Colorado § 4-3-604 - Discharge by cancellation or renunciation.

§ 4-3-604. 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.

Source: L. 94: Entire article R&RE, p. 877, § 1, effective January 1, 1995. L. 2023: (a) amended, (SB 23-090), ch. 136, p. 531, § 23, effective August 7.

Editor's note: This section is similar to former § 4-3-605 as it existed prior to 1994.

ANNOTATION

Law reviews. For article, "One Year Review of Contracts", see 39 Dicta 161 (1962).

Annotator's note. The following annotations include cases decided under former provisions similar to this section.

Section does not apply where note is delivered. This section, providing that the release of a promissory note must be in writing, has no application to a case where the note is delivered to the maker by an authorized agent of the holder. Kitts v. Hill, 89 Colo. 186, 300 P. 610 (1931).

This section only applies if the defense of renunciation is asserted, and does not apply when an assertion is made that a party has waived its right to receive interest under the terms of a promissory note. Ebrahimi v. E.F. Hutton & Co., Inc., 794 P.2d 1015 (Colo. App. 1989).

This section provides that the renunciation of rights in a negotiable instrument must be in writing or the instrument itself must be delivered up to the person liable thereon. Coughlin v. Truitt, 149 Colo. 26, 367 P.2d 350 (1961); Berta v. Rocchio, 149 Colo. 325, 369 P.2d 51 (1962).

So oral evidence is inadmissible to establish a renunciation or release. Tisdel v. Central Sav. Bank & Trust Co., 90 Colo. 114, 6 P.2d 912 (1931); Coughlin v. Truitt, 149 Colo. 26, 367 P.2d 350 (1961); Berta v. Rocchio, 149 Colo. 325, 369 P.2d 51 (1962). But see Edmonston v. Ascough, 43 Colo. 55, 95 P. 313 (1908).

"Renunciation" is the unilateral act of the holder usually without consideration, whereby he expresses the intention of abandoning his rights on the instrument or against one or more parties thereto. Berta v. Rocchio, 149 Colo. 325, 369 P.2d 51 (1962).

Despite the language of this section, an intent to discharge a party is required, and consideration of evidence of intent of the parties is proper in determining the issue of discharge. Columbia Sav. and Loan Ass'n v. Zelinger, 794 P.2d 231 (Colo. 1990).

Where the affirmative defense of renunciation is asserted, the burden is upon those asserting the defense to produce a written renunciation or to prove that the note has been delivered up to them. Adams v. White, 173 Colo. 51, 476 P.2d 36 (1970).

Without delivery of a note to the maker, the writing of the word "paid" across the face of the note by payee and the signing of his name thereto does not operate to discharge the liability of the maker. Wittman v. Pickens, 33 Colo. 484, 81 P. 299 (1905).

Liability is discharged by cancellation and return. The liability of the payee of a promissory note who indorses when transferring it to another is discharged by the acts of the indorsee in cancelling and returning it to the maker and accepting in lieu thereof other evidences of indebtedness. Tomkins v. Tomkins, 78 Colo. 574, 243 P. 632 (1926).

Moreover, a note drawn to alternative, not joint, payees can be discharged only by a holder of the instrument. Reese v. Lietzan, 160 Colo. 253, 419 P.2d 959 (1966).

A cancellation induced through fraud does not act to discharge the parties to a note. Ohio Casualty Ins. Co. v. Yaklich, 768 P.2d 1274 (Colo. App. 1989).

Applied in Metro Nat'l Bank v. Roe, 675 P.2d 331 (Colo. App. 1983); Wynn v. Adams County Bank, 761 P.2d 234 (Colo. App. 1988).