A borrows $415,000 from B. B goes bankrupt. A defaults on the debt. The obligation of A to pay does not vanish when the lender goes under. It simply gets transferred. But to where?
The obligation is embodied in a physical thing: “the note.” When “endorsed in blank,” the note is payable to the “bearer” (defined as “him what’s got hold of the note itself”).
What could be simpler than that?
In the complex world of secondary market mortgage transactions, this fairly straightforward requirement is not necessarily simple in every case.
Thus, Edward and Diane Banks can freely admit to having defaulted on a $415,000 loan (having themselves filed for bankruptcy), and it is recognized that investor Kondaur Capital was assigned the now-bankrupt lender’s interest in the loan, but until Kondaur can come up with the note itself, its claimed interest against the ironically-named Banks, faces a serious impediment.
The Eighth Circuit Bankruptcy Appellate Panel reversed summary judgment, which U.S. Bankruptcy Chief Judge Gregory F. Kishel (D. Minn.) had awarded to Kondaur on the Banks’ adversary proceeding against Kondaur in the context of the Banks’ bankruptcy.
Carl Christensen represents the Banks.
The “show me the note” defense may have legs after all, at least in certain contexts…