Okla. Stat. tit. 12A § 3-604

Current through Laws 2024, c. 453.

Section 3-604 - Discharge by cancellation or renunciation

(a) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (i) 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, or (ii) by agreeing not to sue or otherwise renouncing rights against the party by a signed record. The obligation of a party to pay a check is not discharged solely by destruction of the check in connection with a process in which information is extracted from the check and an image of the check is made and, subsequently, the information and image are transmitted for payment.

(b) Cancellation or striking out of an indorsement pursuant to subsection (a) of this section does not affect the status and rights of a party derived from the indorsement.

Okla. Stat. tit. 12A, § 3-604

Amended by Laws 2024 , c. 13, s. 23, eff. 11/1/2024.

Added by Laws 1961, SB 36, p. 118, § 3-603; Amended by Laws 1991, SB 25, c. 117, § 91, eff. 1/1/1992; Amended by Laws 2008 , SB 1708, c. 382, § 11, eff. 11/1/2008 (Laws 2008, SB 1708, c. 382 held unconstitutional and void by Weddington v. Henry, 2008 OK 102, 202 P.3d 143, and repealed by Laws 2009 , SB 991, c. 208, § 22, eff. 11/1/2009); Amended by Laws 2009 , SB 991, c. 208, § 11, eff. 11/1/2009.

Oklahoma Code Comment

15. Sub section 3-604(a) provides for discharge of an instrument by an intentional, voluntary act. However, if cancellation of a negotiable instrument is made unintentionally or by mistake, then the cancellation is inoperative. And if an instrument or any signature on it appears to have been cancelled, then the party who asserts unintentional or mistaken cancellation has the burden of proof to establish that fact. See Hanna v. Parrish, 317 P.2d 745 (Okla. 1957). Thus, where a seller transferred a buyer's note, with recourse, to a bank and the buyer subsequently defaulted requiring that the seller pay the bank, the fact that the bank had marked the note "Paid," without a written assignment to the seller, did not discharge the buyer's liability on the note. K. & S. Inter'l, Inc. v. Howard, 249 Ark. 901, 462 S.W.2d 458 (1971).

16. When a negotiable note is delivered to the maker or person primarily liable on the note, discharge by renunciation may be oral. See Abraham v. Mike, 179 Okla. 224, 65 P.2d 183 (1937). Discharge of a negotiable instrument by intentional cancellation need not be in writing and the intentional destruction of a note destroys the right of action upon it. In determining whether there has been an intentional cancellation, the holder's purpose or intent, beyond the intent to destroy the evidence of indebtedness, is immaterial. See State Street Trust Co. v. Muskogee Elec. Traction Co., 204 F.2d 920 (10th Cir. 1953). A provision contained in a promissory note to the effect that if the payee fails to survive the maker, then the note should not be paid but should be cancelled and surrendered, is not a renunciation. See Daugherty v. Preuitt, 113 Okla. 66, 242 P. 529 (1925).

17. When there is an entire failure of consideration for a note and mortgage, and fraud is shown, the court will order a surrender of the note and cancellation of the mortgage irrespective of any question of other remedies at law. See Garretson v. Witherspoon, 15 Okla. 472, 83 P. 415 (1905).

18. Sub section 3-604(a)(ii) provides that a person entitled to enforce an instrument may discharge a party's obligation to pay the instrument by agreeing not to sue or otherwise renouncing rights against the party by a signed writing. Oklahoma recognizes the validity of an agreement not to sue as it applies to substantive rights of a party, but not as to remedies or procedure. See 15 Okla. Stat. § 216 (1910); Jordon v. Texaco, Inc., 297 F.Supp. 1140 (W.D. Okla. 1969); Farmers Elevator Mutual Ins. Co. v. Jorski Mill & Elevator Co., 259 F.Supp. 755 (W.D. Okla. 1966), aff'd, 404 F.2d 143 (10th Cir. 1968). However, surrender of an unenforceable negotiable note is not valuable consideration for a third party's assumption of a debt. See Bradstreet v. Crosbie, 123 Okla. 269, 253 P. 63 (1926).

This section overrules prior Oklahoma case law holding that the oral promise of a negotiable instrument's holder to release the maker of the instrument could be established by parol evidence. See Johnston & Larimer Dry Goods Co. v. Helf, 178 Okla. 527, 63 P.2d 681 (Okla. 1936).