Cengage Advantage Books: Law for Business 18th Edition by John Ashcroft ,Janet Ashcroft

Exercise 2

Chester Crow signed a note for a loan from First National Bank (FNB). The note was due in ninety days, but Crow could not pay the full amount when due. Several years later, Premier Bank, the successor to FNB, returned three payments to Crow with a rover letter that called the payments "overpayments." It then issued an IRS Form 1099-C (Cancellation of Debt) to Crow, with these notations: "Date canceled:…; Amount of debt canceled: $7,991.00." The 1099-C resulted in a negative tax impact for Crow. At the same time, Premier sold the note and three dozen others having a total face value of $600,000 and indorsed: "without recourse, representation or warranty of any kind" to Credit Recoveries Inc. (CRI) for $1,500. Four months later, CRI demanded that Crow pay his note. Crow wrote CRI that Premier had "returned a refund check for the last payment." Four years later, after no contact, CRI again demanded that Crow pay the note. Crow replied that Premier had issued the 1099-C. CRI sued Crow. Had Premier cancelled the debt?