Pierre loaned his sister Patti 2,500 so that she could start a gymnastics coaching business. Pierre told Patti to pay him back whenever she could, with no interest. Patti wrote out an "IOU" to Pierre evidencing the loan. Does Pierre own a security in this instance? Why or why not?
Answer
Another law school quiz. Or else its your homework assignment and you are asking lawyers to do the work for you..
This is not a secured debt. A secured debt is secured by property of some kind. Think of a mortgage on a house - the borrower, to get funds to buy the house, grants a mortgage to the lender. The lender loans the funds which the borrower repays. If the borrower defaults, the lender then forecloses and takes back possession of the house. Same with a car loan - if the borrower does not pay, the car lender repo's the car.
In your example, you have a promissory note. There is nothing in your facts to suggest that at the time the note was signed that Pierre took any collateral as security for the loan - for example, Patti could have given title to her car, or a stock certificate.
Since there is nothing in your facts to suggest this, I would conclude that the promissory note is an unsecured debt meaning that Pierre has to sue Patti to recover for the money loaned. With a judgment he can go after property owned by Patti. However, he has no right to any pre-judgment possession of any particular item of property owned by Patti.
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