Promissory Notes: Enforcement, Assignment, Ownership

Promissory cover many financial transactions, including mortgages and many types of commercial loans. In order for a plaintiff to prevail on a claim for breach of promissory note, the plaintiff must prove, among other things, that there is a (1) valid promissory note, (2) signed by the maker/debtor and that there (3) is an outstanding amount due. Fed. Nat. Mortg. Ass’n v. Bostwick, 414 S.W.3d 521, 526 (Mo. Ct. App. 2013); Section 400.3-308(b), RSMo.
In litigation, the ownership of the promissory note often comes up, particularly by a defendant seeking to challenge it on procedural grounds. This is due in part to the fact that creditors often assign/transfer promissory notes to other creditors and debt purchasers. If there are assignments/transfers of the promissory note, the plaintiff is required to prove the assignment of the account to show that it is the rightful owner of the debt. When there are multiple assignments, each assignment must be proven valid. CACH, LLC v. Askew, 35 S.W.3d, 58 61-62 (Mo. 2012). This can be quite onerous for a plaintiff (particularly if it is a financial institute) to do because they’ll need sufficient documentation and testimony.
It is very important that the ownership of a note is called into question in a very precise way. There is older case precedent in Missouri that the general denial of an assignment places ownership of a note and the validity of the assignments at issue. Sec. Inv. Co. v. Hicks, 444 S.W.2d 6, 9 (Mo. Ct. App. 1969). However, with the adoption of much of the Uniform Commercial Code (“UCC”) in Missouri, this may not be applicable to negotiable instruments. For instance, under Section 400.3-301.2, RSMo, actual ownership of a note is not required in order to enforce it. Fed. Nat. Mortg. Ass’n v. Conover, 428 S.W.3d 661, 669 (Mo. Ct. App. 2014). Moreover, the UCC further provides that all signatures on a promissory note are presumed valid — unless specifically denied in the pleadings. Sections 400.3-308, 400.3-204.3, RSMo. Therefore, in the event that you are defending a promissory note claim and are seeking to call its authenticity or ownership into question, it is important that the attorney challenge it properly or else several defenses could potentially be waived and lost.
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