2019 COA 186
Colo. Ct. App.2019Background
- In June 2009 Jerry and Kimberly Gunderson executed two promissory notes to Weidner Holdings (through William Weidner): $739,000 (secured by a deed of trust) and $150,000 (unsecured), both payable on demand with 0.75% interest and no periodic payments made.
- No payments of principal or interest were ever made on either note.
- Weidner demanded payment on March 9, 2017 (almost eight years after execution).
- Gunderson sued in Colorado district court seeking a declaratory judgment that the funds were gifts and arguing the notes were time-barred; Weidner Holdings counterclaimed to enforce the notes.
- The district court granted Gunderson summary judgment, holding the general six-year statute of limitations (Colo. Rev. Stat. § 13-80-103.5) applied and that any claim accrued at note execution.
- The Court of Appeals reversed, holding the notes are negotiable instruments and the UCC statute of limitations (Colo. Rev. Stat. § 4-3-118(b)) governs, so the enforcement action is not time-barred.
Issues
| Issue | Plaintiff's Argument (Gunderson) | Defendant's Argument (Weidner) | Held |
|---|---|---|---|
| Which statute of limitations governs enforcement of the notes? | General six-year statute for liquidated debts (§ 13-80-103.5) applies. | UCC § 4-3-118(b) (specific to negotiable/demand notes) applies. | UCC § 4-3-118(b) applies (more specific governs). |
| Are the promissory notes negotiable instruments under UCC Article 3? | Notes are not negotiable (argues condition from deed of trust defeats negotiability). | Notes meet UCC § 4-3-104(a): unconditional promise, fixed amount, payable to order, payable on demand. | Notes are negotiable instruments. |
| Does securing a note with a deed of trust destroy negotiability? | Deed of trust imposes additional undertakings, so note is non-negotiable. | Security does not alter the note’s unconditional promise or demand character. | Securing a note by deed of trust does not defeat negotiability here. |
| Does Mortgage Investments Corp. v. Battle Mountain control and require applying the general statute? | Battle Mountain supports using the general limitations period. | Battle Mountain is inapposite because it addressed foreclosure/judgment-lien timing and did not decide UCC demand-note limitations or negotiability. | Battle Mountain does not control this case. |
Key Cases Cited
- Mortgage Investments Corp. v. Battle Mountain Corp., 70 P.3d 1176 (Colo. 2003) (supreme court foreclosure/judgment-lien decision; not controlling here for UCC demand-note limitations)
- Haberl v. Bigelow, 855 P.2d 1368 (Colo. 1993) (promissory note secured by deed of trust can still be a negotiable instrument)
- Persichini v. Brad Ragan, Inc., 735 P.2d 168 (Colo. 1987) (specific statute of limitations controls over a more general provision)
- Wasinger v. Reid, 705 P.2d 533 (Colo. App. 1985) (prior accrual rule for demand notes addressed but superseded by later UCC changes)