In the case of JPMorgan Chase & Co. v. Casarano, the Massachusetts Appeals Court affirmed a decision by the Massachusetts Land Court invalidating a mortgage due to a lost promissory note.  The plaintiff sought to quiet title and establish the primacy of its mortgage.  The defendant was the holder of a second mortgage by assignment.  There was no dispute that the note secured by the second mortgage was lost. 

The defendant argued that the mortgage created a contractual obligation between the parties, and that the terms stated in the mortgage were sufficient to recreate the note.  The mortgage contained the principal amount, the interest rate and was signed under seal. 

The Appeals Court rejected the defendant’s argument and reasoned that a mortgage is a “conveyance made for the purpose of securing performance of a debt or obligation” and that without a valid promissory note, a mortgage is generally not enforceable.  Although the mortgage identified certain terms, it was silent on the maturity date, payment schedule, default terms, assignability, whether the note is under seal, and whether the instrument is a demand or term note.  Thus, without the note, the foundational requirements of a valid contract could not be met and the enforceability of the contract could not be determined. 

The court further stated that even if the terms of the missing note could be recreated from the mortgage; there was no possibility of ascertaining whether or not the statute of limitations on enforcement had lapsed.  Although a note and mortgage are meant to be read together, the terms of the mortgage lacked sufficient specificity to determine whether the note was signed under seal.  If the note was signed under seal, the contract would be enforceable for twenty years; however, if the note was not signed under seal, the contract would be enforceable for only six years.  

This decision reminds mortgagees of the importance of safeguarding promissory notes and maintaining good records.  In order to avoid a similar outcome, mortgagees may consider recording a copy of the note as an exhibit to the mortgage.