“All Obligations Are Securities and Discharged by Indorsement”: HJR-192, 31 C.F.R. Part 328 and UCC Article 3

HJR-192 and legal tender

Lawtopolis publishes this discussion for informational and educational purposes, and as an exercise of the freedoms of speech, press, assembly, belief and religion protected by the First Amendment. It sets out what each statute and decision says and what courts have done with it. It is not legal advice and does not recommend any course of action.

… every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby, is declared to be against public policy …

H.J. Res. 192, § 1(a), 48 Stat. 112 (June 5, 1933)

In effect, the resolution ended the right to demand gold and let debtors discharge obligations “dollar for dollar” in legal tender. In other words, it describes how a debtor pays — in currency — not that paperwork can discharge a debt without payment. See the full review of House Joint Resolution 192.

31 C.F.R. Part 328

Part 328 is titled “Restrictive Endorsements of U.S. Bearer Securities.” However, by its own terms it applies “only to U.S. bearer securities presented … By or through banks for payment at or after their maturity,” for conversion to book-entry form, in payment of federal estate taxes, or by IRS officials. Section 328.5 prescribes forms of endorsement and § 328.6 the requirements for endorsement. In short, it concerns Treasury bonds a bank presents for redemption, so it does not apply to bills, coupons or private debts.

UCC Article 3 and discharge by indorsement

If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.

U.C.C. § 3-603(a)

• § 3-601(a) — first, an obligation to pay an instrument ends “as stated in this Article or by an act or agreement … which would discharge an obligation to pay money under a simple contract.”
• § 3-603(b) — next, if the holder refuses a tender, the refusal discharges indorsers and accommodation parties with recourse, to the amount tendered. It does not discharge the main obligor, who still owes the debt (though interest stops on the amount tendered, § 3-603(c)).
• § 3-311 — finally, accord and satisfaction by check requires a good-faith tender, an unliquidated amount or bona fide dispute, a conspicuous statement that the instrument is in full satisfaction, and payment of the instrument.

In law, a tender is an offer of actual payment in legal tender. Therefore, a signed coupon or “accepted for value” indorsement is not payment, so it is not a tender under these rules.

Securities and trust indentures

Similarly, the Securities Exchange Act defines “security” broadly but excludes “currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months” (15 U.S.C. § 78c(a)(10)). The Trust Indenture Act of 1939 applies to debt securities offered to the public under an indenture with a qualified trustee; § 304 exempts securities “issued otherwise than under an indenture” (15 U.S.C. § 77ddd). Of course, utilities and consumer lenders do not issue bills and loans under trust indentures.

How to check the discharge by indorsement claim yourself

The best test of discharge by indorsement is simple: look for a court that accepted it. We have not found one in the reported decisions. Next, read the actual law the claim points to. For example, check the statute, the UCC section or the constitutional text it cites. Then compare that text with what the claim says it means. For a real problem with a debt, a court case or a tax bill, a licensed attorney can explain your actual options. Our directory is a good place to start.

Sources and further reading

Official sources used on this page:

• ecfr.gov
• law.cornell.edu
• law.cornell.edu
• static.case.law
• law.cornell.edu

Related reading on Lawtopolis:

• House Joint Resolution 192 (1933)
• "Accepted for Value," Bills of Exchange and Debt Discharge
• Are Loans, Mortgages and Utility Bills "Government Obligations"? 18 U.S.C. § 8 and 31 U.S.C. § 1501
• IRS Forms 56, 2848, 1040-V and Payment Vouchers: What Each Form Does