Mesa
County District Court No. 17CV30328 Honorable Brian J. Flynn,
Judge
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
OPINION
WELLING JUDGE
¶
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 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 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 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." 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 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 ...