecting both parties from future disputes.
• Asset Protection : The transfer contract safeguards the transferor and transferee's interests by providing a legal framework to protect the promissory note from third-party claims or encumbrances.
• Smooth Transaction Process: A transfer contract streamlines the process by providing a roadmap and necessary procedures to be followed, minimizing potential delays or misunderstandings.
• Enforceability: In the event of default or non-compliance, the transfer contract enables the injured party to seek legal remedies and enforce the terms of the promissory note.
• Preservation of Rights: The transfer contract ensures that the transferee obtains all rights and privileges associated with the promissory note, including interest payments, principal repayments, and other benefits.
• Regulatory Compliance: A transfer contract helps ensure compliance with applicable laws, regulations, and contractual obligations that may govern the transfer of promissory notes.
• Confidence and Trust : By formalizing the transfer procedure, both parties can trust the transaction, understanding that their interests are covered, and the switch is legally sound.
• Documentation and Record-Keeping: A transfer contract is an essential document that provides evidence of the transfer, making it easier to maintain accurate records and facilitate future reference or audits.

Steps in the Transfer of a Promissory Note Transfer Contract

The transfer process of a promissory note typically involves the following steps:

• Review the promissory note’s obligations and terms
• Verify the validity and authenticity of the note
• Assess any existing encumbrances or claims on note
• Determine the rights of the transferor and transferee
• Define the terms of the transfer, including consideration and effective date
• Ensure compliance with applicable laws and regulations
• Seek necessary consent from relevant parties, such as guarantors or co-signers
• Obtain any required approvals from regulatory bodies or lenders
• Sign the transfer contract in the presence of witnesses, if necessary
• Deliver the executed contract to all parties involved
• Update official records and notify relevant stakeholders

Key Considerations in a Promissory Note Transfer Contract

There are many factors which both the transferor and transferee must know and consider during a promissory note transfer, such as:

Transferor Considerations

• Legal ownership and authority to transfer the promissory note
• Financial stability and creditworthiness of the transferee
• Any restrictions or limitations on the note's transferability

Transferee Considerations

• Authenticity and validity of the promissory note
• The creditworthiness of the transferor to repay
• Existing encumbrances or claims on the note

Legal Impact of a Promissory Note Transfer Contract

A promissory note transfer contract carries various legal implications, including:

• Compliance with applicable laws and regulations
• Clear establishment of rights and obligations for both parties
• Mitigation of risks and protection against potential disputes
• Enhanced enforceability of the promissory note in case of default

Vital Steps in Hiring a Lawyer for a Promissory Note Transfer Contract

Approaching an attorney for assistance with a promissory note transfer contract is highly recommended to ensure a smooth and legally sound transfer process. Here are some key steps to consider when seeking legal guidance:

• Research and Selection: Conduct thorough research to identify attorneys with expertise in contract law, specifically promissory note transfers. Look for attorneys who have experience in drafting and reviewing similar contracts.
• Initial Consultation: Schedule an initial consultation with the selected attorney to discuss your specific needs and the details of the promissory note transfer. Ask about the attorney's experience, fees, and approach to handling such cases during the consultation phase.
• Documentation and Information Gathering: Gather all relevant documents related to the promissory note, including the original note, any amendments, and the supporting agreements. Provide the lawyer with all necessary files associated with the transferor, transferee, phrases of the transfer, and any other pertinent details.
• Contract Drafting and Review: The attorney will draft the promissory note transfer contract based on the information provided. They will ensure that the settlement appropriately displays the intentions of both events, includes important provisions for a legitimate switch, and complies with relevant legal guidelines and regulations. Once drafted, the legal professional will overview the settlement with you, explaining the terms and addressing any questions or issues you can have.
• Negotiation and Amendments: If required, the attorney can assist in negotiating the terms of the transfer with the other party involved. They will work to protect your interests and ensure that the contract reflects mutually agreeable terms. Any amendments or revisions to the contract will be made in consultation with the attorney.
• Legal Advice and Guidance: Throughout the method, the lawyer will offer legal advice and steering, assisting you in apprehending the implications of the switch, potential dangers, and how to guard your rights. They will ensure that the contract complies with relevant laws and regulations and advise on any additional steps or considerations to be taken.
• Execution and Notarization: Once the final version of the promissory note transfer contract is agreed upon, the attorney will assist in executing the contract. Depending on the jurisdiction and specific requirements, they may also advise on the need for notarization or witnesses.
• Ongoing Support: Besides drafting and executing the contract, the attorney can provide ongoing support throughout the transfer process. They can address post-transfer issues, assist with record-keeping, and ensure compliance with contractual obligations.

Key Terms for Promissory Note Transfer Contracts

• Transferor: The party currently holding ownership rights of the promissory note and intending to transfer those rights to another party.
• Transferee: The party receiving the ownership rights and obligations of the promissory note through the transfer process.
• Consideration: The agreed-upon value, such as money or other assets, exchanged between the transferor and transferee as part of the promissory note transfer.
• Assignment: The process of legally transferring the rights and obligations associated with a promissory note from the transferor to the transferee.
• Indemnification: A provision inside the transfer settlement outlining the responsibilities of every transfer event to compensate the alternative in case of any losses, damages, or liabilities springing up from the same.

Final Thoughts on Promissory Note Transfer Contracts

Transferring ownership of a promissory note requires careful consideration and establishing a promissory note transfer contract. Understanding the key additives of a promissory note, spotting the signs of a transfer contract, following the step-through-step procedure, thinking about the interests of each the transferor and transferee, and appreciating the legal implications and advantages of a promissory transfer agreement are important for better success. Seeking legal guidance is always recommended to ensure a smooth and legally sound transfer process.

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I am a U.S. lawyer (licensed in California) and have recently relocated to London. I hold a bachelor’s degree in Political Science from the University of California, Berkeley and a Juris Doctor law degree from the University of California, Hastings College of the Law. I have extensive experience in providing legal services and support in areas of business, labor & employment, IP enforcement (patent infringement, copyright & trademark), and other litigation matters; Reviewing, drafting, and editing business and legal documents/contracts; Conducting legal research and analysis, drafting memorandums, pleadings, discovery, document review, various motions, mediation briefs, and other litigation related activities; Reviewing and preparation of templates, policies, and processes for compliance with laws and regulations; educating and advising on legal and compliance issues.

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Buying and Selling Real Estate Notes

Not as Simple as One Might Think by David J. Willis J.D., LL.M.

Introduction

Investors often buy and sell real estate lien notes, either singly or in a package, a transaction that is customarily effected by a Sale & Assignment of Notes and Liens . This transfer instrument is referred to in this article simply as an assignment.

The idea of buying or selling a note seems simple until one delves into it. Is the assignment to be made “as is” with all faults that may exist in the note and the lien instrument? Will there be representations and warranties made by the parties and, if so, how extensive? How long will they last? Will recourse provisions apply if the note goes into default, and if so what is the recourse mechanism? Will indemnities be included? The closer one looks the more questions arise.

Our focus in this article is on the final assignment instrument signed by the parties at closing of the transfer rather than preliminary agreements that may come before closing.

The Assignment Process

In the case of real estate lien notes, a completed assignment involves not just a transfer of a note but the liens securing payment as well, which is why the assignment instrument is referred to as an assignment of note and liens. Two liens may be involved: the vendor’s lien retained in the deed from the seller to the borrower and the lien granted by a deed of trust.

One must distinguish between an absolute assignment of a note (a permanent transfers to a new owner and holder) versus a collateral assignment (made to a lender as collateral for a loan). Notes may be assigned in either way.

This discussion addresses absolute assignments. Steps in the process are usually: (1) an initial letter of intent or preliminary contract phase when basic terms are agreed to—similar to an earnest money contract for real estate—with “outs” for the prospective buyer; (2) a due-diligence or inspection period when a prospective buyer studies and evaluates the note (or package of notes) along with the lien instrument(s) and supporting documentation; (3) a cure period for objections, if any, raised by the buyer; (4) a closing document negotiation phase in which the terms of the final assignment instrument are hammered out and agreed to; and (5) a closing where a final sale and assignment of note and liens is executed, the purchase price paid, and the original note and loan file are delivered to the buyer-assignee.

BUSINESS & COMMERCE CODE

Negotiable instruments.

A properly written and endorsed real estate lien note is a negotiable instrument for purposes of Business & Commerce Code Section 3.201 et seq. Specific requirements of negotiability are listed in Section 3.104:

Bus. & Com. Code Sec. 3.104(a). NEGOTIABLE INSTRUMENT. Except as provided in Subsections (c) and (d), “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain: (A) an undertaking or power to give, maintain, or protect collateral to secure payment; (B) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or (C) a waiver of the benefit of any law intended for the advantage or protection of an obligor.

A real estate note that does not qualify as a negotiable instrument may still be valid and enforceable, and it may still be sold and assigned, but common law rules relating to the assignment of contracts will apply—the negotiable instrument rules of the Business & Commerce Code will not.

The resale value of a note that is non-negotiable is likely to be discounted.

Statutory Warranties

Business & Commerce Code Section 3.416 provides minimal warranties for notes that are negotiable instruments. These are automatically in place unless the assignment instrument disclaims them:

Bus. & Com. Code Sec. 3.416(a). TRANSFER WARRANTIES. A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by indorsement, to any subsequent transferee that:

(1) the warrantor is a person entitled to enforce the instrument;

(2) all signatures on the instrument are authentic and authorized;

(3) the instrument has not been altered;

(4) the instrument is not subject to a defense or claim in recoupment of any party that can be asserted against the warrantor;

(5) the warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker. . . .

Unless contradicted or disclaimed in the assignment, these statutory warranties co-exist with contractual representations and warranties of the parties (discussed below).

DUE DILIGENCE BY BUYER-ASSIGNEE

Are the note and lien valid.

Determining the validity and enforceability of a real estate note and the lien(s) securing it is the core due-diligence task of any prospective buyer—who should obtain the whole loan file not just a copy of the note itself. A complete file will include (at least) the note; a copy of a recorded deed of trust; a copy of a recorded deed into the name of the property owner (the borrower); and a payment history. Even if only copies are being reviewed, the original note should exist and be available for inspection.

For a note to be valid, there must be consideration extended—money that is actually loaned. Hughes v. Belman , 239 S.W.2d 717, 720 (Tex.App.—Austin 1951, writ ref’d n.r.e.); and Bus. & Com. Code Sec. 3.303.

Generally, a note offered for sale should:

(1) be correct as to all material information including clearly identifying borrower and lender as well as the security property; (2) recite an unconditional promise to pay a sum-certain debt (and the numerical portion must match the written portion); (3) contain authentic signatures of all debtors and be dated; (4) provide clear terms of repayment; (5) be secured by a valid, recorded, and unreleased deed of trust; (6) contain the signature of both spouses if the property is homestead; (7) not contain any provisions that are illegal such as requiring usurious interest; (8) not be in default (monetary of technical) or the subject of any dispute with the borrower; (9) not be in litigation or bankruptcy whether existing, threatened, or anticipated; (10) not be the subject of any interest or claim by third parties; and (11) not have been previously sold or transferred in whole or in part.

This is a partial list. Sensible note purchasers will also want to perform minimal due diligence as to the value and condition of the security property since such factors may influence future note payment and performance. Does the property exist? Is it owner-occupied or occupied by renters? Is it in a state of good repair or is it underwater as a result of a recent flood?

If the parties to the note are registered entities (LLCs, corporations, or limited partnerships) it is important to verify that they are in good standing with the Secretary of State and the Texas Comptroller. If not, they do not have the legal capacity to do business, whether it is selling or buying notes or anything else.

All of the foregoing factors affect the quality of the note or notes being considered—and quality affects price.

The importance of thorough due diligence cannot be over-emphasized. A prospective buyer should engage an experienced attorney to assist in determining the validity and enforceability of the loan documents before substantial funds are committed.

Even when a note is being transferred entirely “as is” a prospective buyer-assignee should insist on an adequate due diligence/inspection period before closing.

REPRESENTATIONS AND WARRANTIES

Beyond statutory minimum warranties.

A well-drafted assignment may (and should) go beyond minimum statutory warranties to include contractual representations and warranties by the parties. It is possible for the assignment to include extensive reps and warranties, limited reps and warranties, or no reps and warranties at all—in which case the assignment is made “as is” and almost always without recourse. These terms should be expressly stated in the assignment instrument.

The goal of the seller-assignor is to minimize ongoing liability by limiting the number of reps and warranties. The buyer-assignee will instead prefer a longer list of assurances concerning note quality and completeness of the loan file.

Core representations and warranties of the seller-assignor include assurances that the note and lien(s) contain correct information and are legally valid and enforceable; that they are secured by a lawful vendor’s lien retained in a recorded general or special warranty deed plus a valid first-lien recorded deed of trust against the security property; that payments are current and there is no threat of monetary or technical default; that no adverse litigation is pending or threatened; and that the assignor is the sole owner and holder of the debt with power to transfer the note and liens.

There may be many more seller reps and warranties that a careful buyer will want to include. An example: if the seller-assignor was the original payee on a real estate note, and the note arose from seller financing, the buyer-assignee should want a specific warranty that the SAFE Act and Dodd Frank were fully complied with in the course of the original transaction.

There is the question of how long reps and warranties will survive closing (if at all)—30 days? 90 days? Forever?

Obtaining adequate reps and warranties from the seller-assignor does not substitute for thorough due diligence by a prospective buyer-assignee.

OTHER CLAUSES IN THE ASSIGNMENT

Assignments made “as is”.

What if the transaction is entirely “as is,” with no reps and warranties? There is certainly a market for this although the sales price of the note(s) will be discounted as a result. The key element in the assignment (for the seller-assignor) will be an effective “as is” clause similar to ones found in earnest money contracts and warranty deeds. Drafting these clauses can be tricky. Simplistic, one-liner “as is” clauses will not suffice since the seller-assignor needs not only to disclaim assurances regarding the note being transferred but also any reps or warranties concerning the condition and value of the security property.

Disclosure by the Seller-Assignor

Notwithstanding that an assignment is being made and accepted “as is,” a buyer should seek to obtain an agreement by the seller to make full disclosure of material facts. A sample clause might be: Assignor covenants and agrees to fully disclose to Assignee, prior to expiration of the inspection period, any and all material facts, conditions, and circumstances pertaining to the note(s), the lien(s), and the security property that could reasonably be expected to affect the Assignee’s decision to buy or not buy, even if this assignment is agreed to be “as is,”in present condition with all faults and without recourse.

Recourse by the Buyer-Assignee

Notes are sold with or without recourse by the buyer-assignee against the seller-assignor. Recourse comes in three varieties: none, full, or limited.

No recourse means what it says: if the borrower defaults then the buyer-assignee is stuck with a non-performing note (a near-worthless asset) and is solely responsible for pursuing the debtor and foreclosing on the security property.

Full recourse means that the buyer-assignee gets to give the note back to the seller-assignor if the debtor defaults. One of two things generally happen: (1) the buyer-assignee gets a credit or refund or (2) the buyer-assignee can substitute another note that is current and performing. There are other variations.

Limited recourse is, contractually speaking, all over the place. There are as many different provisions for limited recourse as there are creative attorneys to write them. Limited recourse provisions may state that there will be some sharing of effort and expense in collection or foreclosure, possibly with a reckoning after foreclosure sale of the security property. Remedies may be different when a batch of notes is involved: for example, if 100 notes are sold, the assignment might provide that the first 10 problematic notes will be full recourse, but the remaining 90 will not. In either case, there may be a hard limit on the total monetary amount of recourse available against the seller-assignor.

The availability of recourse—whether none, full, or limited—may also be contained within a specific time period. The availability of recourse is seldom indefinite.

Indemnity Provisions

If possible, the seller-assignor will want an indemnity clause holding him harmless against issues that may later arise in connection with the legality, enforceability, or collectability of the note. As with sellers of anything, the goal is no comebacks after closing.

Note buyers, on the other hand, resist not only taking the heat for defects in what they are purchasing but also paying the cost of defending against lawsuits arising from those defects. As with so many issues in real estate it comes down to quality and price. A seller-assignor may be able to get an indemnity provision included but it may be costly when it comes to the assignment sales price.

Indemnity provisions, although important, may be overrated since they are not self-executing. After all, the terms of an assignment can do nothing to prevent a borrower from suing both the seller-assignor and the buyer-assignee at some later time, resulting in inescapable up-front defense costs. One party to the assignment is left with a claim against the other based on the indemnity provision, often resulting in a second lawsuit.

As is the case with many other types of contracts, it is often beneficial to include a mandatory mediation clause in the assignment.

Drafting Considerations Generally

An assignment of note and lien(s) should be a comprehensive document. (If it is one page or less, something is amiss.) All obligations should be express. Nothing should be implied. No one should be allowed to assume anything or rely on anything unless expressly stated in writing. Oral statements should be disclaimed. A poorly-written assignment that involves unwritten assumptions and reliance on oral statements can easily form the basis for future litigation.

The foregoing discussion is by no means intended to be an exhaustive list of possible provisions that can be included in an assignment of note and liens. (Such documents can easily run 10 to 20 pages.) It merely hits the highlights.

CLOSING OF THE ASSIGNMENT

Endorsement and delivery of the note.

The note itself should be marked or stamped appropriately and the endorsement (or indorsement as it is referred to in the Business & Commerce Code) signed by the seller-assignor. The endorsement should include wording appropriate to the circumstances such as “payable to assignee without representations, warranties, or recourse” and would include the effective date.

Where does one place the endorsement? “For an instrument to be negotiable, indorsements must be written on the instrument or on a paper so firmly affixed thereto as to become a part thereof [sometimes called an allonge ]. An allonge is a piece of paper annexed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself.” Failure to properly endorse a note when it is transferred may impair its negotiability, resulting in the recipient being a mere transferee rather than having the superior status of a holder in due course [see Bus. & Com. Code Sec. 3.302].” Federal Fin. Co. v. Delgado, 1 S.W.3d 181, 185-86 (Tex.App.—Corpus Christi 1999, no pet.).

The original note(s) should be delivered to the buyer-assignee at closing.

Execution and Recording of the Assignment

Both the seller-assignor and the buyer-assignee should sign the assignment in order to indicate mutual assent to its terms and conditions. A properly-drafted assignment is not merely a unilateral transfer but represents a complex contract between the parties. The assigning party’s signature is not enough.

It is usually advisable for the buyer-assignee to record the assignment in the real property records of the county where the security property is located, so the assignment should be prepared in recordable form.

INVESTOR STRATEGIES

Notes are financial assets and their acquisition can be a part of an investor’s long-term buy-and-hold strategy. Like rents, a portfolio of mixed-age performing notes can produce a stream of income; however, unlike real property, there is no underlying equity that appreciates over time. In fact, the value of note assets depreciates so a stable portfolio requires continual replenishment. As notes age and mature new notes must be acquired in their stead if the income stream is to be maintained.

It is, of course, possible to acquire notes for other reasons. One aggressive strategy is to buy a secured note in default with the specific intention of foreclosing on the security property. A long-term hold is not the objective; acquiring the property is the objective. This scenario contemplates more of an “as is” approach to the note since its price is likely to be heavily discounted. In such cases, thorough due diligence is necessary in order to ensure that both the note and deed of trust are valid and enforceable with no obvious defenses available to the debtor.

Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. No attorney-client relationship is created by the offering of this article. This firm does not represent you unless and until it is expressly retained in writing to do so. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well.

Copyright © 2023 by David J. Willis. All rights reserved. Mr. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his website, www.LoneStarLandLaw.com .

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Deed of Trust and Promissory Note

Templates and forms.

A deed of trust, also called a trust deed, is the functional equivalent of a mortgage. It does not transfer the ownership of real property, as the typical deed does. Like a mortgage, a trust deed makes a piece of real property security (collateral) for a loan. If the loan is not repaid on time, the lender can foreclose on and sell the property and use the proceeds to pay off the loan.

Deed of trust is not used for transferring property to a trust A trust deed is not used to transfer property to a living trust (use a Grant Deed for that). Other than the terminology, trust deeds and living trusts have nothing in common. A living trust is used to avoid probate, not to provide security for a loan. Visit our page on Estate Planning for more information on that topic.

A trust deed is always used together with a promissory note (also called “prom note”) that sets out the amount and terms of the loan. The property owner signs the note, which is a written promise to repay the borrowed money.

A trust deed gives the third-party “trustee” (usually a title company or real estate broker) legal ownership of the property. This means that the trustee has no control over the property as long as the borrower (aka property owner or “trustor”) makes the agreed-upon loan payments and keeps the other promises in the trust deed. If the borrower defaults, however, the trustee has the power to sell the property to pay off the loan without having to file an action in court. The lender (also known as “beneficiary”) is then repaid from the proceeds.

Step-by-Step Instructions

Determine the parties to the agreement.

There will be three parties to these agreements. Identifying these parties ahead of time will make it easier to complete the forms.

Beneficiary

The beneficiary, more commonly known as the lender, is the person or company that lends the borrower money, and who will be entitled to be repaid from the proceeds of a foreclosure. If the lender is a corporation, be sure to include language such as “Lender is a corporation organized and existing under the laws of California” in your documents.

Borrower(s)

If there are two or more borrowers, they will be borrowing the money “jointly and severally.” This means each debtor is responsible (liable) for the entire amount of the debt. A creditor may collect from whichever debtor has the “deep pocket” (lots of money); the debtor who pays may demand contributions from the other debtors. Joint borrowers will want to carefully consider whether or not they wish to be jointly responsible with their co-borrower.

When the property used as security for the loan is owned by more than one person, you may want to consider who you will name as borrowers and owners of the property on the deed of trust. The names of  all  owners of the property, and their spouses, must be included to give the entire property (all owners’ interests in the property) as security. A co-owner can only give as security his or her interest in the property. In other words, a lender wants to be sure that all owners and their spouses sign the deed of trust as a condition of lending the money (unless the lender is willing to take as security one co-owner’s interest in property).

When a bank or savings and loan finances the purchase of real estate, the trustee is almost always a title or trust company. Sometimes real estate brokers act as trustees. Attorneys commonly write in the name of a title company as trustee on a trust deed, without consulting the title company. Title companies even give out trust deed forms with their names already printed in the “trustee” space. They don’t mind being named as trustee because a trustee has nothing to do unless the borrower defaults. If that happens, most title or escrow companies turn the deed over to a professional foreclosure firm.

Prepare the Deed of Trust and Promissory Note

The Deed of Trust and Promissory Note must be in a format that the Sacramento County Clerk/Recorder’s Office will accept. Customizable templates may be downloaded from these links:

• Promissory Note
• Deed of Trust

Sample filled-in forms with instructions are available at the end of this Guide.

Get the Signatures Notarized

Notarization is required before recording these documents with the County Recorder. The notary’s acknowledgment of the trustor’s signature is formal proof that the signature is genuine. You can find a notary at your bank, a mailing service, or in the Yellow Pages. with instructions are available at the end of this Guide.

Record the Signed Documents at the County Recorder’s Office

Take the original signed and notarized Deed of Trust and Promissory Note to the County Recorder’s Office for the county where the property is located. In Sacramento, this is at 3636 American River Drive, Ste. 110, Sacramento CA 95864. You will need to pay a fee (you can check the current recording fees in Sacramento ). The clerk in the recorder’s office will take your original documents and stamp them with the date, time, a filing number, and book and page numbers. The original documents will be mailed back to you. Note: trust deeds are exempt from the documentary transfer tax.  California Revenue and Taxation Code § 11921 .

What Happens Next?

If the borrower pays off the loan without defaulting (as happens in most cases), the beneficiary (lender) will request the trustee execute and record a deed reconveying the property to the borrower. You can find a  Deed of Full Reconveyance  on the Find A Form page of our website.

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The Deed of Trust must be in a format the Sacramento County Recorder’s Office will accept. See the sample templates of the Deed of Trust and the Promissory Note below.

This material is intended as general information only. Your case may have factors requiring different procedures or forms. The information and instructions are provided for use in the Sacramento County Superior Court. Please keep in mind that each court may have different requirements. If you need further assistance consult a lawyer.

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What Is a Promissory Note?

How promissory notes work.

• What's Included

Types of Promissory Notes

Promissory note repayment, investing in promissory notes, a brief history of promissory notes, the bottom line.

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Promissory Note: What It Is, Different Types, and Pros and Cons

A promissory note is a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date. A promissory note typically contains all the terms involved, such as the principal debt amount, interest rate, maturity date, payment schedule, the date and place of issuance, and the issuer's signature.

Key Takeaways

• A promissory note is a financial instrument that contains a written and signed promise between two parties to repay a sum of money in exchange for a loan or other financing. 
• A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer's signature.
• In terms of their legal enforceability, promissory notes lie somewhere between the informality of an IOU and the rigidity of a loan contract.

Investopedia / Tara Anand

Promissory notes can lie between an IOU's informality and a loan contract's rigidity. An IOU merely acknowledges a debt and the amount one party owes another. A promissory note includes a promise to pay on demand or at a specified future date, in addition to steps required for repayment (like the repayment schedule)

Although financial institutions may issue promissory notes—for instance, you might be required to sign one to take out a small personal loan —they also allow companies and individuals to get financing from a non-bank source. This source can be an individual or a company willing to carry the note (and provide the financing) under the agreed-upon terms. In effect, promissory notes can enable anyone to be a lender.

In its simplest form, a promissory note might be a written promise to repay a family member. State or federal securities entities may regulate more complicated promissory notes.

Typically, there are two parties to a promissory note: The promisor, also called the note's maker or issuer, promises to repay the amount borrowed. The promisee or payee is the person who gave the loan.

Secured vs. Unsecured Promissory Notes

A promissory note can be secured or unsecured. A secured promissory note describes the collateral—typically property—that secures the debt or amount borrowed. For example, if the borrower owns property, the lender can use the car as collateral until the debt is repaid. If the borrower doesn't repay the loan, the promissory note permits the lender to take possession of the property.

An unsecured promissory note doesn't involve collateral. In this case, if the borrower doesn't repay the loan, the lender can try to use standard debt-collection procedures.

In either case, the lender holds the promissory note until the debt is repaid. Typically, those drafting a promissory note will consult with an attorney to make sure the note follows any state or federal laws around loans or investments.

A promissory note is usually held by the party that's owed money; once the debt has been fully paid, the note must be canceled by the payee and returned to the issuer.

What's Included in a Promissory Note?

A promissory note should include all the details about a loan and the repayment terms. In addition to the names of the borrower and the lender, a promissory note may also include:

• Name and address of borrower and lender
• Maturity date
• Sum borrowed
• Payment schedule
• Interest rate and how interest is calculated
• Prepayments process
• Overdue payment interest charged
• Waivers, amendments, and governing law for the promissory note

In the United States, promissory notes are often used when getting a student loan, mortgage, or a loan from a friend or family member. Promissory notes are also sometimes issued to corporate clients.

Student Loan Promissory Notes

Many people sign their first promissory notes as part of getting a student loan . Private lenders typically require students to sign promissory notes for each loan taken out.

Some schools allow federal student loan borrowers to sign a one-time master promissory note, allowing receipt of multiple loans for up to 10 years if the school certifies the student's continued eligibility.

Student loan promissory notes outline the student borrower's rights and responsibilities and the loan's conditions and terms. By signing a master promissory note for federal student loans , the student promises to repay the loan amounts plus interest and fees to the U.S. Department of Education.

The master promissory note also includes the student's personal contact and employment information as well as the names and contact info for the student's references.

Mortgage Promissory Notes

Homeowners usually consider their mortgage an obligation to repay the money they borrowed to buy their residence. But actually, the signed mortgage promissory note represents a promise to repay the mortgage or loan, along with the repayment terms.

Typically, the promissory note includes:

• Amount you owe
• Mortgage loan's interest rate
• Ways your interest rate can change, if you have an Adjustable Rate Mortgage (ARM)
• Payment dates
• Repayment length of time
• Where you send payments
• Consequences of not making monthly mortgage payments

The promissory note describes the debt's amount, interest rate, and late fees. A lender holds the promissory note until the mortgage loan is paid off. Unlike the mortgage or deed of trust , the promissory note is not entered into county land records.

Corporate Credit Promissory Notes

Promissory notes are commonly used in business as a means of short-term financing. For example, when a company sells products but hasn't yet collected payments, cash may run low, leaving the company unable to pay creditors. The company may ask creditors to accept a promissory note to be exchanged for cash after the company collects its accounts receivables .

Or the company may ask the bank for cash in exchange for a promissory note. Promissory notes offer companies a credit source after exhausting other options, like corporate loans or bond issues. A note issued by a company in this situation is at a higher risk of default than, say, a corporate bond. The corporate promissory note's interest rate will likely provide a greater return than a bond from the same company, as high risk means higher potential returns.

These notes must be registered with the government in the state where sold and with the Securities and Exchange Commission (SEC).

If the note is not registered, the investor has to analyze whether the company is capable of servicing the debt. Companies in dire straits may hire high- commission brokers to push unregistered promissory notes on the public. If the company defaults, the investors' legal avenues may be somewhat limited.

There are several different structures for repayment of a promissory note, but most involve repaying the principal plus interest. The interest rate can be fixed or variable and calculated daily, monthly, annually, or in another way. In some states, interest rates may be capped by state law. A certified accountant and attorney can advise you on the tax or legal implications of the promissory note's repayment schedule.

Here are various repayment approaches for a promissory note:

• Installment note : The most familiar repayment approach is through installments, with the borrower making regular payments; the repayment schedule and interest payments can vary.
• Simple note: For smaller loans, borrowers might arrange a lump-sum repayment on a specified date, meaning that's when you'll repay the whole amount listed in the promissory note.
• Open-ended note : This promissory note allows the borrower to draw on an operating or other loan over time and repay the draw plus interest by a specific date.
• Demand note : Sometimes, a promissory note may specify "on demand" repayment, meaning that the note must be repaid at the lender's request at any time.

Company or corporate promissory notes are rarely sold to the public. When they are, it is usually at the behest of a struggling company working through unscrupulous brokers who are willing to sell promissory notes that the company may not be able to honor.

Alternatively, the promissory note may be part of a scam sold by life insurance agents or online or out-of-state investment advisors. Some sellers may know nothing about the investments' true origins—the promissory notes may be for companies that don't exist. Promissory notes promising "low risk, high yield" investments may lead to a type of fraud, according to the SEC.

Before investing in promissory notes, ensure all of the following are true:

• The person selling the promissory notes is licensed to sell securities 
• The company offering promissory notes is legitimate and can repay debts
• Promissory notes are properly registered by the SEC, state securities regulator, or legally exempt from registration
• If guaranteed or insured by a foreign insurance company, contact your state department of insurance to make sure the company can do business in the U.S.

Investing in promissory notes involves risk. These promissory notes are only offered to corporate or sophisticated investors who can handle the risks and have the money needed to buy a note. To help minimize these risks, an investor must register the promissory note or have it notarized so that the obligation is publicly recorded and legal.

Promissory notes have had an interesting history. At times, they have circulated as a form of alternate currency, free of government control. In some places, the official currency is a form of promissory note called a demand note (one with no stated maturity date or fixed term, allowing the lender to decide when to demand payment).

Promissory notes and bills of exchange are governed by the 1930 Geneva Convention of Uniform Law on Bills of Exchange and Promissory Notes. Its rules stipulate that the term "promissory note" should be inserted in the instrument's body and contain an unconditional promise to pay.

What Does a Promissory Note Contain?

A form of debt instrument, a promissory note represents a written promise on the part of the issuer to pay back another party. A promissory note will include the agreed-upon terms between the two parties, such as the maturity date, principal, interest, and issuer’s signature. Essentially, a promissory note allows entities other than financial institutions to provide lending services to other entities.

What Is an Example of a Promissory Note?

One example of a promissory note is a corporate credit promissory note. For this type of promissory note, a company will typically be seeking a short-term loan. In the case of a growing startup that is low on cash as it expands its operations, the terms of the agreement could state that the company pays back the loan once its accounts receivable are collected.

There are several other types of promissory notes, including investment promissory notes, take-back mortgages, and student loan promissory notes. 

What Are the Pros and Cons of a Promissory Note?

A promissory note can be advantageous when an entity is unable to secure a loan from a traditional lender, such as a bank. However, promissory notes can be risky, as the lender may not have the same means and scale of resources as traditional financial institutions. At the same time, legal issues could arise for both the issuer and payee in the event of default. Because of this, getting a promissory note notarized can be important.

A promissory note is a written promise by one party to make a payment of money at a date in the future. Although potentially issued by financial institutions, other organizations or individuals can use promissory notes to confirm the agreed terms of a loan. In short, a promissory note allows anyone to act as a lender. However, the average investor should be wary of and heavily research any sales pitches for promissory notes as an investment.

University of Vermont Extension. " Guide to Financing the Community Supported Farm ," Page 26 of PDF.

University of Vermont Extension. " Guide to Financing the Community Supported Farm ," Page 27 of PDF.

Stanford University. " Simple Promissory Note (Small Business) ."

Federal Student Aid. " Master Promissory Note (MPN) ."

CFPB. " Guide to Closing Forms ," Page 1 of PDF.

• State of Connecticut Department of Banking. " Promissory Note Scams ."

Ohio State University Extension Farm Office. " Financing the Farm ," Page 3.

Ohio State University Extension Farm Office. " Financing the Farm ," Pages 2–3.

U.S. Securities and Exchange Commission. " Broken Promises: Promissory Note Fraud ."

Investor.gov. " Promissory Notes ."

United Nations Treaty Collection. " 10.Convention Providing a Uniform Law for Bills of Exchange and Promissory Notes ."

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Home » Legal Articles » Assignments: Deeds, Contracts, Accounts, Promissory Notes, Successor in Interest

Assignments: Deeds, Contracts, Accounts, Promissory Notes, Successor in Interest

Many times contracts, promissory notes, deeds or other accounts are sold and transferred to other individuals or entities. After such transfer, proof of an assignment/transfer of the underlying instrument is essential in the event that a suit is filed to enforce the instrument.  Korte Costr. Co. v. Deaconess Manor Ass’n,  927 S.W.2d 395, 404 (Mo. Ct. App. 1996). For instance, if you have received rights under a real estate deed, promissory note, or other contract, you must present all of the evidence necessary to show that it has been validly assigned to you.  See, e.g., C&W Asset Acquisition, LLC v. Somogyi,  136 S.W.3d 134, 140 (Mo. Ct. App. 2004) (where an assignee of a credit card debt’s lawsuit was dismissed because proper assignments were not presented). Evidence of an assignment is necessary because absent that a party would not have “standing.” Standing exists when a party has a legally protectable interest in the subject matter and has an interest to where there is a right to recovery. Without standing, there can generally be no lawsuit maintained because a court  only has power to resolves cases and controversies. In light of the foregoing, whether you are a plaintiff or defendant in a lawsuit involving assignments of legal rights you need to be aware of the need to prove the assignment. It can make for a very short case — or major disappointment at trial — without being prepared to adequately address this issue. Contact with questions.

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Working in a legal firm that generates legitimate documents for others can be quite difficult because a small mistake may ruin the entire business, firm, or concerned purpose of the customer. Many a time, you stay busy catering your business requirements and couldn’t get time to make promissory notes that can work as a legal documentation proof. The readymade Assignment of Promissory Note Template available over the web helps you to stay safe from monetary scams and frauds by mentioning every single thing in detail.

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