Coler v. Barth

• Citation: 48 P. 656,24 Colo. 31
• Parties: COLER et al. v. BARTH.
• Decision Date: 15 February 1897
• Court: Colorado Supreme Court

48 P. 656

24 Colo. 31

COLER et al. v. BARTH.

Supreme Court of Colorado

February 15, 1897

Appeal from district court, Las Animas county.

Action by William Barth against W. N. Coler, Jr., impleaded with Walter O'Malley. Judgment for plaintiff. Defendants appeal. Reversed.

This is an action by William Barth to set aside a trustee's sale to W. N. Coler, Jr., made by Walter O'Malley as trustee and to cancel the trustee's deed, upon the grounds that the deed was fraudulently procured and executed, that there was no authority for the sale, and that the conveyance was not made to the highest bidder. The following are the material facts: Dr. Thomas F. Martin was the owner of certain lands in Huerfano county, Colo., upon a portion of which were a body of water called 'Lake Miriam,' and a reservoir used in connection therewith. He borrowed of R. H. Hutton $5,000 on February 26, 1886, and, to secure its payment executed a trust deed on the premises. On April 28, 1887, he borrowed an additional $10,000 of Hutton, and, as security therefor, executed a second deed of trust on the same land subject to the first incumbrance. From the recitals in some of the deeds in evidence, it appears that Dr. Martin secured from the town of Walsenburg a franchise for a system of waterworks, which franchise, together with a perpetual water right to take sufficient water from Lake Miriam and said reservoir to supply the town of Walsenburg therewith for fire, domestic, and irrigation purposes, Martin on July 16 1888, conveyed to a corporation known as the Walsenburg Water Company. The water company executed its bonds in the sum of $30,000, which were bought by W. N. Coler, Jr., and, to secure their payment, on the 1st day of September, 1888, executed to the Central Trust Company of New York a trust deed upon the same property that it obtained from Martin. Thereafter, on May 27, 1890, a third deed of trust upon all of the lands embraced in the first and second deeds of trust above mentioned (as well as upon lands not therein described) was made by Martin to secure the payment of two of his notes theretofore given to Hutton, part of which, seems, as nearly as we are able to ascertain, to be the same indebtedness already secured by the prior liens. On February 9, 1891, a fourth trust deed, also covering this and other property, was made by Martin to secure his notes to Barth, aggregating $20,000. Thereafter Barth bought all of the Hutton notes above mentioned. After he became their owner, he caused the second trust deed, of date April 28, 1887, and the third trust deed, of May 27, 1890, to be foreclosed because of a failure of the maker to pay the indebtedness secured thereby; and the property was bid in by Barth himself, and the amounts of the respective bids were credited upon the appropriate notes. After these two junior incumbrances were foreclosed, a sale of the lands under the first trust deed, of date February 26, 1886, for failure by Martin to pay the notes secured thereby, was by Walter O'Malley, sheriff of Huerfano county, as successor in trust (Wills, the trustee, having resigned), advertised to take place at Walsenburg on April 11, 1892. There is no direct evidence that Barth, the owner of the note, caused the advertisement to be made, but the facts and circumstances disclosed in the record leave no doubt that it was at his request that the successor in trust advertised the property. In attendance at the sale were Dr. Martin, representing his own interest, and also acting for W. N. Coler, who was the beneficiary under the deed of trust to the Central Trust Company; Mr. Steele, who was authorized to bid for Coler; Mr. Heisler, the attorney for Barth; and Mr. Quillian, who bid for John R. Hanna, who really was the alter ego of Barth in this transaction. The property was first offered for sale in parcels, and, in the bidding, Quillian, acting for Hanna, participated; and, when it was ascertained that the aggregate of the bids received was only $5,835 (less than the amount due on the note), the trustee then offered the property for sale en masse. The bidding then proceeded, the parties mentioned, in turn, participating; and, when the bids amounted to over $7,000 (being considerably more than the amount due upon the note, and all the expenses of the sale), Heisler, who theretofore took no part in the sale, but was only a short distance away, appeared upon the scene in his capacity of Barth's representative, and the evidence tends to show that he first requested of the trustee to postpone the sale, as negotiations for a settlement were then in progress between Mr. Barth and the holders of the bonds secured by a trust deed upon the water right. Martin, as the maker of the various outstanding notes, and claiming an interest in the property, raised an objection, and the trustee refused to postpone the sale. Thereupon Heisler produced the note, which was secured by the trust deed under which the sale was advertised, marked 'Paid' and canceled, and asked the trustee to stop the sale and to execute a release of the deed of trust. To this, also, Martin protested, upon the ground that the bids then in were in excess of the amount due upon the note, and that his rights, as a remote owner of the equity of redemption, and as the debtor whose property was being sold, and as the maker of these notes, must be observed by the trustee, and that it was the duty of the latter to proceed with the sale and get therefrom as large an amount as possible. After taking advice the trustee announced that he would go on with the sale, to which Heisler, for Barth, publicly protested, for the reasons already stated. Bids were made by Quillian, still representing Hanna, by Heisler for Barth, and by Steele for Coler, until Steele finally bid the sum of $15,300. Quillian then bid $15,500. Heisler then raised the bid $1, and Quillian bid $15,502, and the property was struck off to him. It is in evidence, though contradicted, that before the sale opened, as well as at its close, the trustee publicly announced that the sale must be for cash only. The sale closed about noon, and it was suggested by some one present that after the midday meal the parties should assemble, and the transaction be closed by the execution of the trustee's deed, upon the payment of the money. Some time in the afternoon O'Malley approached Quillian and Heisler, or at least they met, and after much discussion between them, unnecessary here to state, both Quillian and Heisler declared that no valid sale had been made, and that it was the duty of the trustee to refuse to execute a trust deed to any one; but, if he otherwise concluded, then either Heisler or Quillian (both really representing the same party, who was Barth) should receive it. O'Malley then offered to execute a deed, upon Quillian's bid, in the name of whatever party Quillian should designate, and to receive as part payment of the purchase price the $5,000 note on which the sale was based, and the balance in cash. Quillian and Heisler refused to comply with this condition, but offered to turn in, as cash, the balance due upon the $10,000 note, and to credit the balance of the purchase money upon the notes of Dr. Martin which were secured by the junior trust deeds, and then owned by Barth. The trustee refused to receive these notes as cash, but executed to Coler a trustee's deed upon his bid of $15,300, and received the full amount in cash. He then tendered to Heisler, for Barth, the full amount due on the first note, and the expenses of the sale, which tender was refused, and paid the balance to Dr. Martin, as the maker of the original trust deed, as that instrument in terms provided, and deposited in the local bank in Walsenburg, in his name as trustee, the amount due on the first note of $5,000, which Heisler had refused to accept. It appears that O'Malley, as trustee, executed three trustee's deeds to Coler,--the second in date of priority, as claimed by Coler and O'Malley, to correct errors in the first, and the last to correct omissions and mistakes in the other two. Such other facts as are material are stated in the opinion. The trial court made two specific findings of facts in accordance with the plaintiff's contention, viz.: First, that Barth, the owner of the note that was the foundation for the sale, tendered the same to the trustee, during the progress thereof, marked 'Paid' and canceled, forbade further proceedings, and demanded from the trustee a release deed of the deed of trust; second, that the sale of said property was not made to the highest bidder, nor was it struck off to Coler, or any one for him. Upon these facts the court found, as matter of law, that the sale was not legally conducted, and that the property was not sold to Coler, and thereupon rendered a decree canceling and vacating the three trustee's deeds to him. To reverse this decree, the defendants below have appealed to this court.

John H. Knaebel, for appellants.

C. E. & F. Herrington and Chas. J. Hughes, Jr., for appellee.

CAMPBELL J. (after stating the facts).

This controversy is best presented by a consideration of the three propositions relied upon by the plaintiff in the trial court. They are as follows: First, there was collusion between the grantee, Coler, through his agents, and the trustee, to get title to the property in fraud of the plaintiff's...