When two promissory notes represent the same debt, which one is legally valid?
<p>An application was completed for a FFEL guaranteed student loan consolidation including a signature on the bottom, promissory note section. The guarantee company insisted a second, computer generated full promissory note be signed. I assumed they would void the first. The list of banks representing the loans to be consolidated on the second note are in conflict with the list on the first note. I am not sure which list is accurate.</p>

<p>Is either note valid and/or enforceable? The information is in conflict. Also, my signature is crossed out on the second, initialed and signed differently. I don't remember doing that and it's not on the copy I have. And lastly, both notes were printed years before the 1992 amendments so not all options for repayment are listed and the disclosure "this is a loan which must be repaid" is not present anywhere. I had read in the Colorado Student Loan Training Manual that duplicate notes are not enforceable.</p>

<p>Without reading the exact language of the documents it is hard to tell. Two possible interpretations of these documents are most plausible.</p>

<p>One interpretation is that the first note is the true promissory note and the second note is a written reaffirmation of the original promissory note which would extend the statute of limitations for enforcing it if there had not been regular payments, but does not create a new obligation or supersede the original note. But, it probably could be enforced if push came to shove, on some legal theory if the original first note was unavailable.</p>

<p>A second interpretation is that the second note is a novation of the original note that replaces and supersedes the original note. Given the differences in the parties to the second note, I would be inclined to give this interpretation a greatly likelihood of being correct, but again, it would come down to the exact language of the documents.</p>

<p>Promissory notes are tricky because they are "negotiable instruments" which means that the right to receive payment and enforce the note can be transferred to a new "Note Holder" by transferring the physical original note and endorsing the back.</p>

<p>The concern in the case of a promissory note is that someone with a photocopy could claim to be the Note Holder when in fact, the physical original has been negotiated to another person who is the true Note Holder to whom the obligation is now currently owed. If judgment were entered against the former Note Holder that might not prevent the true Note Holder from also getting a judgment against you, leaving you to try to vacate the judgment in favor of the former Note Holder and to seek restitution of any funds paid to the former Note Holder.</p>

<p>This could be prevented by insisting on an original note or by requiring the party bringing suit without an original note to post a bond to protect you in the event that the note was actually physically negotiated to someone else. The risk could be mitigated, but not entirely eliminated, if you were sued in a collection action, by joining all of the note holders listed on either note and their successors in interest, as third-party defendants.</p>

<p>While I'm not aware of any significant litigation concerning who the Note Holder is in the case of student loans, there was quite a bit of litigation concerning the true Note Holder in the subprime mortgage loan context around the time of the Financial Crisis of 2008.</p>

<p>The modification of the signature, apparently without your authorization, is deeply problematic and might amount to fraud, but could be found by a court to be harmless because you admit to signing the original. Fraud in a matter that is immaterial is usually not actionable, although it could still constitute grounds to disbar an attorney if this action was authorized by an attorney.</p>

<p>The fact that neither of the notes complies with subsequently enacted legislation is irrelevant as you can't have an <em>ex post facto</em> law that <em>impairs obligations of contracts</em> under the U.S. Constitution.</p>

<p>In the meantime, don't throw out anything related to this loan or delete any files related to it. You could need them to defend yourself in future litigation.</p>

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