"Redeeming Lawful Money"

Overview.  Among the newer scams to hit the usual sites - schemes which only work in the fevered or avaricious imaginations of those who advocate them - is "redeeming lawful money".  Its proponents begin with a federal statute - 12 USC § 411 - and spin out from there into the ozone.  This entry takes a look at it.  The subject has been discussed in some detail on the Quatloos board, where one of its major proponents has been allowed to expound on it in mind-numbingly repetitive detail.  Neither he nor anyone else has been able to cite a single verifiable instance where "redeeming lawful money" has ever accomplished anything.  It has, on the contrary, repeatedly crashed and burned.  Verifiably.

12 USC § 411.  In relevant part, that statute provides that federal reserve notes "shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank".  Proponents of "redeeming lawful money" draw two conclusions from this: that FRNs themselves are not "lawful money", and that "redeeming" your paycheck makes it non-taxable.  The first of those conclusions is wrong but understandable; the second is wrong and gibberish.

To understand the current version of the statute, one needs a little history.  The predecessor version of 12 USC § 411 was first enacted as 38 Stat. 265 in 1913. The U.S. was on the gold standard in 1913, "redeem" meant something very different than it does today, and the statute in so many words permitted redemption in gold. In 1934, the Gold Reserve Act nationalized privately-held gold bullion (not, obviously, ornaments and jewelry), and eliminated the provision of § 411 that permitted redemption in gold. However, there were still other forms of lawful money in circulation then - silver certificates, U.S. Notes, and perhaps one or two others (someone else can look it up). Those no longer exist today, but that provision of § 411 remains, basically an anachronism. The law contains many anachronisms. Everyone has seen the compilations of laws still on the books which do things like prohibit herding cattle on Main Street.

So, as to the first contention: proponents take the anachronism "redeem in lawful money" and infer that it means that FRNs are not "lawful money", something not completely illogical.  It's wrong, though.  "Lawful money" is not a phrase with a well defined meaning such as "legal tender".  FRNs are, of course, legal tender.  31 USC § 5103.  It is very difficult to see how, whatever "lawful money" may mean, something which is defined by statute as legal tender isn't also "lawful money".  The law requires a creditor to accept something that isn't money?  That's pretty nuts.

Plenty of courts have specifically held that FRNs are "lawful money".

Defendant argues that the Federal Reserve Notes in which he was paid were not lawful money within the meaning of Art. 1, § 8, United States Constitution. We have held to the contrary. United States v. Ware, 10 Cir., 608 F.2d 400, 402-403. We find no validity in the distinction which defendant draws between "lawful money" and "legal tender." Money is a medium of exchange. Legal tender is money which the law requires a creditor to receive in payment of an obligation.

United States v. Rickman, 638 F.2d 182 (10th Cir. 1980) (emphasis supplied).  There are many, many others.  For a few, see 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).  In fairness, there is a case in which the Third Circuit in dicta says differently.  United States v. Thomas, 319 F.3d 640 (3rd Cir. 2003).  A thread in Quatloos discusses that case in some detail.

But, ignoring the history and the law, there is nonetheless some logic in saying that, since FRNs can be redeemed in lawful money, they are not themselves lawful money.  Legally that's wrong, and historically it ignores how parts of statutes can become, through changing times and amendments to related statutes, anachronisms which no longer support that sort of inference.  But, just from the language of the statute, it's not illogical.

It's the next part where they sail off into the cream cheese.  One only arrives at the conclusion that 12 USC § 411 somehow renders otherwise taxable income non-taxable through logical knots of Gordian proportions.  Those knots includes things like monetizing debt, Treasury accounts, public money and private credit (or was that private money and public credit?), the Chinese, the Sanhedrin and logarithmic spirals superimposed on maps.  In other words, nothing that makes any sense.

Epic Fails.  On several occasions, people have actually attempted to make something out of nothing, by arguing "redeeming lawful money" in federal courts.  Below are seven examples.  Five have already crashed and burned.  Two are pending; this author has sufficient confidence in his conclusion that this stuff is nonsense that he posts them while they are still undecided.  It shouldn't be long before they, too, are ex-lawsuits.

(1) Michael David [Cress - these guys don't believe in last names] v. Geithner, 12-cv-3442 (CAND).  The complaint looks a whole lot like the ones in the cases below - virtually identical, in fact, down to the "refused for cause" notice of levy and the insistent "I am not pro se" and signature "Lawful money" on the civil cover sheet.  With no proof that he had even served the summons and complaint, Cress tries to file a "default judgment".  Judge Chesney of course refuses, and sua sponte directs him to show cause why she shouldn't toss the sorry mess into the trash (alright, alright, she said "dismiss").  Cress refuses the Court's order for cause.  Dismissed, sua sponte, about two months after Cress filed the action.  Short and sweet:

By order filed August 9, 2012, the Court directed plaintiff Michael David (“David”) to show cause, in writing and no later than August 31, 2012, why the above-titled action should not be dismissed for failure to state a cognizable claim against defendant Timothy Franz Geithner, the Secretary of the Treasury.

On August 15, 2012, David filed a copy of the Court’s August 9, 2012 order, on which copy David had written “Refused for Cause.” David has not otherwise responded to the Court’s August 9, 2012 order, and, in particular, has not shown cause why the above titled action should not be dismissed.

Accordingly, for the reasons stated in the Court’s order of August 9, 2012, the instant action is hereby DISMISSED without leave to amend.
The Clerk of the Court is DIRECTED to close the file.
IT IS SO ORDERED.

Bye.

(2)  Scott Daniel [Macneilage - see above] v. Geithner, 12-cv-1781 (CACD).  Same gibberish complaint and RfCs.  This is a relative biggie - the total (tax, interest, penalties) is $175K.  Macneilage appears to be a cut above the others - at least he actually served Geithner.  Of course, he also RfCs everything in the docket.  Dismissed, July 5, 2012, four months after Macneilage filed it.  Macneilage files eight RfCs after the dismissal.  Maybe they're his grocery lists.

(3)  Jesus Victor [Rodriguez - see above] v. Geithner, 09-cv-1091 (CASD).  I'm not linking to every complaint - they're all the same anyway.  Dismissed April 2, 2010.

(4)  Alvin Ruiz v. Geithner, 09-cv-1332 (CASD).  Dismissed less than four months after filing.

(5)  Patrick Teruo [Walsh - see above] v. Geithner, 09-cv-1644 (CASD).  Dismissed about six months after filing.  In the order, the Court noted that "Mr. Teruo’s complaint is a frivolous, stock complaint that he downloaded from the internet, and that other federal courts have summarily dismissed."  The complaint is just like the others.

(6)  Todd Donald [Weiss - see above] v. Geithner, 12-cv-4493 (CAND).  Same gibberish complaint, same notice of levy refused for cause, only filed a couple of months ago.  Weiss has already "refused for cause" two orders - discovery schedule and referral to M-J.  Nothing more yet.  Maybe Judge Illston's chambers can speak with Judge Chesney's.  Hint to wackos: you don't get to refuse orders, for cause or not for cause.

(7)  Denise Elizabeth [Lam - see above] v. Geithner, 12-cv-7719, CACD.  The complaint is exactly like the others.  It varies between laughable and incomprehensible.  Documents attached to it show that the IRS is threatening her with penalties for frivolous filings.

So, ladies and gentlemen, here we have real-life, unredacted proof that "redeeming lawful money" fails every time.  If anyone tells you otherwise, demand the same.  And then don't hold your breath.

1-9-13 update: Yesterday Judge Illston dismissed Weiss' action.  That's 0 for 6.  Lam's case is still pending, as are the motions to dismiss it.  There is therefore still no evidence that "redeeming lawful money" has ever done anything at all, other than to allow interest and penalties to accrue - and enforcement actions to continue - on unpaid taxes.

2-9-13 update: The last surviving effort at "redeeming lawful money" goes down in flames.  A couple of weeks ago, Judge Snyder dismissed Lam's complaint (see above for link).  Since this is the last case standing, we might as well quote the entire order:

Plaintiff’s complaint is largely incomprehensible and rambling. The Court cannot discern what claims for relief it is attempting to assert, nor on what factual (sic) plaintiff seeks relief. A “complaint that is ‘obviously frivolous’ does not confer subject matter jurisdiction. . . .” [citations omitted]. Dismissal for lack of subject matter jurisdiction is proper when the federal claim is “so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy.” [citation omitted].

The manifest insubstantiality of the present complaint deprives this Court of subject matter jurisdiction. This jurisdictional defect could not be cured by amendment.
Accordingly, the Court hereby DISMISSES this action with prejudice.

IT IS SO ORDERED

In other words, Lam's complaint - the one the purveyors of this nonsense provide to "redeem lawful money" - is such gibberish that it does not even give a court jurisdiction to consider the issue.  That's not easy to accomplish.

That's 0 for 7.  Despite numerous requests, those who advocate "redeeming lawful money" have refused to provide verifiable proof of a single success, so we had to find these seven cases on our own.  None left - every single one has been ignominiously dismissed, frequently sua sponte.  Anyone who uses this monumentally silly idea deserves what s/he gets: liens, levies, continuously-accruing interest and penalties, a judicial determination that the position is nonsense, and no relief whatsoever.

Since we began showing how this "process" does nothing but collect penalties, those who push it have come up with a new tack: they knew all along that the cases would be dismissed.  They only told the poor schmucks to file cases in order to provide them with an "evidence repository".  Don't believe them?  Think it's an ad hoc excuse for abject failure?  Au contraire.  It's actually written in stone on a plaque attached to the bridge they want to sell you.

It isn't worth much time debunking "the dog ate my homework".  Still, a couple of points: The only thing filing a document proves is that it existed on the date is was filed.  Period.  It doesn't prove that it does anything; after all, the above seven people filed complaints, all of which were dismissed.  Whether a document existed at a certain time is almost never an issue.  If you have a letter from the IRS, you have a letter from the IRS; if they deny it, they look like idiots.  If you need proof that you served a document outside of litigation, you get either a return receipt (if served by mail) or an acknowledgment or affidavit of service (if served in hand).  Paying to open a court docket just to hold papers serves no useful purpose, and the court may not permit it in the first place.  But yes, lawyers do have "evidence repositories".

They're called "files".