FRNs and "Lawful Money" (U.S. v. Thomas)

FRNs and "Lawful Money" (U.S. v. Thomas)

Postby wserra » Tue Nov 22, 2011 2:01 am

I allowed myself to be drawn into a debate (start at the post 11-14-11, 1:27 AM) over whether FRNs are "lawful money". I don't go there often; it had actually been going on for over a week, addressed to me but unbeknownst to me, until someone emailed me. A poster named "indio007" came up with a case I had never seen - United States v. Thomas, 319 F.3d 640 (3rd Cir. 2003). It contains the following language:
Paper currency, in the form of the Federal Reserve Note, is defined as an "obligation[] of the United States" that may be "redeemed in lawful money on demand." 12 U.S.C. § 411 (2002). These bills are not "money" per se but promissory notes supported by the monetary reserves of the United States.
Now, I don't think that's very accurate.

Here's how I dealt with it there:
I hadn't seen that case before. That's a damn good question.

I think the answer is that you have to read cases as wholes, not pull quotes from context. The issue in Thomas was not directly whether FRNs are money or notes. Thomas was a drug dealer, from whom the DEA had seized cash (FRNs) to forfeit. The problem arose when the DEA converted the cash to a cashier's check. There is a line of in rem forfeiture cases that holds the the forfeiture is defeated if the govt relinquishes possession of the item before the forfeiture is complete. Thomas argued that the govt did exactly that. The Third Circuit was squirming to avoid that conclusion. In doing so, it used the language you quote to say, hey, FRNs are not that different from checks. I don't think they put a lot of thought into that conclusion before writing it. After all, in an earlier part of the opinion (¶4) they explicitly refer to the seized funds as "the money". It doesn't make a lot of sense to first say that FRNs are money and later say they're not.

In fact, of course, many, many cases (both state and federal) explicitly hold that FRNs are "lawful money", and where that is the issue to be decided, not a peripheral one. I already cited Rickman. Take a look at Poe v. C.I.R., T.C. Memo. 1983-312; United States v. Farber, 679 F.2d 733 (8th Cir. 1982); United States v. Ware, 608 F.2d 400 (10th Cir. 1979); Love v. Baldwin United Mortgage Co., 168 Ga.App. 361 (1983); Herald v. State, 107 Idaho 640 (1984); Brand v. State, 828 S.W.2d 824 (TX App. 1992). And many, many others. And consider a statute, 31 USC 5103: "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues." Can you force someone to accept a note (a promise to pay, essentially an IOU) as payment for a debt? It is simply indisputable that FRNs are in fact money.

So Thomas is a good find, but I submit that it's an anomaly. Moreover, in the face of the drove of cases holding FRNs "lawful money", please cite one that says they aren't.


I admit to not being completely satisfied with that answer. Anyone have a better one?
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Re: FRNs and "Lawful Money"

Postby notorial dissent » Tue Nov 22, 2011 2:59 am

My opinion, FWIW, is that this was just a case of sloppy writing on the part of the court, or more likely the law clerk who actually wrote the opinion. The rest of the opinion is pretty much to the effect that FRN's ARE money, not the other way around, that little section is not particularly well written. I think this comes under the anamoly rule, particularly as there are no other cases taking this stance, and the writing contradicts itself about the status, as in one place it calls them money and then turns around and sort of says they are not. I personally think that whoever wrote the opinion was using an old definition of FRN as a base and got distracted, and since this hasn't been quoted in any other cases, I don't think anyone else agrees with it either, or more importantly, expects a court to go along with it in light of the bulk of cases taking the affirmative that it is money position.
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Re: FRNs and "Lawful Money"

Postby Arthur Rubin » Tue Nov 22, 2011 3:25 am

wserra wrote:I allowed myself to be drawn into a debate (start at the post 11-14-11, 1:27 AM) over whether FRNs are "lawful money". I don't go there often; it had actually been going on for over a week, addressed to me but unbeknownst to me, until someone emailed me. A poster named "indio007" came up with a case I had never seen - United States v. Thomas, 319 F.3d 640 (3rd Cir. 2003). It contains the following language:
Paper currency, in the form of the Federal Reserve Note, is defined as an "obligation[] of the United States" that may be "redeemed in lawful money on demand." 12 U.S.C. § 411 (2002). These bills are not "money" per se but promissory notes supported by the monetary reserves of the United States.
Now, I don't think that's very accurate.

Here's how I dealt with it there:
I hadn't seen that case before. That's a damn good question.

I think the answer is that you have to read cases as wholes, not pull quotes from context. The issue in Thomas was not directly whether FRNs are money or notes. Thomas was a drug dealer, from whom the DEA had seized cash (FRNs) to forfeit. The problem arose when the DEA converted the cash to a cashier's check. There is a line of in rem forfeiture cases that holds the the forfeiture is defeated if the govt relinquishes possession of the item before the forfeiture is complete. Thomas argued that the govt did exactly that. The Third Circuit was squirming to avoid that conclusion. In doing so, it used the language you quote to say, hey, FRNs are not that different from checks. I don't think they put a lot of thought into that conclusion before writing it. After all, in an earlier part of the opinion (¶4) they explicitly refer to the seized funds as "the money". It doesn't make a lot of sense to first say that FRNs are money and later say they're not.
I can't say I like it much, either. However, the preceding paragraph and the entire paragraph containing the questionable text reads:
It behooves authorities to preserve seized money in the form in which they seized it when they intend to use it as physical evidence in a trial. Typical situations are when cash traded for drugs contains trace residue of the narcotics involved or when the serial numbers on the bills implicate the accused. However, when no legal significance attaches to the bills themselves, some courts favor a departure from literal application of in rem jurisdiction. In Madewell v. Downs, 68 F.3d 1030, 1042 n. 14 (8th Cir.1995), the Eighth Circuit refused to follow Scarabin, holding that “[c]urrency, cashier's checks, and bank deposits are simply surrogates for each other, and in modern society are certainly regarded as ‘fungible,’ when the question is ownership of the funds each represents.” Similarly, the Ninth Circuit rejected the argument that when “currency was exchanged for a cashier's check, the currency, which is the res, ‘disappeared into the banking system and is no longer identifiable.’ ” United States v. $46,588 in U.S. Currency and $20.00 in Canadian Currency, 103 F.3d 902, 905 (9th Cir.1996). Citing Madewell, it held that “the cashier's check was an appropriate, fungible surrogate for the seized currency.” Id.

This approach accords comfortably with the jurisprudence of civil forfeiture. Historically, forfeiture proceeded from the legal fiction that property used in the commission of a crime itself offends the law. See, e.g., The Palmyra, 25 U.S. (12 Wheat.) 1, 14, 6 L.Ed. 531 (1827). The forfeited res, as a legal entity, is identical with the physical article when the property is, for example, a sea vessel, an automobile, or a firearm. Currency, however, differs substantially from such objects. Paper currency, in the form of the Federal Reserve Note, is defined as an “obligation[ ] of the United States” that may be “redeemed in *645 lawful money on demand.” 12 U.S.C. § 411 (2002). These bills are not “money” per se but promissory notes supported by the monetary reserves of the United States. When an individual engages in a criminal transaction with paper currency, although the individual certainly uses the notes to accomplish the criminal end, the currency's monetary value funds the transaction and is also an appropriate target of forfeiture. This result also follows from the fact that an individual who uses legal documents representing ownership of land to raise funds for a criminal purpose renders the land itself subject to forfeiture. See United States v. RD 1, Box 1, Thompsontown, 952 F.2d 53 (3d Cir.1991). It would be absurd, in that case, to suppose that forfeiture could attach only to the document and not to the legal interests represented by that document. We therefore hold that the DEA did not abandon the res when it converted the currency to a cashier's check.
I would argue that the questionable argument is "dicta", in that it's not necessary to reach the Court's conclusion. On the other hand, the Scarabin case in question is one that reached the opposite conclusion when the seizing agency converted the cash to a cashier's check, and sent that to the DEA, which then deposited the check. However, in Scarabin, the court was desperately trying to find a reason why the funds shouldn't have been forfeited, as "Scarabin pursued remission of forfeiture via administrative channels but was rebuffed due to a technicality," the 5th Circuit ruled that it couldn't overturn the decision, but suggested that the DEA return the money anyway. After the DEA refused, and the 5th Circuit justices discovered the cashier's check problem, they decided they did have the power, and acted accordingly.

Does this help?
Last edited by Arthur Rubin on Tue Nov 22, 2011 3:28 am, edited 1 time in total.
Reason: Adjust quote levels
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Re: FRNs and "Lawful Money"

Postby grixit » Tue Nov 22, 2011 4:43 am

One could argue that, as the authorities did not seize any bills or coins that were special as individual objects, all that mattered was the value. And as long as there's a paper trail for the conversion, chain of custody is maintained. Personally, if some cops came and took money from me, i'd rather it be kept in escrow as a number than in the evidence depot at the risk of shrinkage.
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Re: FRNs and "Lawful Money"

Postby JamesVincent » Tue Nov 22, 2011 5:38 am

I would have thought they would have had been forced to keep them, if nothing else for tracking purposes. Bills numbered such and such, seized such and such from such and such on this date and so on and so forth. I could see them doing it either way but the simplest way would seem to be simply locking them up as the original bills, wouldnt it? Totally not the topic but still. On topic, that does seem kinda weird, even to my none fully educated eye. Almost like someone like someone started out copying something and then switched to copying something else part way through.
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Re: FRNs and "Lawful Money"

Postby wserra » Tue Nov 22, 2011 1:40 pm

Arthur Rubin wrote:Does this help?


Thank you, but not really. I realize it's dicta, and I realize (and wrote) that a certain degree of squirming is going on here. But I think the problem is that non-lawyers don't realize that, when not central to the issue at hand, courts (even competent courts, such as the Third Circuit) sometimes throw off comments without a lot of thought. Since certain folks live on saying that the courts are wrong, this is always an "I told you so" moment. It does not and will not impress those folks (and I do not include everyone at SJ Forum) that 99.9% of the courts that have addressed the matter - and 100% of the courts that have addressed the matter as holding and not dicta - have ruled the opposite.

So there may not be a satisfactory answer. Dan? Prof? Doc C? JRB? Lawdog?
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Re: FRNs and "Lawful Money"

Postby notorial dissent » Tue Nov 22, 2011 2:29 pm

OK, a question. The UCC which is what they are referring back to for the "instruments" claim is only state law, it is not Federal at all. Does not 31 U.S.C. § 5103 control in this issue and over ride anything the UCC might otherwise have to say in this matter?
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Re: FRNs and "Lawful Money"

Postby Prof » Tue Nov 22, 2011 5:17 pm

notorial dissent wrote:OK, a question. The UCC which is what they are referring back to for the "instruments" claim is only state law, it is not Federal at all. Does not 31 U.S.C. § 5103 control in this issue and over ride anything the UCC might otherwise have to say in this matter?


Article 3 has not, as far as I know, ever uniformly been adopted as federal common law, but the issue is confusing. Compare FDIC v. Banks, WL 1994 111344 (1994 E.D. Pa. 1994), and Alnor Chack Cashing v. Katz, 821 F. Supp. 307 (E.D. Pa., 1993). Lot's of cases state certainly state that the UCC -- Art. 2, Art. 9, Art.3 -- is the proper ground for decision when the dispute is between the US and a third party in an ordinary commercial setting.
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Re: FRNs and "Lawful Money"

Postby Brandybuck » Tue Nov 22, 2011 9:15 pm

Conspiracies start with and thrive off of anomalies. That you say this quote is anomalous will only highlight it for the tax loons.

p.s. Today is the anniversary of a notable conspiracy. An otherwise intelligent friend asserts that he doesn't buy the "official" story because of bullet fragments found in the governor's wrist. An anomaly.
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Re: FRNs and "Lawful Money"

Postby wserra » Tue Nov 22, 2011 9:30 pm

Brandybuck wrote:Conspiracies start with and thrive off of anomalies. That you say this quote is anomalous will only highlight it for the tax loons.


Exactly. Unfortunately, it's the truth.
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Re: FRNs and "Lawful Money"

Postby The Operative » Tue Nov 22, 2011 11:01 pm

It is difficult, if not impossible, to dispel a person's conclusion using logic when the person did not use logic in reaching the conclusion.
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Re: FRNs and "Lawful Money"

Postby Imalawman » Fri Nov 25, 2011 5:17 am

wserra wrote:
Arthur Rubin wrote:Does this help?


Thank you, but not really. I realize it's dicta, and I realize (and wrote) that a certain degree of squirming is going on here. But I think the problem is that non-lawyers don't realize that, when not central to the issue at hand, courts (even competent courts, such as the Third Circuit) sometimes throw off comments without a lot of thought. Since certain folks live on saying that the courts are wrong, this is always an "I told you so" moment. It does not and will not impress those folks (and I do not include everyone at SJ Forum) that 99.9% of the courts that have addressed the matter - and 100% of the courts that have addressed the matter as holding and not dicta - have ruled the opposite.

So there may not be a satisfactory answer. Dan? Prof? Doc C? JRB? Lawdog?


I think you've already done all you can to explain a poorly drafted portion of an opinion. In the end, there's really nothing much we can do, but point out that this is dicta and cite other more applicable case law.
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Re: FRNs and "Lawful Money"

Postby wserra » Fri Nov 25, 2011 2:43 pm

Imalawman wrote:I think you've already done all you can to explain a poorly drafted portion of an opinion. In the end, there's really nothing much we can do, but point out that this is dicta and cite other more applicable case law.


And hope that courts are more careful, but nobody's perfect. But yes, that's how I see it too.

Note to self: in the future, avoid listing the regulars here who are lawyers. I've thought of at least three more since I made the post. Sorry, guys.
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Re: FRNs and "Lawful Money"

Postby notorial dissent » Fri Nov 25, 2011 11:49 pm

I think, more to the point, is that NO other court or case has referred back to this bit of slap dash writing, whereas the other cases are repeatedly referred to. possibly because if they did they WOULD get referred back to those previous cases and explain that they not this bit of poor writing are controlling!!!
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Re: FRNs and "Lawful Money"

Postby David Merrill » Thu Dec 15, 2011 9:54 am

Your bloviations are such pathetic incestuous self-generated sympathy in support of your own psychotic delusions! It is like you are all trying to cry on each others' shoulders at once.

Look at Title 18 USC §333 for one example. You like to use this statute to frighten me about stamping an educational Redemption Demand on my bills:


Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.



Federal Reserve notes are not money per se. They are evidence of debt!


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Re: FRNs and "Lawful Money"

Postby The Dog » Thu Dec 15, 2011 1:49 pm

David Merrill wrote:Your bloviations are such pathetic incestuous self-generated sympathy in support of your own psychotic delusions! It is like you are all trying to cry on each others' shoulders at once.

Look at Title 18 USC §333 for one example. You like to use this statute to frighten me about stamping an educational Redemption Demand on my bills:


Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.

Federal Reserve notes are not money per se. They are evidence of debt!



My understanding is that from a historical perspective banknotes are both money and evidence of debt.

Originally in places such as Venice, people would deposit their gold or other valuables at the bank (the word derives from the Italian for bench) and receive a receipt which was in essence evidence of the deposit and hence a debt. It soon became practice to hand over the receipt rather than to physically transfer the gold, hence using the receipt as money.

Anything can be used as money as this example shows:
Samoan rugby manager hit with 'pig fine'
http://www.sport.co.uk/news/Sportcouk/5 ... _fine.aspx
(I'd like to see somebody stamp that money!)
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Re: FRNs and "Lawful Money"

Postby David Merrill » Thu Dec 15, 2011 3:51 pm

The Dog wrote:
David Merrill wrote:Your bloviations are such pathetic incestuous self-generated sympathy in support of your own psychotic delusions! It is like you are all trying to cry on each others' shoulders at once.

Look at Title 18 USC §333 for one example. You like to use this statute to frighten me about stamping an educational Redemption Demand on my bills:


Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.

Federal Reserve notes are not money per se. They are evidence of debt!



My understanding is that from a historical perspective banknotes are both money and evidence of debt.

Originally in places such as Venice, people would deposit their gold or other valuables at the bank (the word derives from the Italian for bench) and receive a receipt which was in essence evidence of the deposit and hence a debt. It soon became practice to hand over the receipt rather than to physically transfer the gold, hence using the receipt as money.

Anything can be used as money as this example shows:
Samoan rugby manager hit with 'pig fine'
http://www.sport.co.uk/news/Sportcouk/5 ... _fine.aspx
(I'd like to see somebody stamp that money!)




Once fully bonded, banknotes become lawful money indeed. The key word appertaining to this thread and evidence of debt is "obligations". The Third Circuit is correct to say that FRNs are not money per se, but they are obligations. If they are however endorsed fully, then they become money because they operate as (if) money. The Third Circuit is quoting Title 12 USC §411from §16 of the Federal Reserve Act.

Federal Reserve Notes are not the same thing as lawful money but they may be redeemed in lawful money on demand. However, whatever you get be it US Notes in the form of FRNs, or even silver or gold is diminished in value by the fractional lending with the FRNs. So [urlhttp://img24.imageshack.us/img24/8408/1934reclamationdragonfa.pdf] none of these are ever redeemed,[/url] you just get to make your demand.

Here is an example of a fellow who would not frame his damages. He failed to state a claim for which relief could be granted simply because he would not describe how US Notes - non-elastic currency have been attached to the elastic FRNs in face value!

The FRNs in my photo have no residual bonding necessary to be lawful money. Whereas the FRNs that I get in change, and go to the next store, spending them willy-nilly without stamping them might be assumed to have the extra increase from fractional lending bonded by my substance by my assumed endorsement of that private credit from the Fed. Since I did not endorse them they are not fully bonded and therefore are not money per se. Since 1971 the Treasury has not been putting any new US Notes into circulation. But read carefully, the US Notes floating around in circulation cannot be earmarked collectors items.

If the notes only carry the signatures of the Secretary of the Treasury and US Treasurer, they are not fully bonded unless they carry the endorsement of the payee cashing the paycheck, to cover the extra currency created on that endorsement by fractional lending.


Regards,

David Merrill.
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Re: FRNs and "Lawful Money"

Postby Pottapaug1938 » Thu Dec 15, 2011 4:31 pm

The Dog wrote:
David Merrill wrote:Your bloviations are such pathetic incestuous self-generated sympathy in support of your own psychotic delusions! It is like you are all trying to cry on each others' shoulders at once.

Look at Title 18 USC §333 for one example. You like to use this statute to frighten me about stamping an educational Redemption Demand on my bills:


Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.

Federal Reserve notes are not money per se. They are evidence of debt!



My understanding is that from a historical perspective banknotes are both money and evidence of debt.

Originally in places such as Venice, people would deposit their gold or other valuables at the bank (the word derives from the Italian for bench) and receive a receipt which was in essence evidence of the deposit and hence a debt. It soon became practice to hand over the receipt rather than to physically transfer the gold, hence using the receipt as money.

Anything can be used as money as this example shows:
Samoan rugby manager hit with 'pig fine'
http://www.sport.co.uk/news/Sportcouk/5 ... _fine.aspx
(I'd like to see somebody stamp that money!)


Dog, pay no attention to this guy. He is incapable of recognizing facts and law, because the only facts and law, for him, consist of what he has inside his confused little head. Arguing with him only inflates his egotistical dreams of being a Great Legal scholar; and he has just shown us, yet again, that no matter how often we point out facts and law to him, he will ignore what we say, duck any direct questions, and just repeat his delusions as if to force us to accept them by his endless reiterations. He is too much of an intellectual coward to engage you in meaningful debate; so don't bother trying.
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Re: FRNs and "Lawful Money"

Postby wserra » Fri Dec 16, 2011 12:32 am

Pottapaug1938 wrote:Arguing with him only inflates his egotistical dreams of being a Great Legal scholar; and he has just shown us, yet again, that no matter how often we point out facts and law to him, he will ignore what we say, duck any direct questions, and just repeat his delusions as if to force us to accept them by his endless reiterations.


And claim success by posting documents which are sufficiently redacted that they are impossible to verify. Given that what David wishes to claim is not only fanciful and wrong, but also unlawful - most recently that "redeeming lawful money" means that one need not pay income tax - I've disapproved both of his responses.

Once more, the rule: if you are going to claim success in flouting the law, you must provide verifiable proof. That really isn't so hard to understand, David.
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Re: FRNs and "Lawful Money"

Postby David Merrill » Fri Dec 16, 2011 12:34 am

What I meant by bonding on the extra currency is easily explained. Note that the US Notes cannot be used for reserves. While FRNs are designed to be elastic currency. Being elastic and reserve currency, we find them right in with Wserra's opening post. Here is the case in .pdf format.

Currency, however, differs substantially [**13] from such objects. Paper currency, in the form of the Federal Reserve Note, is defined as an "obligation[] of the United States" that may be "redeemed in [*645] lawful money on demand." 12 U.S.C. § 411 (2002). These bills are not "money" per se but promissory notes supported by the monetary reserves of the United States.


According to the Fed Bank of NY fractional lending creates new currency in circulation upon loans/credit. That is the money I am talking about that needs to be bonded. If you are the endorser bringing the money into creation then your signature is the bond on the "extra" money being created off your credit.


Regards,

David Merrill.
Last edited by wserra on Fri Dec 16, 2011 1:27 am, edited 1 time in total.
Reason: Delete link to zip file. I'm not going to open a zip to make sure its contents are OK.
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