Opinion ID: 4529386
Heading Depth: 2
Heading Rank: 2

Heading: The Lost-Instrument Statute

Text: A creditor has a “claim” to property in the bankruptcy estate if it has a “right to payment.” 11 U.S.C. § 101(5)(A) (2018). State law determines the extent to which a creditor has property rights to assets within the bankruptcy estate. In re Miller, 666 F.3d at 1262 (citation omitted). So, like in In re Miller, “[w]e must . . . turn to Colorado law, in particular [Colorado’s] version of the [UCC].” Id. at 1262–63. 14 Under Colorado law, a promissory note is “payable to bearer if it . . . [d]oes not state a payee.” Colo. Rev. Stat. Ann. § 4-3-109(a)(2) (West 2020). As discussed, Washington Mutual did not make the Note payable to any payee, so the Note is payable to bearer. Generally, the only people entitled to enforce a blank-indorsed note are those in physical possession of it. That is because Colorado law states that “[w]hen indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.” Id. § 4-3-205(b); see also In re Miller, 666 F.3d at 1263–64 (“In the case of bearer paper . . . physical possession is essential because it constitutes proof of ownership and a consequent right to payment.”). Colorado’s lost-instrument statute is an exception to this general rule. In pertinent part, the lost-instrument statute states: A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process. Colo. Rev. Stat. Ann. § 4-3-309(a) (West 2020). So even if a holder of a note lost it, he or she may enforce the note by satisfying these three elements. The question now is whether the bankruptcy court was correct in ruling that Chase had satisfied all three of the lost-instrument statute’s elements. Arguing that it was not, Kim and 15 Foster first claim that the court relied on inadmissible evidence, meaning that no factual basis existed for concluding that Chase had met these elements. Second, Kim and Foster assert that Chase did not meet these elements as a matter of law.