Chew v. Acacia Mut. Life Ins. Co.

• Decision Date: 05 February 1968
• Docket Number: 21748,Nos. 21743,s. 21743
• Citation: 437 P.2d 339,165 Colo. 43
• Parties: Elaine CHEW and Holt Chew, and Intermountain Land Development Co., Plaintiffs in Error, v. ACACIA MUTUAL LIFE INSURANCE COMPANY, Hulsey E. Ferrill, Olga Ferrill, G. P. Japha, Gertrude Haas, Helen Bush as the Public Trustee of the County of Jefferson and State of Colorado, Trustee Company, a Colorado corporation, Helene C. Zarlengo, Henry E. Zarlengo, Defendants in Error.
• Court: Colorado Supreme Court

Page 339

437 P.2d 339

165 Colo. 43

Elaine CHEW and Holt Chew, and Intermountain Land Development Co., Plaintiffs in Error, v. ACACIA MUTUAL LIFE INSURANCE COMPANY, Hulsey E. Ferrill Olga Ferrill, G. P. Japha, Gertrude Haas, Helen Bush as the Public Trustee of the County of Jefferson and State of Colorado, Trustee Company, a Colorado corporation, Helene C Zarlengo, Henry E. Zarlengo, Defendants in Error.

Nos. 21743, 21748.

Supreme Court of Colorado, En Banc.

Feb. 5, 1968.

Rehearing Denied March 4, 1968.

Leslie A. Gross, Denver, for plaintiffs in error, Elaine Chew and Holt chew.

Francis R. Salazar, Denver, for plaintiff in error, Intermountain Land Development Co.

Gorsuch, Kirgis, Campbell, Walker & Grover, Charles E. Rhyne, Denver, for defendants in error, Acacia Mutual Life Ins. Co.

DAY, Justice.

Two writs of error are herein consolidated. In the two cases Elaine and Holt Chew, hereinafter referred to as the Chews, in Case. No. 21743, and Intermountain Land Development Company (Intermountain), in Case No. 21748 respectively, seek reversal of district court judgment confirming a sheriff's sale on foreclosure of a deed of trust. The Chews additionally challenge the correctness of the deficiency judgment against them in the sum of $181,069.36.

Other parties involved in the foreclosure will be referred to as follows: Hulsey E. Ferrill and Olga Ferrill as Ferrills; Henry E. Zarlengo and Helene C. Zarlengo as Zarlengos; G. P. Japha and Gertrude Haas as Japha and Haas; Trustee Company by name; Acacia Mutual Life Insurance Co. as Acacia; Morrison & Morrison, Inc. by name. Only the Chews, Acacia and Intermountain are parties in these writs of error.

On September 15, 1961, the Chews and Ferrills executed and delivered a promissory note in the amount of $570,000 payable to Morrison & Morrison, Inc. The note was secured by a deed of trust on real estate in Jefferson County known as Yukon Manor, an apartment complex, which at that time was owned by Holt Chew and Hulsey E. Ferrill. Morrison & Morrison, Inc. immediately endorsed the note and assigned the deed of trust to Acacia. The assignment of the deed of trust was recorded on September 19, 1961.

The Zarlengos recorded a second deed of trust dated October 25, 1960, on July 13, 1962, which secured a promissory note in the amount of $60,000. This deed of trust was subsequently assigned to the Chews on March 16, 1964, and recorded on March 31, 1964.

On March 15, 1963, Holt Chew and Hulsey E. Ferrill conveyed the real estate by warranty deed to the Turnquists, the deed being recorded on March 21, 1963. On December 10, 1963, the Turnquists in turn conveyed the real estate to the Trustee Company by warranty deed, recorded on December 17, 1963. By this deed Trustee Company assumed and agreed to pay the promissory note and deed of trust which had been assigned to and was being held by Acacia.

A third deed of trust dated December 9, 1963, was recorded by the Turnquists on January 16, 1964, having been given by the Trustee Company to the Turnquists as security for a promissory note in the principal sum of $75,000. This deed of trust was assigned by the Turnquists to George A. Kern on January 14, 1964, who, in turn, assigned it to Haas on January 21, 1964, who recorded it on that date.

When Trustee Company defaulted on the note, Acacia brought this action to foreclose its first deed of trust naming the Chews and Ferrills, the markers, as additional defendants and seeking to impose a personal judgment against them for any deficiency between the bid price on the sale and the amount due on the loan. A receiver was appointed on March 23, 1964, by order of court, to take possession and manage the property involved, collecting rents, issues and profits during pendency of the litigation and until deed issued from the sheriff.

On June 11, 1964, the trial court entered its decree of foreclosure and order of sale at public auction, allowing any party to the action to become a purchaser. The court found that the total amount due Acacia on the note including interest, attorneys' fees and costs up to that time was $555,043.62. The court retained jurisdiction 'for the purposes of (1) entering an order confirming or disapproving and setting aside said sale, and (2) of entering a deficiency judgment based upon said return of sale, if any deficiency there be.'

The sale was held August 4, 1964. Acacia was the only bidder at a figure of $380,000 with a resulting deficiency of $181,069.36 including accrued interest due between the court order and sale. Objections were filed by the Chews and Ferrills to confirmation of the sale and entry of deficiency judgment, but after hearing the trial court denied the objections and entered the aforementioned judgments. Motion for a new trial was denied.

A notice of intention to redeem was filed by Intermountain, which held the third deed of trust by virtue of an assignment from Japha and Haas. Intermountain, however, was unable to secure a title commitment satisfactory to those persons who were putting up the funds and as a result the period of redemption expired. Intermountain joined in and adopts the Chews' briefs as their own.

In objecting to the sale in the trial court, the Chews asserted, among nine grounds advanced for consideration by the judge: (a) that Acacia's bid was shockingly and unconscionably below the fair value of the property; and (b) Acacia's bid was made without any regard to the fair value of the property, solely for the purpose of imposing substantial personal liability upon the Chews who were no longer owners of the property and who did not have the final right of redemption.

In support of these contentions, the Chews offered into evidence a considerable volume of correspondence between Acacia and its Denver agents, Morrison & Morrison, Inc., to whom the payments of principal and interest were being made up to the date of the default. The court refused to consider any of the correspondence with the exception of one letter dated April 8, 1964 which was admitted into evidence.

The erroneous exclusion of the proffered evidence is assigned as one of the grounds for reversal of the judgment. It is contended that the letters together with other evidence before the court showing inadequacy of the bid price presents a total picture which, if the trial court had considered it, would have overwhelmingly demonstrated the unfairness of the sale.

All of the grounds asserted may be summed up into the single question to be answered in this writ of error:

WAS THE PRICE BID BY ACACIA UNDER THE TOTALITY OF THE CIRCUMSTANCES IN THIS RECORD SO UNFAIR AS TO SHOCK THE CONSCIENCE OF THE COURT?

We answer the question in the affirmative.

At the hearing on the objections to confirmation of the sale and to the entry of a deficiency judgment the evidence was not in conflict. Four appraisers gave their opinions as to the fair market value of the property. The four values given were as follows: $575,000, $550,000, $535,000, $525,000. The arithmetical average of the four is slightly in excess of $546,000. No appraisers testified on behalf of Acacia so no contrary or different appraisal value was offered by Acacia, but in the correspondence which the court refused to consider were numerous letters showing that Acacia had been informed that it could reasonably expect to sell the property 'as is' for $500,000 to $525,000. On all of the evidence therefore before the court, and the documentary evidence which the court should have considered--but refused to--there was no justification for the bid of only $380,000 on the property. The court made a finding that the fair market value of the property was $546,000 but then modified the finding by stating that the figure represented the fair market value after an...