Morris Manning & Martin, LLP

I Thought You Had It. No, I thought You Had It. What to Do When the Promissory Note Goes Missing.


With more and more loans being bought and sold between banks, the following situation is becoming more and more common. The borrower has defaulted on his loan, and you go to gather up the loan file to send to your attorney to file suit on the promissory note.  In looking through the file, you discovery that the bank does not have the original promissory note signed by the borrower.  To make matters worse, since your bank purchased the loan from the original lender, no one at your bank can testify from personal knowledge that the borrower actually signed the promissory note.  What do you do? 

Prior to 2002, the language of the Uniform Commercial Code was unclear as to whether a bank in the situation described above could enforce the note.  The “old” UCC § 3-309 stated that in order for a party to enforce a lost, destroyed or stolen promissory note, the party must prove that it “was in possession of the instrument and entitled to enforce it when loss of possession occurred.”  Several courts throughout the country interpreted that language to mean that only the party who was in possession of the note when it went missing could enforce a lost, destroyed or stolen promissory note, and that an assignee of the party who held the note when it went missing was simply out of luck.

UCC § 3‑309 was amended in 2002 to make it abundantly clear that a party who is an assignee of a party who was in possession of the note when it went missing can enforce the note.

The problem for lenders in Georgia is that the State of Georgia has never adopted the 2002 amendment to UCC § 3‑309.   Georgia’s statute, codified at O.C.G.A. § 11‑3‑309, still contains the “old” 3-309 language.  Complicating the issue further is that there is no reported Georgia case interpreting this particular aspect of O.C.G.A. § 11-3-309.  As a result, the law in Georgia is unclear as to whether an assignee of a lender who lost a promissory note can enforce the note.   Courts from other states that have looked at state law that is identical to Georgia’s statute have come down on both sides of the question.

So what do you do if your bank takes an assignment of a loan from another bank and the original promissory note has gone missing?  Despite the language in O.C.G.A. § 3-309, your best argument (and one adopted by several courts outside Georgia) is that because the lender who held the note when it went missing had the right to enforce the note under “old” 3-309, then that lender can assign its enforcement right to your bank.  In order to make this argument, O.C.G.A. § 3-309 requires you to put up certain proof. You will need an affidavit from the original lender attesting that it was in possession of the note when it went missing, that the note has not gone missing due to being transferred or being lawfully seized, and that the lender cannot reasonably re-obtain possession of the note. 

If you can gather up this evidence, you have a strong argument that your bank has the right to enforce the note no matter where it may be.  But be warned, O.C.G.A. § 11-3-309(b) allows the Court to require your bank to indemnify the borrower should the original promissory note ever turn up and someone else attempt to sue the borrower on the same debt. 

This article was originally published in the Community Bankers Association of Georgia newsletter, CBA Today. The views expressed in this article are those of the author and are not meant to be construed as legal advice.