Colorado Code
Part 1 - Short Title and General Matters
§ 4-8-105. Notice of Adverse Claim

(1) One year after a date set for presentment or surrender for redemption or exchange; or
(2) Six months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date.

(1) Whether in bearer or registered form, has been indorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or
(2) Is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate is not such a statement.

Source: L. 96: Entire article R&RE, p. 207, § 2, effective July 1.
Editor's note: This section is similar to former §§ 4-8-304 and 4-8-305 as they existed prior to 1996.

The general Article 1 definition of "notice" in Section 1-201(25) -- which provides that a person has notice of a fact if "from all the facts and circumstances known to him at the time in question he has reason to know that it exists" -- does not apply to the interpretation of "notice of adverse claims." The Section 1-201(25) definition of "notice" does, however, apply to usages of that term and its cognates in Article 8 in contexts other than notice of adverse claims.
The first prong of the willful blindness test of paragraph (a)(2) turns on whether the person is aware facts sufficient to indicate that there is a significant probability that an adverse claim exists. The "awareness" aspect necessarily turns on the actor's state of mind. Whether facts known to a person make the person aware of a "significant probability" that an adverse claim exists turns on facts about the world and the conclusions that would be drawn from those facts, taking account of the experience and position of the person in question. A particular set of facts might indicate a significant probability of an adverse claim to a professional with considerable experience in the usual methods and procedures by which securities transactions are conducted, even though the same facts would not indicate a significant probability of an adverse claim to a non-professional.
The second prong of the willful blindness test of paragraph (a)(2) turns on whether the person "deliberately avoids information" that would establish the existence of the adverse claim. The test is the character of the person's response to the information the person has. The question is whether the person deliberately failed to seek further information because of concern that suspicions would be confirmed.
Application of the "deliberate avoidance" test to a transaction by an organization focuses on the knowledge and the actions of the individual or individuals conducting the transaction on behalf of the organization. Thus, an organization that purchases a security is not willfully blind to an adverse claim unless the officers or agents who conducted that purchase transaction are willfully blind to the adverse claim. Under the two prongs of the willful blindness test, the individual or individuals conducting a transaction must know of facts indicating a substantial probability that the adverse claim exists and deliberately fail to seek further information that might confirm or refute the indication. For this purpose, information known to individuals within an organization who are not conducting or aware of a transaction, but not forwarded to the individuals conducting the transaction, is not pertinent in determining whether the individuals conducting the transaction had knowledge of a substantial probability of the existence of the adverse claim. Cf. Section 1-201(27). An organization may also "deliberately avoid information" if it acts to preclude or inhibit transmission of pertinent information to those individuals responsible for the conduct of purchase transactions.
Definitional Cross References:
"Adverse claim". Section 8-102(a)(1)
"Bearer form". Section 8-102(a)(2)
"Certificated security". Section 8-102(a)(4)
"Financial asset". Section 8-102(a)(9)
"Knowledge". Section 1-201(25)
"Person". Section 1-201(30)
"Purchaser". Sections 1-201(33) & 8-116
"Registered form". Section 8-102(a)(13)
"Representative". Section 1-201(35)
"Security certificate". Section 8-102(a)(16)