You have asked whether the words "[t]his note shall not be sold to another entity"
contained in a promissory note owned by SSI claimants constitutes a legal bar to the
note's sale, thereby removing the note's value from consideration as a resource for
SSI purposes. For the reasons outlined below, we believe you would be justified in
finding that the value of the note should be considered as a resource.
According to the regulations a resource is defined as:
(Cash) or other liquid assets or any real or personal property that an individual
(or spouse, if any) owns and could convert to cash to be used for his support and
maintenance. If the individual has the right, authority or power to liquidate the
property or his or her share of the property, it is considered a resource. If a property
right cannot be liquidated, the property will not be considered a resource of the
individual (or spouse).
20 C.F.R. § 416.1201(a).
According to POMS SI 01140.300 and SI O1120.220, the SSI resource value of the property agreement is assumed to
be the outstanding principal balance. However, this assumption can be rebutted if
the claimant can provide evidence of a legal bar to the sale of the note.
PROMISSORY NOTE PROVISIONS
The material you sent us contains a copy of a promissory note for real property located
in Missouri and sold by the claimants, Albert and Dorothey L~, to the debtors, Arthur
F~ and Jalene L. M~ for $75,000. It provides that Mr. F~ and Ms. M~ are to pay to
the order of the claimants one down payment of $500.00, and to pay the remaining balance
in 240 monthly installments of $646.53. The promissory note contains the statement
"[t]his note can not be sold to another entity," in different type at the end of the
"Negotiable commercial notes represent money, and they are intended to pass from hand
to hand as money." H~ v. E~, 81 S.W. 466, 467 (Mo. Ct. App. 1904). H~ involved a promissory note which the court
found was not negotiable due to the notation, "This note is not transferable nor to
be used as collateral without the written consent of principal and indorsers. And
if so used shall be absolutely void." Although the court found that this language
destroyed the negotiability of the note, it determined that is was nevertheless assignable
and transferable as any other nonnegotiable paper. Id at 467. More recent Missouri
cases also reflect that a promissory note that is not negotiable may nevertheless
be transferred by assignment. See G~
v. H~, 857 S.W. 2d 260 (Mo. App. 1993); R~ v. F~, 660 S.W.2d 463, 468 (Mo. App. 1983). As a general rule, unless otherwise agreed,
any written contract or instrument for the payment of money may be assigned.
Although the L~'s promissory note is not negotiable, they could still assign to a
third party their rights to the remaining payments. Thus, they could convert their
interest in the property to cash to be used for their support and maintenance. The
note is, therefore, a countable resource for SSI purposes.
The only remaining question is the note's value. The value of the note depends upon
its marketability. Considering the note is not negotiable, its present market value
may be less than the principal balance. However, because the note seems to clearly
be worth more than $3,000, we see no need to determine its exact value. We believe
it would be reasonable for you to conclude that the note has a market value of at
least $3,000 unless the claimants can establish otherwise.
Should the claimants submit evidence indicating a lesser value, you may wish to investigate
whether the clause destroying the note's negotiability was on the original note when
signed by the debtors and when it was recorded. A notation on the note indicates it
is recorded. You may also wish to contact banks and other financial institutions in
the area to determine the value of the note.