June 24, 2019

Colorado Court of Appeals: Action for Declaratory Judgement of Non-Liability for Promissory Note Based on Statute of Limitations Does Not Trigger Counterclaim Revival Statute

The Colorado Court of Appeals issued its opinion in Tidwell v. Bevan Properties, Ltd. on August 4, 2011.

Promissory Note—Statute of Limitations—Counterclaim Revival Statute—Declaratory Judgment—Evidence.

Defendant Bevan Properties, Ltd. appealed the district court’s summary judgment in favor of plaintiffs Lloyd A. Tidwell, Betty H. Tidwell, and BLT Consulting, Inc. The judgment was affirmed.

On May 12, 1998, BLT Consulting executed a promissory note for $65,000 in favor of defendant. The Tidwells personally guaranteed the note. The note was due and payable on or before October 1, 1998, and was secured by a deed of trust on real estate owned by the Tidwells. The deed of trust was recorded in the local county clerk’s office on October 21, 1998. No payment was ever made on the note. On July 9, 2010, plaintiffs filed this action for declaratory relief requesting that the note, the personal guarantees, and the deed of trust be held unenforceable. The district court entered summary judgment in favor of plaintiffs.

On appeal, defendant contended that the counterclaim revival statute, CRS § 13-80-109, applies in cases where a plaintiff brings a declaratory relief action based on expiration of the statute of limitations. In Colorado, the general six-year limitations statute applies to promissory notes. If, after a debtor defaults on a promissory note, a creditor fails to sue to enforce the note within the six-year limitations period, the creditor’s right to foreclose on the deed of trust lien is extinguished. Here, the promissory note became due on October 1, 1998. Thus, on October 2, 2004, an action on note was barred by the statute of limitations, and the lien created by the deed of trust was extinguished. An action for declaratory judgment of non-liability based on statute of limitations grounds is not a “claim” triggering the counterclaim revival statute. Therefore, the district court correctly granted summary judgment in favor of plaintiffs.

Defendant further contended that the allegations contained in the affidavit it submitted to the district court raised a genuine issue of material fact. The affidavit defendant submitted purported to establish that the parties had verbally agreed to extend the payment of the note and therefore tolled the payment period. However, defendant failed to present any admissible evidence that could demonstrate that the limitations period was tolled by written agreement of the parties. Because defendant failed to produce a written instrument signed by plaintiffs acknowledging a delay in the payment of the promissory note, the district court correctly held that defendant’s affidavit failed as a matter of law to raise a genuine issue of material fact precluding summary judgment.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on August 4, 2011, can be found here.

Office of Attorney Regulation Warns of Canadian Trust Account Scam

The Colorado Supreme Court Office of Attorney Regulation released the following information today about a trust account scam originating in Canada. The scam targets lawyers with a fake client seeking help to collect on a promissory note:

Important Information Regarding Trust Account Fraud:

The Colorado Supreme Court Office of Attorney Regulation received specific information regarding a trust account scam operating out of Canada.  The fraud involves purported collection on a promissory note and involves both the lender and the debtor.  The “client” is seeking the assistance of the lawyer in collecting on the promissory note.  Shortly after making a demand for payment, the lawyer receives cashier’s checks drawn on an Ohio bank.  The checks total $80,000.  The “client” expects the lawyer to run the checks through the lawyer’s trust account and then forward the funds to the “client.”  The cashier’s checks pass the typical fraud detection safeguards and appear legitimate.  A slight spelling error is the only indication of fraud.  All Colorado lawyers should be wary of any similar scheme.  If you are the recipient of telephone calls or emails seeking legal assistance in matters similar to the above facts, you should take all necessary precautions to verify the negotiability of the checks.  Please contact this office and law enforcement with any information related to this scheme.

Office of Attorney Regulation
Colorado Supreme Court
1560 Broadway, Suite 1800
Denver Colorado 80202
United States
(303) 866-6400

Click here to read the original release from the Office of Attorney Regulation online.