A check is undoubtedly a negotiable instrument, see Wedge Mines Co. v. Denver Nat'l Bank, 19 Colo.App. 182, 73 P. 873, 875 (1903); C.R.S. ยง 4-3-104 (check is a negotiable instrument under the U.C.C.), and the check itself, which can be assigned to others, takes on commercial significance apart from the underlying funds it represents. See, e.g., Meyers v. Johanningmeier, 735 P.2d 206 (Colo.Ct.App. 1987) (in general, a holder in due course takes the instrument free from all claims and defenses of any party to the instrument); C.R.S. ยง 4-3-301, 3-302 3-305 (defining rights of holders in due course under the U.C.C.). Thus, there is little doubt that under Colorado law, if A gives B a check to deliver to C, B is A's bailee and can be liable for misdelivery.
Plasterers' Pension Fund explained that in Colorado, "fraud in the execution `is fraud exercised in reference to the acts of signing and delivering an instrument, sometimes by a deceptive substitution of documents causing someone to sign an instrument without knowing the consequences of his act.'" Id. at 1186-1187 (quoting Meyers v. Johanningmeier,11 Brief Times Reporter 122 (Feb. 6, 1987)). Quoting the Restatement (Second) of Contracts, sec. 163 Illustration 2 (1981), the court explained by way of example:
If a person has been fraudulently deceived about the nature of a document, so that he or she is excusably ignorant about what has been signed, courts recognize โfraud in the factum.โ SeeMeyers v. Johanningmeier, 735 P.2d 206, 207 (Colo.App.1987) (explaining relationship between statutory defense against holders in due course of negotiable instruments and the common law defense of fraud in the factum). Unlike other types of fraud, fraud in the factum yields an instrument that is void, and not merely voidable.
If a person has been fraudulently deceived about the nature of a document, so that he or she is excusably ignorant about what has been signed, courts recognize "fraud in the factum." See Meyers v. Johanningmeier, 735 P.2d 206, 207 (Colo. App. 1987) (explaining relationship between statutory defense against holders in due course of negotiable instruments and the common law defense of fraud in the factum). Unlike other types of fraud, fraud in the factum yields an instrument that is void, and not merely voidable.
If a person has been fraudulently deceived about the nature of a document, so that he or she is excusably ignorant about what has been signed, courts recognize "fraud in the factum." See Meyers v. Johanningmeier, 735 P.2d 206, 207 (Colo.App. 1987) (explaining relationship between statutory defense against holders in due course of negotiable instruments and the common law defense of fraud in the factum). Unlike other types of fraud, fraud in the factum yields an instrument that is void, and not merely voidable.
This is a real defense and, if proved, defeats the rights of Geibank to collect under the note. See Meyers v. Johanningmeier, 735 P.2d 206 (Colo.App. 1987); ยง 4-3-305, C.R.S. While we recognize that plaintiff's evidence in her affidavit in support of this claim is somewhat ambiguous, we conclude that application of the above stated summary judgment principles means that plaintiff can proceed on this claim.
In a case involving fraud in the factum, the releasor signs what is actually a release after being led to believe it is some other type of document. See Howard v. International Trust Co., 139 Colo. 314, 338 P.2d 689 (1959); Meyers v. Johanningmeier, 735 P.2d 206 (Colo.App. 1987). Because the releasor in such a case is unaware of what he or she is signing, the release is void and without effect.