Bray v. Trower

• Court: Colorado Supreme Court
• Writing for the Court: ADAMS, J.
• Citation: Bray v. Trower, 87 Colo. 240, 286 P. 275 (Colo. 1930)
• Decision Date: 24 March 1930
• Docket Number: 12309.
• Parties: BRAY v. TROWER.

286 P. 275

87 Colo. 240

BRAY v. TROWER.

No. 12309.

Supreme Court of Colorado

March 24, 1930

In Department.

Error to District Court, Kiowa County; James A. Park, Judge.

Suit by Chester Trower against Ross Bray. To review judgment for plaintiff, defendant brings error.

Reversed with directions.

John F. Mail, of Denver, for plaintiff in error.

E. F Chambers, of Pueblo, J. C. Lang, of Eads, and John H Voorhees, of Pueblo, for defendant in error.

ADAMS J.

Trower, plaintiff in the district court, got a permanent injunction against Bray and the public trustee in Kiowa county, restraining them from foreclosing a trust deed held by Bray on the N. 1/2 14-19-44 in Kiowa county. Bray brings the case here on writ of error to review the judgment. We shall refer to Trower as plaintiff and to Bray as defendant, as aligned at the trial.

On April 30, 1919, Trower was the owner of the N. 1/2 14-19-44, and Doll, Lamb & Woolery were copartners in the real estate business in Kiowa county. On that date, Trower agreed in writing with that firm to sell the above land to them or to any person named by them in their place and stead, for the sum of $8,000, payable $500 on date of sale, $2,700 on date of settlement, and $4,800 balance of purchase price in three years, secured by a mortgage on the land. This agreement was signed by Trower, and by Doll for his firm. It was not acknowledged and was never recorded.

October 16, 1919, Trower executed a warranty deed to the half section described to James H. Parks of Nebraska, a customer of Doll, Lumb & Woolery, for a stated consideraction of $11,200, 'in hand paid,' according to the deed. This deed was recorded June 5, 1920.

Under date of October 16, 1919, Parks and his wife executed a note in the principal sum of $1,600 in favor of Doll, Lamb & Woolery, secured by a deed of trust on the land described. It runs to the public trustee in Kiowa county, was acknowledged November 17, 1919, and recorded December 13, 1919. Bray claims under this trust deed by mesne assignments. Simultaneously with the execution of the above paper, Parks and his wife executed another note in the principal sum of $4,800 in favor of Trower, secured by a separate deed of trust on the same land, to the same public trustee, and recorded January 20, 1920. Trower claims under this trust deed as the original beneficiary. The two trust deeds bear the same dates, but it will be noted that the $1,600 trust deed held by Bray was recorded first. Both of these trust deeds were executed as a part of the same transaction, and were given for the unpaid balance of purchase money on the sale of the land.

Trower shows that his dealings were at all times with Doll, who represented the firm of Doll, Lamb & Woolery; that Trower was getting ready to go to California, and that, after he signed the contract dated April 30th, he left the deed to the land with Doll, intrusted all matters with Doll to take care of, and in the year 1919, Trower went to California to live. Trower thinks the name of the grantee was left in blank and afterwards filed in; he says he knew that Parks was the purchaser before he went away, but that he never heard of the $1,600 trust deed until May, 1926; that he relied on Doll to see that everything was right, and so informed Doll; that Doll told him that he would get $8,000 for his land; and that he left money with Doll for recording the $4,800 trust deed. Trower claims that Doll defrauded him by having the $1,600 trust deed recorded before the other.

Parks and his wife failed to pay either note, and on May 25, 1925, Trower procured a foreclosure by the public trustee of a part of the land--the N.E. 1/4 14-19-44--and bid it in for $3,200. On that date, the public trustee issued a certificate of purchase to Trower in duplicate, pursuant to section 5052, C. L. 1921. The certificate shows on its face that it is 'subject to deed of trust of $1,600.' It is admitted that when this foreclosure by the public trustee took place, no notice was given to the holder of the $1,600 incumbrance. Over a year later--June 21, 1926--the public trustee issued a deed to the above quarter section to Trower, but failed to note on such deed that it was subject to the $1,600 deed of trust. The public trustee's deed was recorded on June 21, 1926. Apparently, the reason for his failure to include the N.W. 1/4 of section 14 in the foreclosure was that it was cut out by a prior incumbrance which is not here involved.

The $1,600 note and trust deed went through various hands. In May, 1926, it was owned by one King. On June 1, 1926, King sold this paper to the defendant Bray, for which the latter paid the sum of $1,600 in cash. On June 19, 1926, Bray filed a notice of election and demand for sale by the public trustee. On July 31, 1926, this suit was commenced in the district court. August 7, 1926, an order for a temporary injunction issued, and on August 30, 1926, Bray filed with the public trustee a written withdrawal of his notice of election and demand for sale.

Trower alleges that, when Bray acquired the $1,600 trust deed, the latter was informed and knew that it was intended to be a second incumbrance on the property, but Bray denies it. Trower prayed for an injunction against Bray's foreclosure, which was granted. He prayed also that the $1,600 trust deed by set aside, held for naught, and that it be declared not to constitute any lien or incumbrance on the land. The decree does not in express terms cover this prayer, but it is granted in effect through the perpetual injunction, which makes the $1,600 trust deed worthless as a lien of any kind if the injunction be allowed to stand.

1. The legal question involved is, which of the two trust deeds is entitled to a first lien on the land, Trower's for $4,800 or Bray's for $1,600? The answer depends on Whether Bray had notice or knowledge of facts putting him on inquiry that Trower was defrauded by Doll in failing to have the $4,800 trust deed recorded first.

Trower's counsel invokes the Negotiable Instruments Act (C. L. 1921, §§ 3818-4013), and says that, because Bray bought the $1,600 note after maturity, it is therefore subject to defenses between the original parties. But Trower was not a party to the $1,600 note, he is not asked to pay it, its validity is not in dispute, there are no defenses to that note between the original parties or otherwise, and consequently the test is inappropriate. Trower's counsel further argue that the debt is the main thing, that the security is only incidental, and follows the $1,600 note. As an abstract legal proposition, this may be conceded to be correct, but if they insist on this formula as a criterion, they argue themselves out of court, because in this instance the $1,600 trust deed follows a good note, either in the hands of the original holder or present owner, and such note is past due and unpaid. However, we must avoid these blind alleys to which we are invited, and pursue the goal by way of the main road.

2. We speak advisedly when we say that, regardless of whether the $1,600 lien is first or second, the $1,600 note and trust deed are both legitimate, and were given to secure a part of the purchase price of the land. We should say this much, even if we stopped after reading the complaint, but of course it does not dispose of the question as to which of the two trust deeds comes first. Plaintiff pleaded the assignment of the Doll, Lamb & Woolery paper to defendant Bray, which made it unnecessary for the latter to show it. The real purchase price was not the sum of $8,000 as contemplated by the unrecorded contract of April 30, 1919, between Trower and Doll et al.; it was $11,200 as evidenced by Trower's later deed to Parks, recorded June 5, 1920, substantiated by this and other proof, and the $1,600 note and trust deed were a part of the purchase price. Doll, Lamb & Woolery made their living by selling real estate; as far as appears of record, they received no compensation for their services other than through the increased...