## Facts

- A water and sanitation district issued a single development bond for $475,000 payable to a developer.
- The developer endorsed the bond to intended buyers as part of a land-sale arrangement tied to subdivision improvements.
- The parties’ agreement provided that the buyers could keep the bond only if they closed on the real-estate purchase.
- If the buyers did not close, they were required to sell the bond back to the developer for $50,000 and deliver the bond.
- The buyers failed to close, triggering the developer’s contractual right to reacquire the bond for $50,000.
- Instead of returning the bond, the buyers transferred it to their attorney for value without informing the developer.
- Evidence supported that the attorney knew the buyers’ right to the bond was conditional and that the developer claimed the right to receive the bond if closing did not occur.
- The developer demanded delivery of the bond and offered to pay $50,000; the attorney refused.
- After a bench trial, the trial court found the attorney was not a protected purchaser under UCC § 8-303 because he had notice of the developer’s adverse claim, and it ordered him to deliver the bond upon payment of $50,000.

## Issues

1. Whether the attorney qualified as a “protected purchaser” under UCC § 8-303, taking the bond free of the developer’s adverse claim despite knowledge of the developer’s contractual right.
2. Whether the trial court properly ordered equitable relief requiring delivery of the bond itself upon tender of $50,000, rather than limiting the developer to money damages.

## Decision

- The appellate court affirmed the judgment.
- The attorney was not a protected purchaser because he took the bond with notice of the developer’s adverse claim, defeating the “no notice” requirement of UCC § 8-303.
- The trial court properly ordered the attorney to deliver the bond to the developer upon payment of the $50,000 contract price as an equitable remedy to prevent unjust enrichment and effectuate the parties’ bargain.
- The trial court’s findings regarding the attorney’s knowledge and the circumstances of the transfer were supported by the record and were not reversible.

## Legal Principles

- Under UCC § 8-303, protected-purchaser status requires value, control, and acquisition without notice of an adverse claim; failure to satisfy any element defeats protected-purchaser status.
- “Notice of an adverse claim” includes actual awareness of facts indicating another person claims an interest in the security; a purchaser need not understand all legal consequences of those facts.
- Knowledge that a transferor’s interest in a security is conditional, and that a third party has a contractual right to obtain the security upon a specified contingency, constitutes notice of an adverse claim.
- When a unique instrument is transferred to defeat a clear contractual entitlement, equitable relief may require delivery of the instrument itself (including through constructive-trust-type relief) where damages are inadequate and retention would result in unjust enrichment.

## Conclusion

The court held that an attorney who acquired a development bond with knowledge of the developer’s contingent contractual entitlement had notice of an adverse claim and therefore could not take as a protected purchaser; equity permitted an order compelling delivery of the bond to the developer upon tender of the agreed $50,000 price.


Meadow Homes Dev. Corp. v. Bowens, 211 P.3d 743 (Colo. App. 2009)