Reuven loaned $100 to Shimon for a year and holds a note of indebtedness (shtar) to evidence the indebtedness. Reuven wants to dispose of the shtar. For example, he may need the money now rather than wait a year. Or he feels that his estate is too large for tax purposes and he wants to give the $100 shtar to a friend as a gift. There are many reasons that may prompt Reuven to dispose of the shtar. Assume that Reuven needs immediate cash and wants to sell the shtar to Levi for $90. 

The shtar consists of the paper on which it is written and the written letters on the paper. Levi is not interested in the paper for its own sake. Levi wants to acquire the rights that the words on the paper enforce. But the letters are not a tangible thing that can be acquired in the manner in which tangible things are usually acquired. Thus there must be a method by which the rights that accompany the shtar can be acquired.

The sale and transfer of ownership to the shtar is effected by an assignment of the shtar. The assignment must be made in the form of a written deed that transfers ownership to the shtar. Even a kinyan with two witnesses who sign that they saw the assignment of ownership would not suffice, since such a writing would only serve as proof of the assignment; it's not an assignment itself. 

The assignment must state that it assigns the shtar and all of the rights that flow therefrom. Like any other document, the assignment must be signed by Reuven, the assignor, or by subscribing witnesses. If witnesses sign, they must write that they were instructed by the assignor to write the assignment that conveys the shtar and the rights thereunder. 

The shtar must be assigned in two parts; the delivery of the shtar assigned, and the delivery of the assignment. Neither element is sufficient without the other. The assignment may be endorsed on the shtar itself, or may be by a separate writing. Levi, the assignee, must physically take the assignment and the shtar into his hands and lift it up to show that he has acquired them. The assignment is valid even if one of the witnesses on the shtar is Levi himself. Once Levi has purchased the shtar, he may no longer be a witness to anything pertaining to the amendment or correction of the shtar.

Furthermore he may not testify as to any ambiguity in the shtar. Thus if Shimon pleads that the shtar is a forgery, Levi cannot testify and will have to prove the facts of the indebtedness and that the shtar is genuine from other sources. 

If Levi reassigns the shtar to Reuven named in the shtar, the delivery of the shtar suffices to effect the transfer and there need not be a separate assignment. 

In halachah, even after Reuven has sold or assigned the shtar to Levi, Reuven, or even his heirs if Reuven has died, may forgive all or part of the underlying debt of Shimon. Only Reuven can forgive the underlying debt. Neither Levi, nor any subsequent assignee from Levi may forgive the underlying debt, since they never acquired the right to Shimon’s personal obligation. Each indebtedness carries with it two distinct obligations: the personal obligation to repay the loan and the lien on the property of the debtor as guarantee for repayment. When Reuven sells the shtar he sells only the lien on Shimon’s property; he cannot transfer Shimon's personal obligation because it is not transferable. Reuven retains the personal obligation and this he can forgive. Reuven can forgive the debt even if he agreed with Levi that he would not, because Shimon always has the right to have the debt forgiven and Reuven would be giving away a right of Shimon by this agreement. Levi can protect himself from such action by not paying Reuven the $90 until Shimon endorses the shtar and states that he is obligated to Reuven and his assigns, then Reuven cannot forgive the underlying debt. Better still, Levi can protect himself by having a new shtar written and witnessed that states that Shimon owes $100 to Levi. However, in this case, Levi should keep the original shtar so that he will not lose his priorities as a creditor from the date of the original shtar. The second shtar should state that it is effective only if Levi gives up his rights under the first shtar. Another method to prevent Reuven from forgiving the debt would be for Shimon to admit before witnesses that the shtar being assigned by Reuven to Levi is a binding obligation upon Shimon. In the event that none of these procedures are followed and Reuven does forgive the indebtedness under the shatar so that Levi cannot sue Shimon, Reuven must pay Levi the value of the shtar at the time that Ruven forgave the debt. If Reuven dies his heirs are liable to pay Levi.

If the debtor, Shimon, alleges that he repaid the debt to Reuven, he must still pay Levi, since Levi has both the shtar and the assignment. Shimon can insist that Reuven take an oath that he was not repaid. If Reuven refuses to take such an oath, he must pay to Levi the value of the shtar. If Shimon died before the due date of the shtar, both Reuven and Levi must take oaths that they were not repaid the debt. 

If Levi has the shtar but does not have the assignment of the shtar to him, then of course Levi’s position is weakened regarding his relationship to both Reuven and Shimon. Regarding his relationship with Reuven, Reuven pleads that the assignment of the shtar was not effective. There are two opinions regarding his relationship to Reuven. One opinion is that Levi is believed that he received the shtar from Reuven without even the necessity of having to have witnesses testify to what he pleads. Dissenting opinions hold that Levi is not believed against Reuven without proof since there is a weakness in Levi’s position because he does not possess the assignment.
Regarding Levi’s relationship with Shimon, Shimon may insist that Levi produce witnesses that the shtar was assigned to Levi by Reuven. Levi must comply with such request. If Levi does not comply, he cannot collect the debt from Shimon. If Levi is able to prove with witnesses that the assignment was made, then Shimon must pay the $100 to Levi although Levi does not have the assignment of the shtar. 

Assume that the shtar was properly assigned without Shimon being aware of the assignment, and both Reuven & Levi sue Shimon to collect the debt, then Beth Din will direct and compel Shimon to pay Levi. If Shimon nevertheless paid Reuven, the Beth Din will compel Reuven to turn the money over to Levi. Levi has no legal claim against Shimon. 

The subject matter of this lesson is more fully discussed in Volume 2, Chapter 66 of A Restatement of Rabbinic Civil Law by E. Quint and on sale at local Judaica bookstores. 

Keep your questions coming. I answer most of them upon receipt.