Also known as: debt securities · bond · debenture · note
Written by attorneys · grounded in primary & secondary sources — see below
An obligation to pay that serves as the underlying debt secured by a mortgage or other security device. The obligation may be existing or future.
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Dominion Capital issued a long-term bond to Diana Delgado in exchange for a loan to develop land. Diana recorded a mortgage on the parcel reciting that it secured the bond as the underlying obligation. When Dominion defaulted on an unrelated debt, the mortgage remained enforceable because the bond constituted a valid existing debt security that the mortgage could secure.
Dustin Donovan purchased a debt security from Decker Electronics promising annual interest payments over ten years. A sudden regulatory ban on the company's manufacturing process made continued performance impossible without fault. The court discharged Dustin's remaining duty to make payments on the debt security because the supervening event rendered performance impracticable.
Demetrius Douglas sought visitation with his niece after forming a close bond with the child. The court required Demetrius to post a debt security in the form of a corporate bond to guarantee compliance with visitation terms. The bond served as the enforceable obligation securing the nonparent's commitment during the proceeding.
Daphne Doyle executed an international will but could not sign due to injury. She directed her attorney to sign her name on the document while noting the reason and the debt security she held in the estate. The will remained valid because the attorney properly recorded the substitution on the instrument.
Derek Douglas prepaid the full principal on a debt security held by Dillon Energy that was secured by a mortgage on commercial property. Upon receipt of payment, Dillon executed and recorded a satisfaction releasing the mortgage. The debt security obligation having been satisfied, the mortgage was extinguished from the public records.
Dominic Drake orally agreed to purchase a debt security from Dynamic Solutions and later received a signed email confirming the essential terms. The email, created after formation, satisfied the statute of frauds requirement for the transaction. Dynamic could enforce the debt security purchase against Drake based on the subsequent writing.
A debt security represents a continuing interest in the issuing corporation rather than functioning merely as sale proceeds. This distinction determines whether the instrument qualifies as property that can be received tax-free in a reorganization.
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Yes. A mortgage or other security device requires a valid underlying obligation, which may be an existing or future debt security. Without such an obligation the security instrument lacks enforceability and may be extinguished.
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Payment or prepayment of the full obligation generally discharges the mortgage. The mortgagor then becomes entitled to a recorded satisfaction that clears title.
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