Holly Hill Acres, Ltd., executed and delivered a promissory note and a purchase money mortgage to Rogers and Blythe.
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Holly Hill Acres, Ltd., executed and delivered a promissory note and a purchase money mortgage to Rogers and Blythe. The note provided that it was secured by a mortgage on certain real estate and that the terms of that mortgage “are by this reference made a part hereof.” Rogers and Blythe then assigned the note to Charter Bank, and the bank sought to foreclose on the note and mortgage. Holly Hill Acres refused to pay, claiming that the note was not negotiable and therefore subject to the defense that Holly Hill Acres had been defrauded by Rogers and Blythe. Holly Hill Acres, Ltd., executed and delivered a promissory note and a purchase money mortgage to Rogers and Blythe. The note provided that it was secured by a mortgage on certain real estate and that the terms of that mortgage “are by this reference made a part hereof.” Rogers and Blythe then assigned the note to Charter Bank, and the bank sought to foreclose on the note and mortgage. Holly Hill Acres refused to pay, claiming that the note was not negotiable and therefore subject to the defense that Holly Hill Acres had been defrauded by Rogers and Blythe. Holly Hill Acres, Ltd., executed and delivered a promissory note and a purchase money mortgage to Rogers and Blythe. The note provided that it was secured by a mortgage on certain real estate and that the terms of that mortgage “are by this reference made a part hereof.” Rogers and Blythe then assigned the note to Charter Bank, and the bank sought to foreclose on the note and mortgage. Holly Hill Acres refused to pay, claiming that the note was not negotiable and therefore subject to the defense that Holly Hill Acres had been defrauded by Rogers and Blythe. |
Explanation
Many notes contain statement that they are secured by mortgage and that they are an important part of commercial real estate law.This does not destroy the negotiability of the instrument. For a note to be considered negotiable, it must contain the following requirements:
It must be in writing,which means it must be printed, handwritten, or typed.
It must be signed by the maker.
It must contain a promise to pay.
It must be unconditional,which means it must be absolute and should not contain any contingency or qualifications.
It must contain a fixed amount to pay.
It must be exchanged for money and not commodities.
It must not contain any further instructions for payment of the money.
Verified Answer
In this case, the note issued by Company HHA can be considered a negotiable instrument as it fulfills all the formal requirements of being negotiable. The fact that it is secured by a mortgage does not destroy its negotiability.
Explanation
The statement that the note is secured by mortgage does not destroy the negotiability of the instrument.However,the other statement that it is a part of mortgage does destroy the negotiability as a note to be negotiable should only contain a promise to pay. Any further instructions or undertaking can destroy the negotiability of the instrument. The following is the list of certain provisions that can be included in the note without affecting its negotiability:
If an instruction is given to protect, maintain, and give collateral in order to secure payment.
If it contains a power in writing to enter into judgement against the maker and in favor of the holder.
If it contains the right to sell the collateral in case of default by the debtor or borrower.
If it contains any provision to waive the benefit of the debtor.
The note issued by Company HHA did not contain any of these provisions. For this reason, it can be considered nonnegotiable.
Verified Answer
The note issued by Company HHA can be considered nonnegotiable on the ground that it contained the statement that mortgage wasa part of this note. A note, to be considered negotiable, should not contain any more instructions other than a promise to pay.
Explanation
The note states that the terms of the deed are by reference made a part of the notation. This condition on the pledge to pay renders’ the note to be non-flexible because it depends on terms not appearing on the face of the tool as the note may be non-flexible.Company C, as the assignee of a deed, securing a non-flexible note, may take subject to all denials, including that of fraud available against Persons R and Person B.
Verified Answer
The note is not negotiable as the note expresses that it is dependent upon or represented by some other arrangement and does not contain a genuine guarantee to pay.
