Question about secured loan (need answer fast)

So, my inlaws were once in a much better financial position than they are now. When one of their nephews was in dire financial straits, they loaned him $10k. He gave them as a surety against the loan a diamond ring which had been certified as being worth $15k. (A certification that was worth approximately the paper it was written on, of course.) He also hand-wrote an IOU. If it’s relevant, the ring-as-surety was the cousin’s idea.

Nowadays, the cousin is nowhere to be found and my inlaws are the ones in dire financial straits. We went to sell the ring and couldn’t find a place that would give us more than $750 for it.

My question is this: If we do sell the ring, and miraculously the cousin reappears and wants to pay them back, what position will they be in? Can the cousin say “Well, you don’t have my ring, so I don’t have to pay you”? Or can we just credit the $750 against the $10k?

Bumping - speculation is encouraged - Husband is out trying to get a better price for the ring right now.

Was there a written loan agreement? If so, has he actually defaulted on the loan? Since we’re speculating, not offering legal advice, blah blah blah, I’d suggest making a good faith effort to have the loan repaid - certified letter to his last known address, etc. Then, hock away.

There was a written agreement, with interest rate and everything, but I don’t know if it was notarized and I don’t remember if it made arrangements for how much was to be paid back at what schedule.

To make things even more complex, he’s in Arizona and we’re in California, so I don’t know if we’d even be able to take him to court/enforce a judgement.

A notary seal isn’t strictly necessary. Presumably there’s a written record of the transaction - a cashier’s check order, or whatever. Evidence that he received the funds and that he agreed to pay them back are generally sufficient.

Jurisdiction is a bit more complicated, but assuming he lived in California at some point he is most likely subject to jurisdiction of CA courts - especially if he was in CA at the time of the loan.

As a general rule, if collateral securing the loan is not worth the full value of the loan, then the remainder is merely considered an unsecured loan. But to be a security interest, the ring might have had to comply with certain provisions of Art 9 (IIRC) of the Uniform Commercial Code, so if it didn’t, the rules about secured transactions might not apply.

Your in-laws’ local bar association probably sponsors free legal clinics. This seems to me like the kind of question that would be right in their wheelhouse.


You need to simplify this scenario down to it’s real world elements. Paying an attorney for an opinion might be useful information if there was any chance whatsoever the loan would be paid back, but it is of dubious practical value in this situation, and is IMO throwing good money after bad.

They need to realize as a concrete fact that it is most probable they will never see that money again. It is gone, gone, gone.

Shop around and sell the ring for what can be gotten. If some miracle does occur and he pops up again and pays the money back it’s a pure bonus but the chances of that happening are infinitesimal.