The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.
SUMMARY December 26, 2019
2019COA186
No. 18CA2261, Gunderson v. Weidner Holdings, LLC — Uniform Commercial Code — Negotiable Instruments — Statute of Limitations
A division of the court of appeals considers the applicable
statute of limitations for two payable-on-demand promissory notes.
The division concludes that because the promissory notes are
negotiable instruments, the more specific statute of limitations
under Colorado’s Uniform Commercial Code (UCC) applies, not the
general six-year statute of limitation applied by the trial court. And
because the promissory notes are demand notes on which no
principal or interest has been paid and because suit was filed
within ten years of execution of the notes and within six years of
demand being made, the action is not time-barred. Accordingly, the division reverses the trial court’s summary
judgment. COLORADO COURT OF APPEALS 2019COA186
Court of Appeals No. 18CA2261 Mesa County District Court No. 17CV30328 Honorable Brian J. Flynn, Judge
Jerry Gunderson,
Plaintiff-Appellee,
v.
Weidner Holdings, LLC and William Weidner,
Defendants-Appellants.
JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS
Division VI Opinion by JUDGE WELLING Berger and Martinez*, JJ., concur
Announced December 26, 2019
Joseph Coleman & Associates, LLC, Joseph Coleman, Isaiah Quigley, Grand Junction, Colorado, for Plaintiff-Appellee
Dackonish & Blake, P.C., Thomas W. Blake, Grand Junction, Colorado, for Defendants-Appellants
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2019. ¶1 This case centers on which statute of limitations applies to two
payable-on-demand promissory notes, one of which is secured by a
deed of trust on real property. Citing Mortgage Investments Corp. v.
Battle Mountain Corp., 70 P.3d 1176 (Colo. 2003), the district court
applied the general six-year statute of limitations, not the one
applicable to negotiable instruments under the Uniform
Commercial Code (UCC). Based on this, and its conclusion that a
claim to enforce a payable-on-demand promissory note accrues
when the note is executed, the district court granted summary
judgment in favor of plaintiff, Jerry Gunderson. Defendants,
William Weidner and Weidner Holdings, LLC, appeal the district
court’s order for summary judgment. Because we conclude that the
UCC applies and that under the UCC’s limitations period Weidner
Holdings’ claim to enforce the promissory notes is not time barred,
we reverse the district court’s judgment.
I. Background
¶2 Jerry Gunderson and his wife, Kimberly Gunderson, asked
Kimberly’s father, William Weidner, to provide them with money to
purchase a home. Through his limited liability company, Weidner
Holdings, Mr. Weidner disbursed two lump sums to the couple in
1 order to fund the real estate purchase. On June 19, 2009, the
Gundersons executed two promissory notes in the amounts of
$739,000 and $150,000, respectively. The promissory notes were
explicitly payable on demand and bore a nominal annual interest
rate of 0.75 percent. The $739,000 note was secured by a deed of
trust; the $150,000 note was unsecured. The promissory notes did
not require any periodic payments of interest or principal. And the
Gundersons made none.
¶3 Later, the Gundersons asked Mr. Weidner to forgive the notes
so that they could sell the property encumbered by the larger note
and purchase property in Montana. Mr. Weidner declined the
request. But he did agree to release the deed of trust on the
property the Gundersons were selling and take a subordinated
security interest in the Montana property. The Gundersons then
moved to Montana. Soon after, the Gundersons separated and
began dissolution of marriage proceedings.
¶4 After the Gundersons filed for divorce in Montana, Mr.
Weidner, on behalf of his limited liability company, called the two
2 notes due against Mr. Gunderson.1 Mr. Weidner demanded
payment on March 9, 2017, almost eight years after the notes were
executed. After Mr. Weidner demanded repayment, Mr. Gunderson
sued in Colorado district court, seeking a declaratory judgment that
the money was a gift, never to be repaid. Mr. Gunderson also
contended that the statute of limitations barred Mr. Weidner’s and
his limited liability company’s efforts to enforce the notes.
¶5 On July 19, 2017, Weidner Holdings asserted counterclaims,
seeking a declaratory judgment that the disbursed funds were loans
and not gifts and that its enforcement action was not time barred.
Weidner Holdings also sought to enforce the promissory notes
against Mr. Gunderson. Mr. Gunderson then moved for summary
judgment, seeking application of the statute of limitations to
preclude enforcement of the notes and to extinguish the deed of
trust.
¶6 Mr. Gunderson contends the general statute of limitations,
section 13-80-103.5, C.R.S. 2019, applies to the notes, while the
Weidner defendants contend that the statute of limitations under
1Weidner Holdings seeks to enforce the notes against Jerry Gunderson, but not Mr. Weidner’s daughter, Kimberly Gunderson.
3 Colorado’s UCC, section 4-3-118, C.R.S. 2019, applies to the
notes.2
¶7 The district court granted Mr. Gunderson’s motion for
summary judgment, concluding that Colorado’s general six-year
statute of limitations applied to the notes, that any claim on the
notes accrued when they were executed, and therefore that Weidner
Holdings’ claim for enforcement of the notes is time barred. Mr.
Weidner and his limited liability company appeal.
II. Applicable Statute of Limitations
A. Legal Principles
¶8 We review an order granting a motion for summary judgment
de novo. Salas v. Grancare, Inc., 22 P.3d 568, 571 (Colo. App.
2001). Summary judgment is only appropriate when there is no
genuine issue of material fact. C.R.C.P. 56(e). In reviewing a
motion for summary judgment, “the nonmoving party is entitled to
any favorable inferences that may reasonably be drawn from the
facts, and all doubts must be resolved against the moving party.”
2 Neither party disputes that Colorado law applies.
4 Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 225-26 (Colo.
2001).
¶9 Which statute of limitations applies is a question of law that
we review de novo. Castle Rock Bank v. Team Transit, LLC, 2012
COA 125, ¶ 16. A statute of limitations prescribes the time during
which an action must be brought. The purposes of statutes of
limitation are to promote justice, discourage unnecessary delay,
and preclude the prosecution of stale claims. Sulca v. Allstate Ins.
Co., 77 P.3d 897, 899 (Colo. App. 2003). The statute of limitations
is an affirmative defense, C.R.C.P. 8(c), that must be pleaded and
proved by the defendant. Zertuche v. Montgomery Ward & Co., 706
P.2d 424, 426 (Colo. App. 1985); cf. Drake v. Tyner, 914 P.2d 519,
523 (Colo. App. 1996) (concluding that the defense adequately
raised a statute of limitations defense in its summary judgment
motion).
B. Analysis
¶ 10 So, which statute of limitations controls a cause of action to
enforce the promissory notes? Mr. Gunderson contends (and the
district court agreed) that section 13-80-103.5(1)(a), the general
5 statute of limitations applicable to liquidated debts, applies. That
section provides:
(1) The following actions shall be commenced within six years after the cause of action accrues and not thereafter:
(a) All actions to recover a liquidated debt or an unliquidated, determinable amount of money due to the person bringing the action, [and] all actions for the enforcement of rights set forth in any instrument securing the payment of or evidencing any debt . . . .
§ 13-80-103.5.
¶ 11 The Weidner defendants, on the other hand, contend that the
two promissory notes are negotiable instruments, and that as
payable-on-demand negotiable instruments, an action to enforce
them is subject to the limitations period in section 4-3-118, which
provides:
[I]f demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten years.
§ 4-3-118(b).
6 ¶ 12 The key, undisputed facts affecting the statute of limitations
analysis are:
• The promissory notes were executed on June 19, 2009.
• The promissory notes are payable on demand and
payments of principal and interest have never been
made.
• Demand for payment wasn’t made until March 9, 2017
(just shy of six years and nine months after the
promissory notes were executed).
• Suit to enforce the promissory notes was initiated on July
19, 2017 (eight years and one month after the promissory
notes were executed).
¶ 13 Based on the undisputed facts, it is uncontested that if section
13-80-103.5(1)(a) applies (and assuming that a claim on a payable-
on-demand promissory note accrues when it is executed), then
Weidner Holdings’ action to enforce the promissory notes is time
barred. This is so because demand for payment was not made until
more than six years after the promissory notes were executed. See
§ 13-80-103.5(1)(a). It is also uncontested that if section 4-3-118(b)
applies instead, then the Weidner Holdings’ action to enforce the
7 promissory notes is not time barred. This is so because demand for
payment was made within ten years of the notes being executed
and because suit was filed within six years after demand was made.
See § 4-3-118(b). Simply put, whether the district court properly
granted summary judgment turns on which statute of limitations
applies.
¶ 14 To resolve this question, we must first address whether the
promissory notes are negotiable instruments. If they are, we must
next determine whether securing them with a deed of trust defeats
negotiability. Answering both of these questions in favor of
negotiability, we then consider whether the supreme court case on
which the district court relied — Mortgage Investments Corp. v.
Battle Mountain Corp., 70 P.3d 1176 (Colo. 2003) — controls; we
conclude that it does not control the disposition of this case. Based
on this analysis, we finally conclude that the UCC’s statute of
limitations, section 4-3-118(b), governs and that the district court’s
application of the general statute of limitations, section 13-80-
103.5, was erroneous.
8 1. The Promissory Notes Are Negotiable Instruments
¶ 15 Article 3 of the UCC governs the issuance, transfer,
enforcement, and discharge of negotiable instruments. Liberty
Mortg. Corp. v. Fiscus, 2016 CO 31, ¶ 13. Whether a promissory
note is a negotiable instrument is a question of law that we review
de novo. Cf. Reid v. Pyle, 51 P.3d 1064, 1067 (Colo. App. 2002)
(appearing to treat the question of whether a promissory note is a
negotiable instrument as a question of law); DBA Enters., Inc. v.
Findlay, 923 P.2d 298, 303 (Colo. App. 1996) (same).
¶ 16 Under the UCC, a negotiable instrument is an “unconditional
promise or order to pay a fixed amount of money, with or without
interest or other charges described in the promise or order” if it:
(1) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
(2) Is payable on demand or at a definite time; and
(3) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money [with exceptions that are not applicable here].
§ 4-3-104(a), C.R.S. 2019.
9 ¶ 17 We conclude that the two promissory notes here meet the
definition of a negotiable instrument under the UCC. First, the
notes contain plain language describing an unconditional promise
to pay a fixed amount of money with interest. Cf. Bank of Kimball v.
Rostek, 161 Colo. 584, 586, 423 P.2d 579, 580 (1967) (“In order for
a promissory note to be negotiable . . . it must contain both an
unconditional promise to pay and a fixed or determinable date of
payment.”). Specifically, both notes contain the following language:
“In return for the loan that I have received, I promise to pay [the
principal amount] . . . plus interest, to the order of the Lender.”
Second, the notes were payable to order at the time they were
issued; the language of both notes specifically makes payment due
to an identified legal entity — namely, Weidner Holdings (which
continues to be the holder of the notes). Third, the notes are
payable on demand and due at the lender’s call, providing: “I will
pay principal and interest by making a payment upon demand.”
Fourth, the notes do not state any additional undertakings,
conditions, or promises.
¶ 18 Because the promissory notes satisfy the conditions set forth
in section 4-3-104(a), they are negotiable instruments. See Haberl
10 v. Bigelow, 855 P.2d 1368, 1372-73 (Colo. 1993). Still, Mr.
Gunderson contends that the promissory notes are not negotiable
instruments because they are secured by a deed of trust.3 We turn
to that contention next.
2. Securing a Promissory Note With a Deed of Trust Does Not Defeat the Negotiability of the Promissory Note
¶ 19 As noted earlier, the larger of the two promissory notes is
secured by a deed of trust in real property. Mr. Gunderson argues
that the conditions of the deed of trust constitute “further
undertakings,” rendering the promissory note non-negotiable. We
agree that if a written agreement makes an obligation to pay subject
to an express condition, the instrument is not payable on demand,
but is payable only upon the happening of the express condition.
See Roa v. Miller, 784 P.2d 826, 829 (Colo. App. 1989) (holding that
defendant’s promise to pay was not unconditional because it was
expressly conditioned upon her “transfer of title,” and therefore, the
3 In his briefing, Mr. Gunderson appears to contend that both promissory notes are secured by a deed of trust. But the record reflects that only the larger of the two notes is secured. Because we conclude that whether a note is secured does not have a bearing on negotiability, see Part II.B.2, infra, we don’t need to resolve this discrepancy.
11 document could not be a negotiable instrument). But here, any
additional conditions are solely required by the deed of trust and
are not incorporated into the promissory notes. And Mr.
Gunderson does not cite any case law, and we know of none, that
holds that a promissory note secured by a deed of trust cannot be a
negotiable instrument under the UCC.
¶ 20 Instead, the promissory notes here are similar to the
promissory note that the supreme court found to be a negotiable
instrument in Haberl. In that case, the supreme court held that the
promissory note at issue, despite being secured by a deed of trust,
was still a negotiable instrument because it contained “both an
unconditional promise to pay and a fixed date of payment.” Haberl,
855 P.2d at 1372. Here too, the promissory notes satisfy the
conditions of a negotiable instrument, and the fact that one is
secured by a deed of trust does not defeat its negotiability. See id.
at 1372-73 (collecting cases from other jurisdictions that stand for
the proposition that a promissory note is not stripped of its
character as a negotiable instrument simply because it is secured
by a deed of trust or mortgage). Accordingly, we conclude that both
12 promissory notes are negotiable instruments, notwithstanding the
fact that one is secured by a deed of trust.
3. The Colorado Supreme Court’s Decision in Battle Mountain Is Inapposite
¶ 21 The district court relied on Battle Mountain to conclude that
the general six-year statute of limitations applies to a payable-on-
demand promissory note secured by a deed of trust. Mr.
Gunderson urges us to do the same. We, however, are not
persuaded that Battle Mountain controls this case. To understand
why, a close examination of Battle Mountain is warranted.
¶ 22 The underlying claim in Battle Mountain was a foreclosure on a
deed of trust. 70 P.3d at 1179. Eight years before filing the
foreclosure action giving rise to Battle Mountain, the lender sued the
borrower for default on a promissory note, and instead of
immediately foreclosing on the property, simply obtained a
judgment. Id. at 1179-80. In an effort to collect on the judgment,
the lender filed the Battle Mountain litigation, seeking to foreclose
on the deed of trust that originally secured the promissory note
(and, at the time of filing, secured the judgment). Id. at 1180.
Because eight years had passed between the lender obtaining its
13 judgment and initiating the foreclosure action, the borrower
contended that the lender’s foreclosure action was barred by the
six-year statute of limitations contained in section 13-80-103.5. Id.
A division of our court agreed, and the lender sought certiorari
review. Id. at 1181.
¶ 23 The supreme court granted certiorari to determine whether the
six-year statute of limitations barred foreclosure on a lien of a deed
of trust.4 Id. at 1178. The supreme court reversed a decision of the
court of appeals, holding that an action to foreclose on a deed of
trust is governed by the fifteen-year limitations period applicable to
deeds of trust, so long as the action to reduce the promissory note
to judgment was timely pursued. Id. at 1179, 1183. In so holding,
the supreme court stated as follows:
We conclude that the six-year statute of limitations, section 13–80–103.5, 5 C.R.S. (2002), is a general statute of limitations on the enforcement of debts, including those evidenced by a promissory note secured by a deed of trust. When, as here, a party brings an
4The court also granted certiorari to address whether certain defendants had standing to assert a statute of limitations defense in a foreclosure action. See Mortg. Invs. Corp. v. Battle Mountain Corp., 70 P.3d 1176, 1179 n.1 (Colo. 2003). This second issue has no bearing on the issues presented in this case. And neither party contends otherwise.
14 action for default on a promissory note within the six-year limitations period and thereafter reduces the note to judgment, the more specific six and fifteen-year limitations periods apply to the resulting judgment lien and the deed of trust respectively. The action before us is for foreclosure on a deed of trust, not execution upon a judgment lien, and the fifteen-year statute of limitations of section 38– 39–205, 10 C.R.S. (2002), applies.
Id. at 1183 (emphasis added).
¶ 24 It is the italicized language that the district court seized upon
to conclude that regardless of whether a promissory note is a
negotiable instrument, the general statute of limitations in section
13-80-103.5 controls.5 We are not persuaded, however, that this
language supports that conclusion, for two reasons.
5 In addition to determining that the applicable statute of limitations is the six-year general statute of limitations, the district court also relied on Wasinger v. Reid, 705 P.2d 533, 534 (Colo. App. 1985), to conclude that Mr. Weidner’s claim accrued when the promissory notes were executed. Id. (“When a promissory note is payable on demand, the statute of limitations begins to run on the date the note is executed.” (citing Kirby v. Bourg, 165 Colo. 500, 440 P.2d 151 (1968))). When Wasinger was decided, however, the Colorado UCC specified that a cause of action on a demand note accrues on the date of issuance. See § 4-3-122(1)(b), C.R.S. 1985 (“A cause of action against a maker or an acceptor accrues . . . [i]n the case of a demand instrument upon its date or, if no date is stated, on the date of issue.”). But in 1994, portions of the Colorado UCC — including article 3 — were repealed and reenacted; in this process, section 4-3-122(1)(b) was eliminated and section 4-
15 ¶ 25 First, the court in Battle Mountain was not presented with the
issue of what statute of limitations applied to the claim to enforce
the promissory note. The case reducing the defaulted promissory
note to judgment had been resolved eight years earlier without any
apparent issue regarding the applicable statute of limitations being
raised. Id. at 1179-81. Indeed, even if the action to reduce the
promissory note to judgment had been subject to a valid statute of
limitations defense, the proper time to raise and resolve the issue
was in the earlier case, not in the foreclosure case. This is so
because an alleged violation of a statute of limitations is a waivable
affirmative defense, not a jurisdictional defect subject to collateral
attack. Put differently, even if the court in the promissory note case
misapplied the statute of limitations, Battle Mountain — the
foreclosure case — was not the proper setting to remedy it. Thus,
3-118 was enacted, dramatically changing the accrual of a cause of action on a demand note. See Ch. 159, sec. 1, 1994 Colo. Sess. Laws 839-50. Because of the statutory change and our determination that the promissory notes are negotiable instruments, Wasinger has no bearing on this case. But because we do not reach the issue of when a non-negotiable payment-on- demand promissory note would accrue, we offer no opinion on whether Wasinger has continuing viability under such circumstances.
16 the applicable statute of limitations that applied to enforcement of
the promissory note was not at issue in Battle Mountain. So any
discussion of the statute of limitations applicable to the
enforcement of the promissory note was outside of the scope of the
grant of certiorari in Battle Mountain. See id. at 1179 n.1 (listing
the issues that the court granted certiorari to review).
¶ 26 Second, the question of whether the promissory note at issue
was a negotiable instrument was not raised, much less resolved in
Battle Mountain. In other words, we are confronted with a question
that was not before the court in Battle Mountain — whether a
payable-on-demand promissory note that is a negotiable instrument
is subject to the UCC’s statute of limitations.6
¶ 27 In summary, two things that were necessary to the court’s
holding in Battle Mountain regarding the promissory note was the
fact that the promissory note had been reduced to judgment and
6 Mr. Weidner also points out an additional distinction: that the promissory note at issue in Battle Mountain was not a payment-on- demand note. While this is true, this strikes us as a distinction without a difference when it comes to evaluating whether Battle Mountain sheds any light on the applicable statute of limitations. If this distinction were to have any relevance to our analysis it would be with respect to the issue of accrual under the general statute of limitations, an issue that we do not reach. See supra note 5.
17 when that occurred. And the Battle Mountain court’s discussion of
the statute of limitations applicable to the action to enforce the
promissory note was not necessary to its holding. Accordingly, we
conclude that Battle Mountain does not shed any light on — much
less control — what statute of limitations applies to a suit to enforce
the promissory notes at issue in this case.
4. The UCC’s Statute of Limitations Applies and the Claims Are Not Time Barred
¶ 28 Having resolved the threshold issues of whether the
promissory notes are negotiable instruments and whether Battle
Mountain controls, we now turn to the question of which statute of
limitations applies to Weidner Holdings’ claim to enforce promissory
notes against Mr. Gunderson.
¶ 29 Section 13-80-103.5 is a general statute of limitations on the
enforcement of debts, while section 4-3-118(b) is a more specific
statute of limitations, reserved for negotiable instruments. Battle
Mountain, 70 P.3d at 1184 (observing that section 13-80-103.5 is a
“general limitations provision that is broad in scope and includes
many types of instruments that secure a debt”). Where there is a
conflict over the applicable statute of limitations, courts should
18 apply the more specific statute of limitations over a more general
statute of limitations. See Persichini v. Brad Ragan, Inc., 735 P.2d
168, 172-73 (Colo. 1987) (holding that in the absence of a clear
legislative intent to the contrary, a statute of limitations specifically
addressing a particular class of cases will control over a more
general or catch-all statute of limitations); see also Battle Mountain,
70 P.3d at 1183. This leads us to the conclusion that section 4-3-
118(b) — the UCC’s statute of limitations for payable-on-demand
negotiable instruments — applies, and not the general statute of
limitations applied by the district court.
¶ 30 In case any doubt lingers over whether the legislature
intended the UCC’s statute of limitations to apply to circumstances
like those presented here, official comment 2 to section 4-3-118
confirms our conclusion. See West v. Roberts, 143 P.3d 1037, 1041
(Colo. 2006) (“Comments to a statute are relevant in its
interpretation.”). That official comment provides as follows:
The second sentence of subsection (b) bars an action to enforce a demand note if no demand has been made on the note and no payment of interest or principal has been made for a continuous period of 10 years. This covers the case of a note that does not bear interest or a case in which interest due on the note has not
19 been paid. This kind of case is likely to be a family transaction in which a failure to demand payment may indicate that the holder did not intend to enforce the obligation but neglected to destroy the note.
§ 4-3-118 cmt. 2.
¶ 31 For these reasons, we conclude that section 4-3-118(b) — and
not section 13-80-103.5 — applies to Weidner Holdings’ effort to
collect on the promissory notes executed by the Gundersons. And
because it is undisputed that the promissory notes are demand
notes on which no principal or interest has been paid and because
suit was filed within ten years of execution of the notes and within
six years of demand being made, the action is not time barred.
Accordingly, we reverse the summary judgment.
¶ 32 There’s one more issue that we need to address. Having
concluded that Weidner Holdings’ claim to enforce the promissory
notes are time barred, the district court also concluded that its
claim to enforce the deed of trust is similarly time barred. The
district court was certainly correct in its legal analysis that if a
claim on a promissory note is time barred, so too is a claim to
foreclose on the collateral securing the note. See § 38-39-207,
C.R.S. 2019 (“The lien created by any instrument shall be
20 extinguished, regardless of any other provision in this article to the
contrary, at the same time that the right to commence a suit to
enforce payment of the indebtedness or performance of the
obligation secured by the lien is barred by any statute of limitation
of this state.”). But because we reverse the district court’s statute
of limitations ruling on the promissory notes, we also reverse its
ruling dismissing the foreclosure claim, as it is wholly derivative of
the reversed ruling.
III. Conclusion
¶ 33 For the foregoing reasons, the district court’s order granting
summary judgment in favor of Mr. Gunderson is reversed, and the
case is remanded for further proceedings. Nothing in this opinion,
however, should be construed as addressing the merits of any other
defense to the enforcement of the notes or deed of trust, including
that they were a gift; such issues were not before us and should be
addressed by the district court on remand.
¶ 34 JUDGE BERGER and JUSTICE MARTINEZ concur.