Member Article

In a recent case by the Swedish Supreme Court (Sw. Högsta domstolen) (T 4904-08), the burden of proof of payments made by the debtor in relation to a negotiable promissory note was placed on the creditor.Since the borrowers had not confirmed that the debt had not been paid, the transferees were not in good faith in relation to the payment of the debt.  The effect is that the difference between negotiable promissory notes and ordinary claims has been blurred. Another consequence is that banks and other credit institutions are reconsidering their use of negotiable promissory notes. Background The case relates to a loan made to a couple of SEK 110,000 which was used to acquire a cooperative flat (Sw. bostadsrätt).

The couple received the loan from a finance company and entered into a customary loan agreement issued to the finance company or to order (i.e. a negotiable promissory note). The promissory note was immediately transferred from the finance company to a bank. After payment of the loan amount to the bank prior to the maturity date, the promissory note was transferred several times with a guarantee that the original principal amount had not been paid. Under Section 15 of the Promissory Notes Act (Sw. skuldebrevslagen (1936:81)), if a person has acted in good faith when acquiring possession of a negotiable instrument, it is not possible to raise a defense on the ground that, prior to the transfer, the debt has been extinguished or altered due to payment. However, the transferee shall not be considered to have acted in good faith if it was aware of the circumstances upon which the defense was based or had reasonable cause to believe that such circumstances existed. If a written notification has been made on the promissory note regarding payment, and where such notification could not be removed without difficulty but has nevertheless been removed, this fact may be raised as a defense notwithstanding that the new creditor has acted in good faith.  The transferee argued that even if the debtors had already paid off the debt, they were obliged to pay the full amount again, since they had issued a negotiable promissory note and each transferee
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