Entries in defense to foreclosure (2)


No Rubber Stamp for Business Records Exception to Hearsay

To foreclose, you need the original promissory note (Note) with the original endorsement or assignment, if any, and the original recorded deed of trust.[1]  

As a matter of proof the original Note with endorsements or assignments and the original recorded deed of trust is the best evidence.[2]  CRE 1002 requires that the contents of a writing be proven by the original writing.   The original note is authentic and reliable evidence that the debtor owes money[3].  The original deed of trust establishes the authority of the Public Trustee to sell the property securing the notes.  And the original endorsement establishes that the holder, one in possession, is the real person entitled to foreclose on the outstanding debt.      

The Colorado foreclosure statute also allows copies of the Note, its assignment, if any, and recorded deed of trust [4] to commence a foreclosure if accompanied with a certification that the note, assignment and deed of trust are true and correct copies of the original and accompanied by a promise to indemnify the debtor if the original note appears. [5] 

Article 3 of the Uniform Commercial Code offers insight into how a certification as to the accuracy of copies of a Note with proper endorsement and deed of trust allow a foreclosure to proceed with a promise to indemnify.  

C.R.S. § 4-3-309(b)[6] simply says that in order for a person to foreclose without the original note, assignment and deed of trust that person must provide some “adequate protection” to the debtor if the original note and deed of trust somehow appears after enforcement of the note.  The comment to this section states that “adequate protection” is a flexible concept depending on the “degree of certainty about the facts in the case”.[7]

With the complex process of bundling home loans and transferring them into mortgage backed securities (MBS), there is “a degree of uncertainty” whether the person bringing a foreclose action has a right to foreclose.

For instance, the Note and deed of trust may have been misplaced or lost as they are transferred from the original lender through various intermediaries into a mortgage backed security (MBS).  Or there may have been no valid endorsement or endorsements transferring the Note into the MBS as required for the integrity of the MBS.  

Producing the original Note with the proper endorsements and the deed of trust shows ownership and the right to enforce the Note by foreclosure.    Original notes and valid endorsements also insure clear title when the property is subsequently sold.

Copies of promissory notes are not allowed when obtaining a default judgment[8] and should not be allowed in a foreclosure because foreclosure is the same as obtaining a default judgment.[9]

In most Colorado foreclosures, producing the original note and deed of trust satisfies the foreclosure statute C.R.S. § 38-38-101’s definition of “holder of evidence of debt” and courts will allow a foreclosure to continue.  If copies are produced, the foreclosing party can argue enforcement of a lost instrument[10] or prove the copies’ authenticity by arguing their admissibility under the business records exception to the hearsay rule discussed below.[11]

Even with possession of the original Note and deed of trust, if the Note and deed of trust have not been transferred into the MBS before its closing date, the representative of the MBS has no authority or standing to bring a foreclosure. [12]  The endorsement or endorsements trace the transfers and establishes the right of the holder of the Note to enforce it. 

The trust, responsible for holding pools of home loans (notes and deed of trusts) in a particular MBS, require a clear separation from the originators of the home loans through various intermediaries to the MBS.   An endorsement from the originator into the trust creates the separation and establishes the MBS’s ownership of the home loans.         

A complete chain of endorsements from originator into the trust are unlikely because “the rapid growth of mortgage securitization outpaced the ability of the legal and financial system to track mortgage loan ownership.[13]   More common is a blank endorsement on the note or on a separate piece of paper called an allonge.  Possession of a Note with an original blank endorsement satisfies Colorado’s foreclosure statute’s requirement that a “holder of evidence of debt”[14] has a right to foreclose. 

However, possession of the note with a blank endorsement does not necessarily mean the foreclosing party has the right to foreclose when the holder is a trustee or servicer of a MBS.        

As an example, a foreclosing party appears at a Rule 120 hearing with the original Note and Deed of Trust and an “original” rubber stamp endorsement on the Note.  There is no endorsement on the copy of the Note filed with Public Trustee to initiate the foreclosure. The foreclosing party is a national bank acting as Trustee for a MBS.  The court approves the foreclosure sale based on the plain language of the foreclosure statute requiring possession of the original Note with endorsement and original deed of trust.  The court enters its decision despite the fact that the copy of the Note filed with the Public Trustee months earlier did not show the rubber stamped endorsement presented the day of the Rule 120 hearing.

This example illustrates why rubber stamped endorsements requires proof that they are not fabricated.  It is not news that tracking transfers of Notes into a trust has been fraught with uncertainty as highlighted by federal and state investigations into “shoddy paperwork and possible forgeries of legal documents by banks, other lenders or their representatives”.[15] 


Blank, undated, un-notarized endorsements make it difficult to track home loans into a MBS.  And as illustrated above “original” rubber stamp endorsements lack trustworthiness and leave it open for abuses that would not otherwise be available if the substantive law governing the transfer of home loans into securities has more sway than the foreclosure statute. 


Article 3 and Article 9 of the Uniform Commercial Code are the substantive laws relating to who has the right to enforce a negotiable instrument.  The notes of a home loan are negotiable instruments under Article 3.[16][17] The transfer of a home loan into a security is a secured transaction under Article 9.[18][19].  The Colorado foreclosure statute is the adjective law or the process by which security interests are enforced.[20]

Using our example of the “original” rubber stamp blank endorsement, there must be more evidence than simple possession to show the foreclosing party has authority to foreclose when a loan has been transferred into a MBS.  Lack of endorsement on Note would prevent foreclosing party from being “holder” under Colorado law.[21]  


Normally, business records are inadmissible as hearsay[22] because they are out of court statements about when the note and deed of trust were transferred into the MBS.  The “original” rubber stamp blank endorsement is another level of hearsay because it is offered for the truth that the person signing the endorsement did in fact endorse the note.  Statements of outside or third parties included in a business record are not granted the same presumption of accuracy, "because the third party has no business duty to report the information accurately.[23]

However under the business records exception to the hearsay rule, business records may be introduced into evidence if a proper foundation is laid.[24]  This exception is based on a presumption of trustworthiness that business records maintained and communicated on a regular basis as part of that business’ activity are less likely to be fabricated when introduced into evidence.[25]

Under this exception, proof of the transfer or assignment of the home loan into a MBS may be admissible hearsay if there is a record of the transfer made “at or near the time” of the transfer, “by a person with knowledge”, during the course of a “regularly conducted business activity”.[26]   

The person testifying will be a representative of the trustee or servicer bringing the foreclosure action.  “The rule does not require that the person with knowledge testify or that such person even be identified as long as the representative testifies that the method by which the record is produced includes its making by a person with knowledge.”[27]

For example, the foundation for a witness who will testify as to the authenticity of the “original” rubber stamp endorsement should be able to demonstrate that the “original” rubber stamp endorsement was executed by a person with authority acting on behalf of the then current owner of the note at or near the time the Note was to be transferred into the MBS.

Based on the above foundational requirements a witness should also be familiar with the procedure of transferring the home loans into the MBS near or at the closing date for transfers into the MBS trust.  Such familiarity gives credibility to testimony about the transfer of home loans into a MBS.  A copy of the mortgage schedule listing all the home loans lodged in a MBS should be offered as additional proof that a particular home loan is properly lodged in the MBS.   

The “original” rubber stamp endorsement would not pass the test for trustworthiness because it appeared after the filing of the foreclosure not “near or at the time” of when it was supposed to be transferred; it was done not in the course “regularly conducted business activity” but for litigation; and the signature on the rubber stamp was not by “by a person with knowledge”. [28]

The lesson to learn is make sure the court sees the original documents, the Note, deed of trust and the endorsement, when a foreclosed loan is in mortgage backed security.










[1] C.R.S. § 38-38-101. Holder of evidence of debt may elect to foreclose (1) Documents required. (b) The original evidence of debt, including any modifications to the original evidence of debt, together with the original indorsement or assignment thereof, if any, to the holder of the evidence of debt or other proper indorsement or assignment in accordance with subsection (6) of this section …  c) The original recorded deed of trust securing the evidence of debt …”  

[2] CRE Rule 1002. Requirement of Original. To prove the content of a writing, recording, or photograph, the original writing, recording, or photograph is required, except as otherwise provided in these rules or by statute of the State of Colorado or of the United States.

[3] Smith v Weindrop, 833 P.2nd 856, (Colo. App. 1992).  Promissory notes are self authenticating under Rule 902(9).

[4] C.R.S. § 38-38-101 (1)(b)… in lieu of the original, … (II) A copy of the evidence of debt and a certification signed and properly acknowledged by a holder of an evidence of debt …    that the copy of the evidence of debt is true and correct … (c) (II) Copies of the recorded deed of trust … and a certification signed and properly acknowledged by a holder of an evidence of debt… certifying or stating that the copies of the recorded deed of trust …are true and correct… ”

[5] C.R.S. § 38-38-101 (2) Foreclosure by qualified holder without original evidence of debt, original or certified copy of deed of trust, or proper indorsement… shall, by operation of law, be deemed to have agreed to indemnify and defend any person liable for repayment of any portion of the original evidence of debt in the event that the original evidence of debt is presented for payment ..”   

[6] “Enforcement of lost, destroyed, or stolen instrument” b) A person seeking enforcement of an instrument under subsection (a) of this section must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, section 4-3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

[7]Under Section4- 3-309 adequate protection is a flexible concept. For example, there is substantial risk that a holder in due course may make a demand for payment if the instrument was payable to bearer when it was lost or stolen. On the other hand if the instrument was payable to the person who lost the instrument and that person did not indorse the instrument, no other person could be a holder of the instrument. In some cases there is risk of loss only if there is doubt about whether the facts alleged by the person who lost the instrument are true. Thus, the type of adequate protection that is reasonable in the circumstances may depend on the degree of certainty about the facts in the case.”

[8] C.R.C.P. Rule 121 Section 1-14(1) (f) “If the action is on a promissory note, the original note shall be presented to the court in order that the court may make a notation of the judgment on the face of the note. If the note is to be withdrawn, a photocopy shall be substituted.”

[9] See Foothills Holding Corp. v. Tulsa Rig, Reel & Mfg. Co., 155 Colo. 232, 393 P.2d 749, 751 (1964)(suit on a promissory note and an action against particular property may be pursued concurrently or consecutively).

[10] C.R.S. § 4-3-308 Enforcement of lost, destroyed or stolen instruments.

[11] In re Goodwin, 779 P 2d 837 (Colo 1989).

[12] See my April Blog, “Chink in the Armor- A Foreclosure Defense”

[13]After the Storm, Foreclosure Fraud & Robo-Signing Continues…” Nye Lavalle, Pew Mortgage Institute Citing the “Congressional Oversight  Panel Report of November 16, 2010 titled “Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation.”

[14] C.R.S. § 38-38-100.3(10) (c).

[15] “Two States Ask if Paperwork in Mortgage Bundling Was Complete” New York Times, Gretchen Morgenson, June 12. 2011. http://www.nytimes.com/2011/06/13/business/13mortgage.html?

[16] C.R.S. § 4-3-104(a).

[17] Haberl v Bigelow, 855 P.2d 1368 (Colo 1993)

[18] C.R.S. §4-9-109(3).

[19] Columbus Investments v. Lewis, 48 P.3d 1222 (Colo 2002).

[20]Allen v. Bailey, 91 Colo. 260, 14 P.2d 1087 (Colo. 1932). 

[21] C.R.S.  §§ 4–1–201(20). Barclay Receivables Co. v. Mountain Majesty, Ltd., 903 P.2d 37, 39 (Colo.App.1995)

[22] CRE 801“out of court statements offered in court for the truth being asserted.”

[23] Henderson v. Master Klean Janitorial, Inc., 70 P.3d 612 (Colo. App. 2003)

[24] CRE 803(6) Records of Regularly Conducted Activity. A memorandum report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or by certification that complies with Rule 902(11), Rule 902(12), or a statute permitting certification, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. The term "business" as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

[25] See Comment to CRE 803(6).

[26] Teac Corp. v. Bauer, 678 P.2d 3 (Colo.App.1984) (computer-generated statement of account was admissible as business record where it was based in relevant part upon records supplied by original creditor);

[27] 23 COPRAC §803:6

[28] Teac Corp. v. Bauer, 678 P.2d 3 (Colo.App.1984) (computer-generated statement of account was admissible as business record where it was based in relevant part upon records supplied by original creditor);


Who Is The Real Party For A PSA Foreclosure?

To foreclose you need possession of the original note and deed to trust representing the residential home loan.   If the note and deed of trust have been transferred to a trust as part of securitization, the trustee must comply with Pooling and Servicing Agreement (“PSA”) which gives the Trustee power over all the notes and deed of trust in that particular security.[1]


A PSA foreclosure defense is the failure of the note and deed of trust to be transferred into its particular trust or security according to the Pooling and Service Agreement.  An argument that a PSA foreclosure defense does not apply to a foreclosure by a Trustee because the homeowner is not a party to the PSA as a third party beneficiary is a misunderstanding of the PSA foreclosure defense.[2]


A PSA foreclosure defense is not based on the homeowner being a third party beneficiary to the PSA but is based on whether the Trustee has possession of the note and deed of trust, which is a standing issue.


A basic rule of contract law is that “a person not a party to an express contract may bring an action on such contract if the parties to the agreement intended to benefit the non-party, provided that the benefit claim is a direct and not merely an incidental benefit of the contract.” E.B. Roberts Construction Co. v. Concrete Contractors, Inc., 704 P.2d 859, 865 (Colo.1985).  Jefferson County School Dist. No. R-1 v. Shorey, 826 P.2d 830
(Colo., 1992).


A homeowner is not a third party beneficiary to a PSA because the PSA is not intended to directly benefit the homeowners.[3]  The investors in the security which contains a pool of home loans are third party beneficiaries to the PSA because they benefit from the PSA’s requirement that the Trustee oversee the collection of the monthly loan payments and transfer of these funds to the investors. 


If the home loan (the note and deed of trust) is not transferred to the trust according to the explicit requirements of the PSA on the transfer of the home loan into the security, the Trustee does not possess the home loan and is precluded from bringing a foreclosure action.  


In Colorado, a homeowner can challenge the foreclosing party’s right to bring a foreclosure action in a Rule 120 hearing.   Goodwin v. District Court In and For Sixteenth Judicial Dist. 779 P.2d 837, (Colo.1989).   Goodwin allows a court in C.R.C.P. 120 motion to decide whether the moving party is a real party in interest.  


Courts have the authority to whether a party has a right to bring a foreclosure action because of due process.  Due process is a constitutional principle that no person can be deprived of life or liberty or property without adequate legal procedures and safeguards.  C.R.S.A. Const. Art. 2, § 25. Plymouth Capital Co., Inc. v. District Court of Elbert County 955 P.2d 1014 (Colo., 1998)


In Colorado, C.R.C.P. Rule 17(a) provides the necessary mechanism to comply with due process by ensuring the “real party in interest” is bringing the foreclosure action.  C.R.C.P. 17(a) provides that "every action shall be prosecuted in the name of the real party in interest." "The real party in interest is the party who, by virtue of substantive law, has the right to invoke the aid of the court to vindicate the legal interest in question." In re Goodwin, supra.   


Simply, Rule 17(a) ensures the person or entity bringing a foreclosure action has the right to foreclose by asking do they have an "interest," which is material (not incidental) and properly before the court.


With respect to a Trustee bringing a foreclosure action on a home loan within a securitized trust, the question is does the Trustee have an “interest” in the note and deed of trust.    


There is Colorado case law that states a trustee who holds legal title to property is a real party in interest.  Koch v. Story 47 Colo. 335, 107 P. 1093 (Colo. 1910). Elk-Rifle Water Co. v. Templeton, 173 Colo. 438, 484 P.2d 1211 (Colo. 1971).  However, this rule does not apply to a Trustee of a securitized home loan.   Colorado is lien theory state, which provides that the holder of a note and deed of trust does not hold legal title to the property. “Colorado has adopted the lien theory of mortgages under which the mortgage or deed of trust creates a lien against real property but does not convey title. Section 38-35-117, C.R.S.[4]   Hohn v. Morrison, 870 P.2d 513 (Colo. App. 1993).


A Trustee can foreclose on a home loan if it has an “interest” in the home loan according to “substantive law” governing the transfer of notes and deeds of trusts into a security.  


“We mean by substantive law the positive law of duties and rights which gives rise to a cause of action, as distinguished from adjective law, which pertains to practice and procedure, or the legal machinery by which the substantive law is made effective.”  Allen v. Bailey, 91 Colo. 260, 14 P.2d 1087 (Colo. 1932). 


In the context of a Rule 120 hearing, the “substantive law” governing the “rights which give” a trustee an “interest” in the home loan and thus the right to foreclose is Article 3 of the Uniform Commercial Code (“UCC”) (C.R.S. §4-3-101 et seq.).


The Colorado foreclosure statute (C.R.S. § 38-38-101 et seq.) sets forth the procedure for foreclosing on a defaulted home loan and is, as such, “adjective law” and not dispositive on who can bring a foreclosure action.


The “substantive law” of Article 3 applies because when the note and deed of trust travel from the original lender in Colorado into a security managed by a Trustee in New York the note becomes a “negotiable instrument”.[5]  In fact the foreclosure statute references Article 3 when it identifies the person entitled to bring a foreclosure action as the “holder” [6] and defines “holder” in similar terms to Article 3.       


The “substantive law” of Article 3 of the Uniform Commercial Code determines whether or not a foreclosing entity is a “entitled to enforce an evidence of debt”.  C.R.S. § 4-3-301 provides a Person entitled to enforce” an instrument[7] means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 4-3-309 or 4-3-418(d).  A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument .”


 The right to enforce a note in foreclosure depends on the transfer of the note to a person entitled to enforce the “negotiable instrument”.   “To be a holder one must meet the two conditions in section 4-1-201(b)(20): (1) he or she must have possession (2) of an instrument drawn, issued, or indorsed to him or her. With rare exceptions, those claiming to be holders have physical ownership of the instrument in question.”[8]  


Possession is designed to prevent two or more claimants from qualifying as holders who could take free of the other party's claim of ownership.  


The right to possession of the note depends on the transfer.  Article 3 provides two ways to transfer a note: “negotiation”[9] and “transfer”[10].    A “negotiation” of a note gives the person in possession the rights of “holder”.  A “transfer” gives the person in possession the “right to enforce” the note.


UCC Comment 1 to C.R.S. § 4-3-203(a) explains:

“The right to enforce an instrument and ownership of the instrument are two different concepts….A thief who steals a check payable to bearer becomes the holder of the check and a person entitled to enforce it, but does not become the owner of the check….Moreover, a person who has an ownership right in an instrument might not be a person entitled to enforce the instrument…The right to payment is transferred by delivery of possession of the instrument “by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.” 


Under both the Colorado foreclosure statute and Article 3, a “holder”  is  person in rightful possession of the note:  C.R.S. § 4-1-201(20) “Holder” means: (A) the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;  C.R.S. §38-38-100.3(10)(c) “Holder of an evidence of debt” means the person in actual possession of or person entitled to enforce an evidence of debt. §38-38-100.3(10)(c).


The safest way to transfer a note to ensure a right to payments is to deliver possession with an endorsement [11] on the note specifying the name of the party taking ownership of the note.  The second safest way to transfer a note is to deliver possession of the note to a party endorsed in blank or endorsed to bearer[12].  In both instances the person who has possession of the note is deemed a “holder” with a right to payment on the note. 


Endorsement is important because it is the way to know if the person in possession is rightfully in possession.  When notes are transferred into a trust for the purpose of securitization, the requirements for endorsements are all the more important.  For an outline for all the reason why transfer of a home loan into a securitized trust is stricter than that allowed under Article 3 and state foreclosure laws please refer to my prior blog post “A Chink in the Armor- A Foreclosure Defense”.


The UCC allows stricter requirements for transfers of notes by agreement.[13] The PSA requires proof of the transfers of the note or a chain of title from original lender to the deposit of the note into a securitized trust for the trust to own the note.  The reason for a clear chain of title from lender to the trust serves several purposes.  One main reason is to establish the integrity of the trust in order that certificates in the trust can be sold to investors.  Another reason is to obtain favorable tax treatment. 


A sample of the PSA language which requires a clear chain of title of the note into the trust states:

“In  connection  with the above  transfer and  assignment,  the Sponsor  hereby  deposits with the Trustee or the related Custodian, on behalf of the Trustee, with respect to each Mortgage Loan: (i)  the original  Mortgage Note,  endorsed  without recourse (A) in blank or to the order of the  Trustee  or (B) in the case of a Mortgage  Loan  registered  on the MERS  system,  in blank,  and in each case showing an unbroken chain of endorsements.” 


If there is no documented chain of title tracking the delivery of the note into the security, the note is not properly lodged within the   security and the Trustee has no right to foreclosure as the “real party in interest”.


Therefore, an argument that a homeowner has no right to contest a Trustee’s status as a “real party interest” because the homeowner is not a third party beneficiary of the PSA is an opportunity to explain why a Trustee is bound by the PSA.  


[1] Asset Securitization: Comptroller's Handbook, Office of the Comptroller of the Currency, November1997, http://www.occ.treas.gov/handbook/assetsec.pdf.

[2]Standing to Invoke PSAs as a Foreclosure Defense”, posted by Adam Levitan, Credit Slips, August 4, 2011.

[3] See my previous Blog, “Chink in the Armor, A Foreclosure defense”  citing an Alabama case, Horace vs. LaSalle Bank National Association, et al., CV-2008-000362.00, (3/30/11) Circuit Court of Russell County Alabama, where Judge found homeowner was third party beneficiary because without the homeowner the security would not be funded.  

[4] § 38-35-117. Mortgages, not a conveyance--lien theory:  Mortgages, trust deeds, or other instruments intended to secure the payment of an obligation affecting title to or an interest in real property shall not be deemed a conveyance, regardless of its terms, so as to enable the owner of the obligation secured to recover possession of real property without foreclosure and sale, but the same shall be deemed a lien.

[5] C.R.S. 4-3-104(a) Except as provided in subsections (c) and (d) of this section, “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:(1) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;(2) Is payable on demand or at a definite time; and(3) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.

[6] C.R.S. § 38-38-101. Holder of evidence of debt may elect to foreclose.  §38-38-100.3(10) “Holder of an evidence of debt” means the person in actual possession of or person entitled to enforce an evidence of debt. §38-38-100.3(10)(c) The person in possession of a negotiable instrument evidencing a debt, which has been duly negotiated to such person or to bearer or indorsed in blank.  Possession of a Note without a proper indorsement to a specific person or “to bearer” is enforceable if the person in possession can “account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired it.” Comment 2,

C.R.S. § 4-3-203, 

[7] “Instrument” means a negotiable instrument.  C.R.S. §4-3-104.

[8] Georg v. Metro Fixtures Contractors, Inc. 178 P.3d 1209 (Colo. 2008). 

[9] “Negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder. C.R.S. § 4-3-201(a).

[10] An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. C.R.S. § 4-3-203(a).

[11] “Indorsement” means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (i) negotiating the instrument. C.R.S. §4-3-204.

[12] “Bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or indorsed in blank. C.R.S. § 4-1-201(5).

[13] Except as otherwise provided in subsection (b) of this section or elsewhere in this title, the effect of provisions of this title may be varied by agreement. C.R.S. § 4-1-302(1).