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Simple English definitions for legal terms
close-connectedness doctrine
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A quick definition of close-connectedness doctrine:
The close-connectedness doctrine is a rule that some courts use to prevent someone who receives a negotiable note from being considered a holder-in-due-course if they are too closely related to the original holder of the note. This means that if the person who gave you the note is too closely connected to you, you may not have the same legal rights as someone who received the note from a more distant source.
A more thorough explanation:
The close-connectedness doctrine is a legal principle used by some courts to prevent an assignee of a negotiable note from being considered a holder-in-due-course if they are too closely connected to the original holder-mortgagee.
For example, if a mortgage company assigns a note to a subsidiary or affiliate company, the assignee may not be considered a holder-in-due-course under the close-connectedness doctrine. This is because the assignee is too closely connected to the original holder-mortgagee.
The purpose of the close-connectedness doctrine is to prevent collusion or fraud between the original holder-mortgagee and the assignee, which could harm the interests of the borrower or other parties involved in the transaction.