CO Code § 4-3-308 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 3 - Negotiable Instruments|Part 3 - Enforcement of Instruments|§ 4-3-308. Proof of Signatures and Status as Holder in Due Course

  In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under section 4-3-402 (a).    If the validity of signatures is admitted or proved and there is compliance with subsection (a) of this section, a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under section 4-3-301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.     History. Source: L. 94: Entire article R&RE, p. 858, § 1, effective January 1, 1995.    Editor's note:   This section is similar to former § 4-3-307 as it existed prior to 1994.   OFFICIAL COMMENT   1. Section 3-308 is a modification of former Section 3-307. The first two sentences of subsection (a) are a restatement of former Section 3-307(1). The purpose of the requirement of a specific denial in the pleadings is to give the plaintiff notice of the defendant's claim of forgery or lack of authority as to the particular signature, and to afford the plaintiff an opportunity to investigate and obtain evidence. If local rules of pleading permit, the denial may be on information and belief, or it may be a denial of knowledge or information sufficient to form a belief. It need not be under oath unless the local statutes or rules require verification. In the absence of such specific denial the signature stands admitted, and is not in issue. Nothing in this section is intended, however, to prevent amendment of the pleading in a proper case.   The question of the burden of establishing the signature arises only when it has been put in issue by specific denial. “Burden of establishing” is defined in Section 1-201. The burden is on the party claiming under the signature, but the signature is presumed to be authentic and authorized except as stated in the second sentence of subsection (a). “Presumed” is defined in Section 1-201 and means that until some evidence is introduced which would support a finding that the signature is forged or unauthorized, the plaintiff is not required to prove that it is valid. The presumption rests upon the fact that in ordinary experience forged or unauthorized signatures are very uncommon, and normally any evidence is within the control of, or more accessible to, the defendant. The defendant is therefore required to make some sufficient showing of the grounds for the denial before the plaintiff is required to introduce evidence. The defendant's evidence need not be sufficient to require a directed verdict, but it must be enough to support the denial by permitting a finding in the defendant's favor. Until introduction of such evidence the presumption requires a finding for the plaintiff. Once such evidence is introduced the burden of establishing the signature by a preponderance of the total evidence is on the plaintiff. The presumption does not arise if the action is to enforce the obligation of a purported signer who has died or become incompetent before the evidence is required, and so is disabled from obtaining or introducing it. “Action” is defined in Section 1-201 and includes a claim asserted against the estate of a deceased or an incompetent.   The last sentence of subsection (a) is a new provision that is necessary to take into account Section 3-402(a) that allows an undisclosed principal to be liable on an instrument signed by an authorized representative. In that case the person enforcing the instrument must prove that the undisclosed principal is liable.   2. Subsection (b) restates former Section 3-307(2) and (3). Once signatures are proved or admitted a holder, by mere production of the instrument, proves “entitlement to enforce the instrument” because under Section 3-301 a holder is a person entitled to enforce the instrument. Any other person in possession of an instrument may recover only if that person has the rights of a holder. Section 3-301. That person must prove a transfer giving that person such rights under Section 3-203(b) or that such rights were obtained by subrogation or succession.   If a plaintiff producing the instrument proves entitlement to enforce the instrument, either as a holder or a person with rights of a holder, the plaintiff is entitled to recovery unless the defendant proves a defense or claim in recoupment. Until proof of a defense or claim in recoupment is made, the issue as to whether the plaintiff has rights of a holder in due course does not arise. In the absence of a defense or claim in recoupment, any person entitled to enforce the instrument is entitled to recover. If a defense or claim in recoupment is proved, the plaintiff may seek to cut off the defense or claim in recoupment by proving that the plaintiff is a holder in due course or that the plaintiff has rights of a holder in due course under Section 3-203(b) or by subrogation or succession. All elements of Section 3-302(a) must be proved.   Nothing in this section is intended to say that the plaintiff must necessarily prove rights as a holder in due course. The plaintiff may elect to introduce no further evidence, in which case a verdict may be directed for the plaintiff or the defendant, or the issue of the defense or claim in recoupment may be left to the trier of fact, according to the weight and sufficiency of the defendant's evidence. The plaintiff may elect to rebut the defense or claim in recoupment by proof to the contrary, in which case a verdict may be directed for either party or the issue may be for the trier of fact. Subsection (b) means only that if the plaintiff claims the rights of a holder in due course against the defense or claim in recoupment, the plaintiff has the burden of proof on that issue.   ANNOTATION   I.GENERAL CONSIDERATION.   Law reviews. For note, “The Burden of Proof of a Holder in Due Course of a Defective Negotiable Instrument”, see 4 Rocky Mt. L. Rev. 145 . For article, “One Year Review of Contracts”, see 36 Dicta 19 (1959).   Annotator's note. The following annotations include cases decided under former provisions similar to this section.   Every holder of a negotiable instrument is deemed prima facie to be a holder in due course. Civic Fin. Co. v. Meintzer, 137 Colo. 572 , 328 P.2d 379 (1958). See Myrick v. Garcia, 138 Colo. 298 , 332 P.2d 900 (1958).   A holder is entitled to sue thereon. A holder of a promissory note is deemed prima facie to be a holder in due course and entitled to sue thereon. Waterman v. Sullivan, 156 Colo. 195 , 397 P.2d 739 (1964).   A holder is entitled to recover. A plaintiff, being holder of a note in his possession, is entitled to have it admitted in evidence, establishing a prima facie right to recover thereon. Myrick v. Garcia, 138 Colo. 298 , 332 P.2d 900 (1958).   Whether a promissory note is negotiable or not is immaterial, as the same result would obtain, a holder of an instrument being entitled to sue thereon as the prima facie owner. Myrick v. Garcia, 138 Colo. 298 , 332 P.2d 900 (1958).   Assignee of negotiable instrument suing thereon need not plead specific facts from which his assignor derives the status of a holder in due course. Blake v. Samuelson, 34 Colo. App. 183, 524 P.2d 624 (1974).   A holder is entitled to the presumption of due course holding until the maker succeeds in showing a defense. Atkinson v. Englewood State Bank, 141 Colo. 436 , 348 P.2d 702 (1960).   Where the answer of the maker denies that the holder is the owner of the note sued upon, such answer merely has the effect of putting this defense in issue, and thus the holder is not obliged to prove such ownership until maker's evidence challenges his prima facie title. Myrick v. Garcia, 138 Colo. 298 , 332 P.2d 900 (1958), rev'g in part Marks v. Munson, 59 Colo. 440 , 149 P. 440 (1915); Middlesex Safe Deposit & Trust Co. v. Jacobs, 87 Colo. 445 , 290 P. 784 (1930).   The burden of establishing an affirmative defense against a holder in due course is on the maker. Atkinson v. Englewood State Bank, 141 Colo. 436 , 348 P.2d 702 (1960) (fraud).   The burden is on the holder. When it is shown that the title of any person who has negotiated a promissory note is defective, the burden is on the holder to prove that he, or some person under whom he claims, acquired the title as a holder in due course. Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923). See McClellan v. Morris, 71 Colo. 304 , 206 P. 575 (1922); Am. Nat'l Bank v. First Nat'l Bank, 130 Colo. 557 , 277 P.2d 951 (1954).   By a preponderance of the evidence. Where the maker proves at least a prima facie defense, the burden is on the holder to establish by a preponderance of the evidence that he is a holder in due course. Atkinson v. Englewood State Bank, 141 Colo. 436 , 348 P.2d 702 (1960).   That he is a bona fide holder. Where title is defective the burden of proof is upon the holder to show that he is a bona fide holder and that he took the paper before maturity, in good faith and for value. Johnson County Sav. Bank v. Gregg, 51 Colo. 358 , 117 P. 1003 (1911).   Which may be sustained by proof of paying full value and good faith. Where the burden of showing due course is cast upon the holder, he sustains that burden by proof of payment of full value and by showing the full details of the transaction from which there can be no national inference of knowledge or bad faith on his part. Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923); Omaha Steel Works v. Martin, 78 Colo. 560 , 243 P. 619 (1926).   Upon proof of full payment, a presumption of innocence prevails again as before the proof of defective title, subject, of course, to refutation by further evidence. This rule is reasonable, for who, with knowledge that a note was paid or invalid, would buy it at full price? Delaney v. Brownwood, 73 Colo. 83 , 213 P. 578 (1923).   Evidence held to support finding that holder purchased note in due course. Stewart v. Pub. Indus. Bank, 85 Colo. 546 , 277 P. 782 (1929).   Section determinative of sufficiency of allegations required to state claim. Although this statute on its face is concerned with evidentiary burdens of proof, it is also determinative of the sufficiency of allegations required to state a claim for relief in an action to recover on a negotiable instrument. Blake v. Samuelson, 34 Colo. App. 183, 524 P.2d 624 (1974).   Subsection (2) sets forth the requirements of a prima facie case. Blake v. Samuelson, 34 Colo. App. 183, 524 P.2d 624 (1974).   Parol evidence to show that a maker was only secondarily liable on a note is not a defense under subsection (2) and rejection of such evidence was not error. Metro Nat'l Bank v. Roe, 675 P.2d 331 (Colo. App. 1983).   Applied in First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).   II.PRESUMPTION OF DELIVERY.   Under the N.I.L., as long as an instrument remained in the possession of a person whose signature appeared thereon, there was no presumption of delivery from that person. Norman v. McCarthy, 56 Colo. 290 , 138 P. 28 (1914).   When the instrument was no longer in the possession of a party whose signature appeared thereon, a delivery from the persons whose signatures did appear thereon was presumed until the contrary appeared. Norman v. McCarthy, 56 Colo. 290 , 138 P. 28 (1914). See Weaver v. First Nat'l Bank, 138 Colo. 83 , 330 P.2d 142 (1958).   When the instrument was in the possession of a holder in due course, that presumption became conclusive. Norman v. McCarthy, 56 Colo. 290 , 138 P. 28 (1914).   Where there was no evidence of the delivery, it was presumed that it was delivered to the named payee by the drawer. Weaver v. First Nat'l Bank, 138 Colo. 83 , 330 P.2d 142 (1958).   Indorsement allegation implied delivery. In an action upon a negotiable promissory note by an indorsee, an allegation that the payee indorsed the note to the indorsee implied a delivery, and it was unnecessary to specifically allege a delivery. Louisville Coal Mining Co. v. Int'l Trust Co., 18 Colo. App. 345, 71 P. 898 (1903).   Presumption of delivery did not apply where fiduciary relationship. The general presumption of delivery was overcome by the specific presumption arising where there was a fiduciary relationship in which case the claimant had to overcome, by evidence, the presumption of undue influence with which the transaction was tainted because of the existence of the fiduciary relationship. Arnold v. Abernethy, 134 Colo. 573 , 307 P.2d 1106 (1957).