Top Story - A Promise is a Promise
Date:
March 1 2005
If a mortgage is granted as “collateral security” to a note, and the note is not technically a “bill of exchange”, is the mortgage enforceable by the creditor? The answer is yes. In Sniderman v. Gibbs the borrower argued that because the note was not for a sum certain as required in the Bills of Exchange Act, it was not a bill of exchange and therefore was void. Because the note contained a promise by the borrower to pay all costs and expenses paid or incurred by the creditor in collecting under the note after demand, the court found that the note was not for a “sum certain” as required under the Bills of Exchange Act and therefore not a bill of exchange. The borrower reasoned that, because the mortgage was given as collateral security for a void note, the mortgage should also be treated as unenforceable.
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