Enforceability of lost or destroyed Negotiable Instruments/Commercial Paper

An interesting case that shows the how lost or destroyed Negotiable Instruments/Commercial Paper can remain enforceable is Atlantic National Trust, LLC v. Mcnamee, 2007.
 
The High court in Alabama held that a destroyed promissory note is still enforceable both the maker of the note, or an assignee could enforce it so long as its existence could be proven.
 
In this case a bank (Wachovia) made a loan in 2003 to the debtor, McNamee, in the amount of $150,000. For this he signed a promissory note. At some point, Wachovia inadvertently misplaced, lost or destroyed the original note. The note matured in 2005 and after the loan matured Wachovia assigned its rights in and to the note to the plaintiff Atlantic National Trust., which then sued for recovery. Atlantic demanded McNamee repay the remaining principal balance of $138,620 plus interest. The plaintiff moved for summary judgment based on an affidavit affirming that the instrument had been lost by the assignor.
 
Now Atlantic could not produce the original note, but had a copy, so the debtor defended on the grounds that the plaintiff assignee had no right to enforce the note since it was never in possession of the original document, and that the assignee of a lost note has no standing to sue the maker. Thus McNamee contended that because the original note was destroyed, the note could not be enforced. The federal court certified a question to the Alabama high court to clarify Alabama common law on that issue.
 
It was concluded that an assignee has all of the same rights, benefits, and remedies that the assignor has to enforce contracts to the extent the assignor was able to do so, hence the plaintiff assignee was entitled to enforce the note whether it was lost, destroyed, or stolen. Ultimately the evidence was clear that the note was genuine, the fact of the destruction of the original did not make it unenforceable either by the maker of the note, Wachovia, or by the assignee, Atlantic .
 
What implications does this have in the greater financial industry and banking sector?  Please share your comments below.

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3 Responses

  1. This is a very informative article, how ever I would definitely like to mention a few more points: If the “ORIGINAL” note you signed in ink that contains your signature is claimed to be lost, stolen, missing and/or destroyed, then one’s defense will be then, The “named” Plaintiff is not the ‘holder in due course” of the note and only an agent or nominee for the true beneficial owners and holders in due course; there may be fraud upon the court in that the named Plaintiff may not have ANY interest to the note and that the supposedly lost note is not lost, but may have been intentionally destroyed due to missing assignments on the note which may have made it void and a legal nullity, thus they have exploited key and vital evidence; there is no proof that the named Plaintiff ever held the note or took possession of the note and thus has no claim or right.

  2. There is a very good case explaining the similar situation in regards to the comments mentioned above. The case is related in support of the Case Law Where the complaining party cannot prove the existence of the note, then there is no note. The complete details of the case can be found at (http://mortgageaudit.wordpress.com/2008/11/15/us-lender-audit-says-beware-of-loan-modification-solicitations/?referer=sphere_related_content/), under the section “Supporting Case Law”.

  3. Excellent site, keep up the good work

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