Supporting, Informing & Connecting People in Foreclosure

Intentional Destruction of the Note

§ 913 By loss or destruction of instrument [11 Am Jur 2d BILLS AND NOTES]

If the holder of an instrument intentionally destroys it he thereby forgives and discharges the debt and he may not maintain an action based upon the instrument. The instrument is discharged by cancellation and it is immaterial that there is no consideration and a gift is involved and that there is no written renunciation of rights or delivery of the instrument. District of Columbia v Cornell, 130 US 655, 32 L ed 1041, 9 S Ct 694; State Street Trust Co. v Muskogee Electric Traction Co. (CA10 Okla) 204 F2d 920; Darland v Taylor, 52 Iowa 503, 3 NW 510; Norton v Smith, 130 Me 58, 153 A 886; McDonald v Loomis, 233 Mich 174, 206 NW 348; Wilkins v Skoglund, 127 Neb 589, 256 NW 31; Vanauken v Hornbeck, 14 NJL 178; Henson v Henson, 151 Tenn 137, 268 SW 378, 37 ALR 1131. It has been said that there can be no higher evidence than this of an intention to discharge and cancel the debt created or represented by the instrument destroyed. State Street Trust Co. v Muskogee Electric Traction Co. (CA10 Okla) 204 F2d 920; Larkin v Hardenbrook, 90 NY 333.

The purpose or intent of the holder beyond the intent to destroy his evidence of indebtedness is immaterial. State Street Trust Co. v Muskogee Electric Traction Co. (CA10 Okla) 204 F2d 920 (applying Oklahoma law).

Thus, the intentional destruction of negotiable instruments by the holder, believing them to be valueless, works a cancellation and discharge of the debt evidenced thereby. State Street Trust Co. v Muskogee Electric Traction Co., supra.

The destruction of a promissory note by a third person by command of the payee or holder is equivalent to its destruction by his own act. Henson v Henson, 151 Tenn 137, 268 SW 378, 37 ALR 1131.

But a mere intent to destroy the instrument or unfulfilled instructions to another to do so are ineffectual to discharge the obligation. Re Campbell, 7 Pa 100.

A statute providing that a lost instrument may be supplied by an affidavit stating that such instrument has been unintentionally lost or mislaid and is still the property of the person claiming it, unpaid and unsatisfied, has no application to an instrument which has been intentionally destroyed. Henson v Henson, 151 Tenn 137, 268 SW 378, 37 ALR 1131.

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Permalink Reply by Glenn Augenstein on April 10, 2010 at 12:30am

UCC 3-604:

A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument:
(a) By an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party's signature, or the addition of words to the instrument indicating discharge;

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Permalink Reply by Alina on April 10, 2010 at 9:34am

Exactly Steve. I was just quoting some very old case law that is still good for anyone who wants to use it. In Florida, the relevant statute is 673.6041:

673.6041 Discharge by cancellation or renunciation.--

(1) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument:

(a) By an intentional voluntary act, such as:

1. Surrender of the instrument to the party;

2. Destruction, mutilation, or cancellation of the instrument;

3. Cancellation or striking out of the party's signature; or

4. Addition of words to the instrument indicating discharge; or

(b) By agreeing not to sue or otherwise renouncing rights against the party by a signed writing.

The Florida Banker's Association have not yet realized the full ramifications of their written words to the Florida Supreme Court.

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Permalink Reply by Glenn Augenstein on April 10, 2010 at 10:05am

Alina,

I had a helpful fellow a couple of years ago just hammer into me "Read the rules!!!" He was right. How can we expect to win the game if we don't know the rules? At this point I know some sections of the rules better than most attorneys I speak with. I continue to read them and most times I do I gain a new and valuable perspective.

I feel the same way about the law. Read the law!!! So I posted the reference to the UCC, which seems to be the underlying law to your above referenced cases.

Another useful section of the UCC is 3-501, Presentment, which states in relevant part:

(a) "Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.

(b) The following rules are subject to Article 4, agreement of the parties, and clearing-house rules and the like:

(1) Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of two or more makers, acceptors, drawees, or other payors.

(2) Upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument, (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.

(3) Without dishonoring the instrument, the party to whom presentment is made may (i) return the instrument for lack of a necessary indorsement, or (ii) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule.

(4) The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cut-off hour not earlier than 2 p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.

Hoyer's office popularized a "make 'em produce the note" strategy. UCC 3-501 is the basis for that.

Here is a link to the Federal UCC through Cornell Law:

http://www.law.cornell.edu/ucc/ucc.table.html

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Permalink Reply by Alina on April 10, 2010 at 11:19am

Steve,

The "helpful fellow" was right on. You have to read and know the rules.

The problem I am seeing with the majority of these foreclosures is that there is such variety of rules that may apply, i.e, IRS, SEC, UCC, state statutes, etc. Unforetunately, the nature of this beast means that it would take a regular person years to read each and every rule that may apply to their own case.

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Permalink Reply by Glenn Augenstein on April 10, 2010 at 12:21pm

Alina,

Surely that is a problem.

99% of foreclosures aren't defended at all. Is that what "regular" is? If so then you're not "regular" (I sincerely mean that as a compliment). Neither am I. Nor are most others involved in this fight. "Regular" or "normal" aren't always qualities worthy of aspiring to.

My fight has been going on for 29 months now. People have said to me things like "You're so brave to be doing this," or "My but you're an incredibly strong individual," or "You have a lot of courage."

Pfft.

Truth is I'm terrified of being put out on the street, with nothing, and having just lost my lifes work. Everything I have (all possessions, and a good portion of my soul) is wrapped up in this property. I am well aware that what drives me is that fear. Because of my specific blend of dysfunctions and neuroses* I am of the/a particular personality type to at least be willing to fight for the duration. If I win then I'll also say I'm able.

*That comes from childhood when I was told and taught by family, school, church, media, that "good" behavior is rewarded and "bad" behavior is punished. But that isn't the way the world seems to work. I've been pissed off ever since, and trying to get the world to conform to that early childhood ideal. Fighting the bank AND the court comes from that place.

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Permalink Reply by Alina on April 10, 2010 at 1:03pm

Steve,

I am fighting not just for myself but for all those who are on the verge of losing their home. This insanity has to stop somewhere. Most elected officials do not realize that the banks/lenders/creditors make more money in foreclosing a home than in trying to keep a family in their home. My heart breaks every time I hear about a family being put out on the street.

The ones leading the charge to nonjudicial foreclosure in Florida do so by calling these hardworking American families "deadbeat scumbags." Somehow, they beleive that if they label these families as such, this will give credence to their arguments. What they fail to understand is that these families are not trying to get something for nothing. Through no fault of their own, they have been placed in a very precarious position. They wuld like nothing more than to be able to pay mortgages. The government has advised all of us that all we need to do is contact the banks/lenders/creditor and they will modify the loans. The governemnt has given these entities billions of our tax dollars specifically for this purpose. However, these entities have no intention of working with struggling homeowners because they are not the ones calling the shots. The one caling the shots are the investors and they are not willing to work with the homeowners.

Because these loans were rushed, there were many errors made. Why shouldn't a homeowner use any and all legal defenses available to them? The homeowner is not trying to game the system but simply trying to protect their own little pie in the sky - their small bit of the American dream.

Anyway, enough of my soapbox. I am glad that you decided to join the Hamlet. Wish that our "helpful fellow" will do the same. We need him and his intellectual arguments. I miss his voice of reason.

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Permalink Reply by Glenn Augenstein on April 10, 2010 at 1:41pm

Alina,

As far as I'm concerned you can stay on the soap box as long as you like. Your knowledge and insights are always welcomed by me.

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Permalink Reply by Angry&NOT TAKING IT on April 10, 2010 at 10:22pm

"The one caling the shots are the investors "
i would love to see ANY evidence of this.
If the servicer wants to recoup advances made [as per the psa] this can only be accomplished by liquidating the asset. Any additional fees servicers can tack on is only more $ profit for them.I believe the average loan pays aprox $60 per year as the servicing fee [under the psa]