OPINION OF THE COURT
In this diversity case the parties cross-appeal from a final judgment of $441,027.19 in favor of the plaintiff, Charles R. Peterson. This sum represents $363,875.62 in interest charges that Peterson disputed but paid, under protest, to defendant Crown Financial Corporation, together with prejudgment interest of six percent. On appeal, we are asked to resolve two questions of Pennsylvania law. 1 First, is a financial institution that intentionally cancels a promissory note and returns it to the borrower in exchange for a new note, later entitled to collect interest on the first note if such interest is not explicitly “carried over” to the new note? Second, does the trial judge have discretion in a restitution action to award damages in the nature of prejudgment interest in an amount greater than the legal six percent rate?
I.
Charles R. Peterson is a farmer and rancher residing in Nebraska. 2 On December 12, 1969, he entered into a security agreement with Crown Financial Corporation, a Pennsylvania corporation engaged in the business of installment sales financing, whereby Crown agreed to lend Peterson up to $1,450,000 within 180 days. On the same day, Peterson .borrowed $1,150,000 from Crown and executed a promissory note to that effect. Interest on the note was to be calculated at two-and-one-half percent above the prime rate, and was due at maturity. On December 29, 1969, Peterson borrowed the remaining $300,000, at the same rate of interest, and executed a second note.
On July 6, 1970, Peterson and Crown entered into another security agreement, this time for an additional $3,000,000. Peterson borrowed the $3,000,000 and executed a third note for $4,450,000 in exchange for the notes of December 12, 1969 and December 29, 1969. In addition, Peterson pledged 1,100,000 shares of National Alfalfa Dehydrating and Milling Company common stock as collateral for the loan.
Peterson executed a fourth note on December 29, 1970, also for $4,450,000, in exchange for the note of July 6, 1970. Interest, calculated at two-and-one-half percent above the prime rate, was payable at maturity two years later. On October 3, 1972, Henry S. Faus, the president of Crown, sent a letter to Peterson reminding him that the fourth note would reach maturity on December 29, 1972 and advising him that “no further deferral of interest can be granted.” The letter was accompanied by a *289 statement of interest due totaling $860,-837.57.
Ten days before the December 29 maturity date, Crown prepared a statement entitled “Interest Due December 29, 1972,” which amounted to only $499,658.85. On December 21, Peterson, with Crown’s assistance, borrowed $500,000 from First Pennsylvania Bank to pay the $499,658.85 then due. After signing the $500,000 check over to Crown, Peterson received a letter from F. X. Dalton, Crown’s vice president, wishing him a “very Merry Christmas” and noting: “We have received in our account $500,000, which represents payment of interest due December 29, 1972 on your Note. The $341.15 [the difference between the $500,000 paid and the $499,658.85 due] will be applied to interest after the above date.”
At the same time, Peterson executed yet another note evidencing his $4,450,000 debt to Crown. This new note matured on December 21, 1975; the previous note — the fourth in the series — was stamped “can-celled” and returned to Peterson.
Shortly before the fifth note came due, Crown advised Peterson that both the principal of $4,450,000 and interest of $1,899,-312.05 would be due and payable on December 21, 1975. The latter figure included $363,875.62 in interest which had been due on the “cancelled” fourth note, but which Peterson claims had been forgiven. 3 No payment was received and Crown notified Peterson that he was in default.
On December 29, 1975, Peterson agreed to sell 1,304,350 shares of National Alfalfa Dehydrating and Milling Company stock— including the 1,100,000 shares pledged as collateral for Crown’s loan — to Bass Brothers Enterprises. Peterson planned to use the proceeds of the sale to pay off his debt to Crown. Crown, however, agreed to release the collateral only if Peterson paid the full amount of principal and interest that Crown claimed was due — including the $363,875.62 in interest on the “cancelled” fourth note. Peterson, acknowledging that “I will be unable to sell the National Alfalfa stock unless I obtain a release of the said stock from you,” paid the $363,875.62 “under duress, involuntarily, and under protest.” He then filed this lawsuit in the Eastern District of Pennsylvania, seeking judgment in the amount of $363,875.62, plus interest and attorney’s fees.
The district court determined that, under section 3-605 of the Uniform Commercial Code,
4
Crown’s intentional cancellation of the fourth note discharged Peterson’s obligation to pay the $363,875.62 in interest as a matter of law. The intent of the parties to extinguish or continue the debt was not, in the view of the district court, relevant. Thus the court granted Peterson’s motion for summary judgment on this issue.
II.
Section 3-605 of the Uniform Commercial Code provides:
(1) The holder of an instrument may even without consideration discharge any party
(a) in any manner apparent on the face of the instrument or the indorsement, as by intentionally cancelling the instrument or the party’s signature by destruction or mutilation, or by striking out the party’s signature; or
(b) by renouncing his rights by a writing signed and delivered or by surrender of the instrument to the party to be discharged.
(2) Neither cancellation nor renunciation without surrender of the instrument affects the title thereto.
13 Pa.Cons.Stat.Ann. § 3605 (Purdons 1980).
Peterson argues that, under § 3-605, Crown’s intentional cancellation of the December 29, 1979 note and intentional delivery of the note to him in exchange for a new note constituted a discharge of Peterson’s indebtedness as a matter of law. The district court, believing that no Pennsylvania court had addressed the issue, accepted this position. It reasoned that parties such as Crown, which deal regularly in negotiable instruments, “ought to be held, as a matter of law, to an understanding of the implications which normal business practice assigns to ‘intentionally cancelling [an] instrument’ . . . . ”
We find this reasoning persuasive. Under both traditional common law principles and the Uniform Commercial Code,
a negotiable instrument is regarded as the debt itself. This conception is due, in part, to the similarity, in form and function, of commercial paper to that of government currencies and bank notes. The unitary concept of a debt fused into the written evidence of it, leads readily to the further concept that destruction of the physical res itself by its owner destroys the legal relations which it induces. Consideration is thus not necessary. Cancellation then becomes a sort of constructive tearing up of the instrument.
Danville UAW-CIO Local No. 579 Credit Union v. Randle,
Crown does not dispute the foregoing analysis insofar as it pertains to the ordi *291 nary cancellation of a negotiable instrument. But it argues that different rules apply when a “renewal note” is issued in exchange for the original note. Specifically, Crown urges that, because a renewal note merely “evidences the same debt by a new promise and does not constitute a payment or discharge of the original note,” the court must explore the subjective intent of the parties to determine whether the original obligation has been discharged. Because subjective intent is a question of fact, Crown contends that the district court erred when it granted partial summary judgment and held that Peterson’s debt was discharged as a matter of law.
Crown is correct in asserting that the question whether a renewal note operates as a discharge of the original note depends on the intention of the parties. This principle is embodied in a number of old Pennsylvania cases,
6
and retains its vitality today. Thus, in
Slaughter v. Philadelphia National Bank,
[T]he giving of a new note for a debt evidenced by a former note does not extinguish the original indebtedness unless such is the intention of the parties. Such intention is never presumed and the burden of proving the discharge or novation is therefore upon the one who asserts it. In general, the renewal merely operates as an extension of time in which to pay the original indebtedness. The debt is not thereby increased. It remains the same; it is in substance and in fact the same indebtedness evidenced by a new promise. . . . Section 3.605 of the Texas Business and Commerce Code does not appear to alter the rule.
Id. at 430.
Slaughter
and
Bank of Austin
appear, superficially at least, to support Crown’s assertion that it is entitled to present evidence of subjective intent. But we find these cases — as well as the others cited by Crown — distinguishable. Most of the cases address the question whether the cancellation of an old note by renewal impairs the security interest underlying the debt.
See Mid-Eastern Electronics, Inc. v. First National Bank,
We have been directed to no case, however, in which the
amount
of indebtedness — as contrasted with the underlying security interest or liability of a co-signer — -is in dispute. In the latter cases, the debt itself remains constant; when the parties renegotiate the schedule of repayment, they call into question the continuity of other, collateral provisions of the original note. In the present case, however, the debt itself is at issue. When Crown intentionally can-celled and returned the first note in return for a new note, it did not renew the $363,-875.62 interest charge; rather, it annulled the one document that evidenced Peterson’s debt for that amount. In such a situation, we agree with the district court that the lending institution is deemed
as a matter of law
not to have intended that the old indebtedness survive. Subjective intent under these circumstances is irrelevant; in the absence of clerical error or other mistake— neither of which is claimed here — the lender cannot, consistent with the dictates of § 3-605, remain free to insist upon the terms of a cancelled note simply because it did not subjectively intend to alter its terms. The commercial world — “dependent upon the necessity to rely upon documents meaning what they say,”
Safe Deposit Bank and Trust Co. v. Berman,
Because we hold that Crown’s cancellation and surrender of the December 27, 1970 note was sufficient as a matter of law to discharge the $363,875.62 debt not explicitly carried over into the new note, we find it unnecessary to review the documents and testimony presented to the court as evidence of intent or lack thereof. 7 The decision of the district court, insofar as it ordered restitution of the $363,875.62 payment to Peterson, will therefore be affirmed.
III.
We turn now to the issue of prejudgment interest. 8 Neither party disputes the district court’s holding that Peterson was entitled to prejudgment interest on the sum he unwillingly paid to Crown. The question on appeal is rather the rate of interest properly chargeable to Crown under Pennsylvania law.
The district court conceded that “[tjhere is considerable logic in plaintiff’s contention that 2V2 points above prime would be a singularly equitable measure of prejudgment interest in this case,”
We agree with the district court that, under Pennsylvania law, prejudgment interest in the ordinary suit for contract damages is limited to the six percent legal rate. But because Peterson’s claim sounds in restitution, it calls for the exercise of the *293 court’s broader equitable powers. Under our reading of the relevant Pennsylvania precedents, the trial judge does have discretion in such cases to award damages in the nature of prejudgment interest in an amount greater than six percent.
A.
The law of Pennsylvania with respect to the rate of prejudgment interest is far from perspicuous. It is clear, however, that in contract actions, the prejudgment interest award properly is measured by the legal rate. Thus, in
Miller v. City of Reading,
Whenever one man binds himself to pay a specific sum of money to another by a certain day, and he fails to do so, he becomes liable, by the law of this State, to pay interest thereon at the rate of six percent per annum afterwards, as long as he shall improperly withhold payment thereof, unless, perhaps, it should be expressly agreed otherwise by the parties.
If the parties have not by contract determined otherwise, simple interest at the statutory legal rate is recoverable as damages for breach of contract as follows:
(a) Where the defendant commits a breach of a contract to pay a definite sum of money, or to render a performance the value of which in money is stated in the contract or is ascertainable by mathematical calculations from a standard fixed in the contract or from established market prices of the subject matter, interest is allowed on the amount of the debt or money value from the time performance was due, after making all the deductions to which the defendant may be entitled.
Restatement of Contracts § 337(a) (1932) (emphasis added).
The court is thus obligated to award “simple interest at the statutory legal rate” only in those circumstances in which the plaintiff proves that the defendant breached a promise to pay “a definite sum of money,” or render a performance the value of which is ascertainable with exactitude. In such a case, the plaintiff is entitled to interest at the six percent legal rate as a matter of law.
See, e. g., Sun Shipbuilding & Dry Dock Co. v. United States Lines, Inc.,
In tort cases, prejudgment interest is not allowable as a matter of law. The Pennsylvania courts have instead awarded “compensation for delay” or “detention damages” at the prejudgment stage. The contours of this remedy were first delineated in
Citizens’ Natural Gas Co. v. Richards,
*294 Interest, as such, is recoverable only where there is a failure to pay a liquidated sum, due at a fixed day, and the debtor is in absolute default. It cannot, therefore, be recovered in actions of tort, or in actions of any kind where the damages are not in their nature capable of exact computation, both as to time and amount. In such cases, the party chargeable cannot pay or make tender until both the time and the amount have been ascertained, and his default is not, therefore, of that absolute nature that necessarily involves interest for the delay. But there are cases sounding in tort, and cases of unliquidated damages, where not only the principle on which the recovery is to be had is compensation, but where, also, the compensation can be measured by market value or other definite standard. Such are cases of the unintentional conversion or destruction of property, etc. Into these cases the element of time may enter as an important factor, and the plaintiff will not be fully compensated unless he receive not only the value of his property, but receive it, as nearly as may be, as of the date of his loss. Hence it is that the jury may allow additional damages in the nature of interest for the lapse of time. It is never interest as such, nor as a matter of right, but compensation for the delay, of which the rate of interest affords the fair legal measure.
Id. at 600 (emphasis added).
The distinction between interest, as such, and compensation for delay, has continued to trouble the courts.
See, e. g., Hussey Metals Division v. Lectromelt Furnace Division, supra,
at 967 (“Logic does not inherently require separate rules where the loss of use of property or detention of damages results not from tort but from breach of contract.”);
Marrazzo v. Scranton Nehi Bottling Co.,
We decline to accept Crown’s contention that the caáe at bar falls under the § 337(a) rubric. That section, as adopted and applied in Pennsylvania, addresses only the situation in which the defendant “commits a breach of a contract to pay a definite sum of money” and the plaintiff sues for contract damages. Without exception, the case law reflects this precise scenario.
See, e. g., Sun Shipbuilding & Dry Dock Co. v. United States Lines, Inc.,
We agree with Peterson that — in this situation — the district court has discretion to award damages in the nature of prejudgment interest at a rate higher than the statutory six percent rate. Our holding is based not on our characterization of the underlying substantive dispute, but rather on the equitable nature of the remedy the plaintiff seeks — restitution of money unjustly received. We thus find it unnecessary to decide whether, as Peterson urges, Crown’s conduct constituted the tort of business coercion.
B.
That Peterson’s claim rests upon equitable considerations is not disputed. The district court held that Peterson is entitled to “restitution of an undeserved benefit” from Crown.
In resolving Peterson’s equitable claim, we are guided by the mandate of the Pennsylvania Supreme Court in
Murray Hill Estates, Inc. v. Bastin,
The decided trend of courts of law and courts of equity has been “to break away from hard and fast rules and charge and allow interest in accordance with principles of equity, in order to accomplish justice in each particular case” . . . Unless a case be found, which is a conclusive precedent, the safest and at the same time the fairest way for a court is to decide questions pertaining to interest according to a plain and single consideration of justice and fair dealing.
Id.
at 545 (quoting
McDermott v. McDermott,
The flexible approach advocated in
Murray Hills Estates
has been followed by the
*296
Pennsylvania Supreme Court on several occasions. In
In re Kenin’s Estate,
The Act of May 28, 1858 [the predecessor to 41 P.S.A. § 201] . . . fixing at 6% the lawful rate of interest for the loan or use of money, in all cases where no express contract shall have been made for a less rate does not rule the question of “damages for detention.” The word “use” when referring to money is often employed as a synonym for “loan.” Money is not “used” within the meaning of this act when it is detained under the circumstances here present.
Id. at 844 n.4. Finding that, if safely invested, the proceeds could not have yielded more than two-and-one-half percent per year, the Court reduced the interest rate for detention damages from six percent to two-and-one-half percent for the six-year period during which the trustee had improperly collected and distributed the funds.
The district court here read
Kenin’s Estate
as according the courts discretion to set prejudgment interest at a rate
lower
than six percent when the prevailing rate of return is below the legal rate. Indeed, subsequent cases have cited
Kenin’s Estate
for that proposition. .
See, e. g., In re Lewis’ Estate,
The recent case of
Sack v. Feinman,
*297 Hence, any claim based upon unjust enrichment or restitution, rather than upon compensation or damages, not only permits pre-judgment interest, but also permits an award of compound interest.
Because all of this was most obvious in fiduciary cases, and because those cases were decided in equity courts, the generalization often made was that interest would be permitted in equity, as a matter of the chancellor’s discretion, even where not permitted at law because the claim was unliquidated. The principle behind this, however, is clearly broader than the scope of purely equitable actions: it is a principle based upon unjust enrichment notions. For that reason it should be stated, not as a rule about equity, but as a rule about restitution. Whenever the defendant holds money or property that belongs in good conscience to the plaintiff, and the objective of the court is to force disgorgement of his unjust enrichment, interest upon the funds or property so held may be necessary to force complete restitution. This may be true in law as well as in equity.
Concededly, Sack v. Feinman does not by its terms resolve the issue before us today. At oral argument, counsel for Crown urged that, at most, Sack stands for the proposition that the court has discretion to award prejudgment interest in any amount up to the six percent rate. While Sack conceivably can be so read, we remain unconvinced. The language and the logic of the case— and the lack of conclusive precedent to the contrary — compel the holding that, in the restitution context at least, the court has discretion to award damages in the nature of prejudgment interest at a rate higher than the six percent legal rate. 12 Our conclusion is buttressed by the fact that in Sack the Court sanctioned the award of compound interest. This in itself is considerably more generous than the “simple interest” allowable in a contract action. See Restatement of Contracts § 337(a). 13
We concede, too, that it is difficult to draw a logical distinction between the present case — a wrongful demand and acceptance of a sum paid under protest — and
*298
the refusal to pay funds due under a contract. It may be inequitable to require debtors to pay only six percent under present Pennsylvania law yet force creditors who have made wrongful demands to disgorge at money-market rates. As to the former situation, however, Pennsylvania has provided clear — if questionable — precedent to which a federal court sitting in diversity is bound. In the present case, to the contrary, we find support in the Pennsylvania case law for the proposition that prejudgment interest in restitution awards can be set at the trial court’s discretion, and find no conclusive precedent to the contrary. Mindful of “those considerations of basic fairness and equity which suggest a more flexible rule . . ., [and] not unmindful of the fact that at the currently high money-market rates [a contrary] ruling appears to create a built-in incentive to withhold sums due, and indeed, to prolong litigation,”
Affirmed in part, vacated in part, and remanded.
Notes
. The promissory notes in question in this case each state: “This Note was made in and shall be integrated in accordance with the Laws of the State of Pennsylvania.” Both the parties and the district court viewed the case as one governed by Pennsylvania law, and there is no basis to question this assumption.
. Peterson’s state of citizenship was incorrectly recorded as “Nevada” in the district court opinion.
. There appears to be a discrepancy in the record as to the amount of interest accrued as of December 29, 1972. The statement dated October 3, 1972 that accompanied the letter of Henry S. Faus shows an amount due of $860,-837.15. The statement of December, 1975 shows, for the same day, an amount due of $863,534.47 (appendix at 1032a). It was apparently from this latter figure that the parties subtracted the December 21, 1972 payment of $499,658.85, leaving a balance due of $363,-875.62. We leave it to the district court to reconcile the two figures.
. That section is presently found in 13 Pa.Cons. Stat.Ann. § 3605 (Purdons 1980).
. The court reserved judgment on Peterson’s entitlement to interest, attorney’s fees, punitive damages, and costs. By stipulation, the claim for punitive damages was dismissed; the district court later rejected Peterson’s claim for attorney’s fees.
. See, e.
g., Brown v. Scott,
. Peterson argues strenuously that, even were the court to require additional evidence of intent, he would nonetheless prevail.
. As will be discussed infra, prejudgment “interest” as such in Pennsylvania is conceptually distinguishable from detention damages in the nature of interest. For simplicity’s sake we will use the term “prejudgment interest” throughout this opinion to refer generically to both types of awards; we will make specific reference to “interest as such” or “damages in the nature of interest” when necessary.
. The question of the applicable interest rate has been raised infrequently in the tort context. Those courts that have addressed the issue have apparently adhered to the six percent legal rate.
See, e. g., Hussey Metals Division, supra,
at 967;
Tennessee Carolina Transportation, Inc., supra,
at 440,
. Lord Mansfield provided one of the earliest analyses of the remedy of restitution. In Moses v. MacFerlan, 2 Burr. 1005, 97 Eng.Rep. 676, 680-81 (K.B.1760), an action in assumpsit, he stated:
This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies . . . for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express', or implied) or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances.
In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.
. This is concededly not true in the estates area. The Pennsylvania legislature has mandated that when a personal representative commits a breach of duty with respect to such assets, he shall, “in the discretion of the court, be liable for interest not exceeding the legal rate on such assets.” 20 Pa.Cons.Stat.Ann. § 3544 (Purdons 1975). We find no basis for concluding that the reach of this statute should be extended any further than its literal context.
But see Nedd v. United Mine Workers,
.
Nationwide Mutual Insurance Co. v. Philadelphia Electric Co.,
. Our holding is not without precedent in other jurisdictions.
See, e. g., Davis Cattle Co. v. Great Western Sugar Co.,