Pierre loaned his sister Patti 2,500 so that she could start a gymnastics coaching business. Pierre told Patti to pay him back whenever she could, with no interest. Patti wrote out an "IOU" to Pierre evidencing the loan. Does Pierre own a security in this instance? Why or why not?
1 Answer from Attorneys
Another law school quiz. Or else its your homework assignment and you are asking lawyers to do the work for you..
This is not a secured debt. A secured debt is secured by property of some kind. Think of a mortgage on a house - the borrower, to get funds to buy the house, grants a mortgage to the lender. The lender loans the funds which the borrower repays. If the borrower defaults, the lender then forecloses and takes back possession of the house. Same with a car loan - if the borrower does not pay, the car lender repo's the car.
In your example, you have a promissory note. There is nothing in your facts to suggest that at the time the note was signed that Pierre took any collateral as security for the loan - for example, Patti could have given title to her car, or a stock certificate.
Since there is nothing in your facts to suggest this, I would conclude that the promissory note is an unsecured debt meaning that Pierre has to sue Patti to recover for the money loaned. With a judgment he can go after property owned by Patti. However, he has no right to any pre-judgment possession of any particular item of property owned by Patti.
Related Questions & Answers
1) Lloyd borrows money from Collin. In exchange for the loan, Lloyd offers Collins a... Asked 10/15/13, 11:39 am in United States Pennsylvania Business Law
I'm start a web design company and purchased an LLC. Is there an annual fee for... Asked 10/11/13, 1:50 pm in United States Pennsylvania Business Law
I need help regarding my MLM. I am a distributor for a product. I received an email... Asked 10/05/13, 11:58 am in United States Pennsylvania Business Law
Can a non-US person resident outside the US take a US person to small claims court... Asked 9/16/13, 10:32 pm in United States Pennsylvania Business Law
Corporation dissolution / partner firing question so here is my question: I was an... Asked 9/16/13, 12:09 pm in United States Pennsylvania Business Law