Opinion
Rehearing Denied May 6, 1975.
Page 861
Almon & Barsotti, David Barsotti, Denver, for plaintiffs-appellees.
Agee, Fann, Ewing & Goldstein, Peter A. Goldstein, Carew & Birch, William L. Carew, Colorado Springs, for defendants-appellants.
BERMAN, Judge.
Plaintiffs, Edna Kroh and J. F. Kroh, instituted this action against the defendants Pronto Petroleum Company, a corporation, A. Louis Laney, G. A. McGlothlin, Charles A. Closson, Edward L. Noonan, Joe B. Springfield, and Billy D. Springfield, to recover on the promissory note. At the close of plaintiffs' case, the court dismissed the complaint against A. Louis Laney, whom the court found had signed the note in his representative capacity. The court also dismissed as against defendants Joe B. Springfield and Billy D. Springfield. Judgment was rendered against all other defendants. Only defendants Closson and Noonan appeal. We affirm.
Pending this appeal, Edna Kroh died, and J. F. Kroh has become seriously ill. By order of this court, a motion was granted substituting parties for the plaintiffs.
These facts form the basis of this action. Pursuant to a contract for the purchase of 100,000 shares of stock in Pronto, Inc., in March 1971, defendants Pronto Petroleum Company, A. Louis Laney, G. A. McGlothlin, Edward L. Noonan, and Charles A. Closson paid $25,000 and executed and delivered to defendant Pronto, Inc., their promissory note in the sum of $75,000. In April 1971, plaintiffs purchased the note from Pronto, Inc., for $70,000. The note was due and payable on March 8, 1972. On that date, the note was not paid and plaintiffs filed this suit to recover the amount owing thereon. The stock itself was never delivered.
Defendants raise two basic issues on this appeal: (1) The trial court erred in holding that plaintiffs were holders in due course, and (2) the trial court erred in holding that Closson and Noonan were individually liable for the judgment.
This transaction is covered by the Uniform Commercial Code-Commercial Paper. Section 4--3--101 et seq., C.R.S.1973 (C.R.S.1963, 155--3--101 et seq.). Defendants' primary contention under their first claim is that plaintiffs were not holders in due course under s 4--3--302, C.R.S.1973 (C.R.S.1963, 155--3--302), because they failed to prove by a preponderance of the evidence that they did not have notice that a defense existed to the promissory note. Defendants claim that s 7--4--105(2), C.R.S.1973 (C.R.S.1963, 31--4--5(2)), which prohibits the purchase of stock by promissory note, was a defense which they were entitled to invoke to avoid payment of the note. Their contention is that plaintiffs had notice of this defense and therefore took the note subject thereto.
We note initially that neither Colo.Const. Art. XV, Sec. 9, nor s 7--4--105(2), C.R.S.1973 (C.R.S.1963, 31--4--5(2)), is a defense to an action brought on a promissory note given for unissued stock of a corporation. Haselbush v. Alsco of Colorado, Inc., 161 Colo. 138, 421 P.2d 113; Burch v. Exploration Data Consultants, Inc., 518 Colo.App. 155, 518 P.2d 288. Whether plaintiffs had any other knowledge which would defeat their claim to the status of holders in due course is one of fact. Hendrickson v. Alpert, 159 Colo. 463, 412 P.2d 433. And, the facts, with respect to notice, which exist at the time of negotiation are determinative of whether one occupies the status of a holder in due course. Terrell v. Walter E. Heller & Co., 165 Colo. 463, 439 P.2d 989.
Here, the evidence is sufficient to support the determination of the trial court that plaintiffs did not have notice of any defense to the instrument. Accordingly, we cannot disturb the findings of the trial court.
Closson and Noonan contend that they were not personally liable on the note and that the trial court erred in so finding. The note in question contained the typewritten name of Pronto Petroleum Company, followed by the signatures, A. Louis Laney, 'Secretary,' and the names of Closson, Noonan, and McGlothlin without any designation as to what office they held in the company. These defendants testified that they did not intend to be personally bound by the note. One of the plaintiffs testified that it was their understanding that when the time came for the note to be paid, those whose names appeared on the note would pay. We agree with the trial court that there is nothing on the note which would indicate that these defendants signed in any representative capacity for the corporation. Greenlawn Sprinkler Corp. v. Forsberg, 170 Colo. 286, 461 P.2d 22; s 4--3--302(2)(b), C.R.S.1973 (C.R.S.1963, 155--3--403(2) (b)).
Judgment affirmed.
ENOCH and VanCISE, JJ., concur.