Conrad v. Davison

• Decision Date: 04 June 1928
• Docket Number: 11931.
• Citation: 268 P. 573,84 Colo. 134
• Parties: CONRAD v. DAVISON.
• Court: Colorado Supreme Court

268 P. 573

84 Colo. 134

CONRAD v. DAVISON.

No. 11931.

Supreme Court of Colorado

June 4, 1928

Department 2.

Error to District Court, Yuma County; L. C. Stephenson, Judge.

Suit by Floyd Davison against J. Q. Conrad. Decree for plaintiff, and defendant brings error.

Reversed with directions.

M. M. Bulkeley, of Wray, for plaintiff in error.

Louis Henke, of Wray, and S. S. Abbott, of Denver, for defendant in error.

DENISON C.J.

Davison had a decree, on trial to the court, canceling the release of a trust deed which secured a note held by him and foreclosing the trust deed, and defendant Conrad, who held a note secured by a later trust deed, brings error.

One Wray owned the S.E. 1/4 of section 34 in township 4 north range 44 west, in Yuma county. October 14, 1918, he gave Mrs J. H. Rogers a note and trust deed on said land for $800, due in five years. March 5, 1921, he conveyed the land to Floyd L. Hester, who gave back a note and trust deed for $1,400. March 24, 1923, the public trustee executed a release of the first trust deed which was acknowledged and recorded February 23, 1924. April 5, 1923, Davison sent his sister, who was the wife of Floyd L. Hester, $2,000 to pay the incumbrances against the land or to purchase them. (He testifies both ways.) She paid Mrs. Rogers the amount due on the first trust deed note, and Mrs. Rogers indorsed the note, 'Pay to Floyd Davison or order, without recourse. Mrs. J. H. Rogers,' and delivered it, with the trust deed, to Mrs. Hester, who then sent the note and trust deed to Davison, and later gave him her note for the balance of the $2,000, i. e., for $1,200, without taking up the second trust deed.

June 25, 1924, Conrad took an assignment of the second trust deed and note as collateral to secure a note of Wray to him, believing the first trust deed had been lawfully released.

The position of the plaintiff in error is: (1) That the first note is paid, that it is shown to be paid by Davison's testimony that he sent the $2,000 to Mrs. Hester to pay it, and that she paid Mrs. Rogers what was due; (2) that Conrad is an innocent incumbrancer for value, having taken the first note while the release, which was a genuine release, actually executed and acknowledged by the public trustee, and actually requested by the original payee, remained of record and unquestioned.

The position of the defendant in error is: (1) That the note was not paid but purchased by him at its face value and indorsed to him accordingly; (2) that the plaintiff in error was not an innocent incumbrancer for value, because (a) the note was taken as collateral to a prior existing debt, and (b) the record showed enough to put him on inquiry, since the release was dated before maturity of the note, and, though dated March 24, 1923, was not acknowledged or recorded till February 23, 1924.

As far as payment is concerned, the evidence is conflicting, and the findings are for plaintiff. We must say, therefore, that the note was not paid, but was purchased by plaintiff and indorsed to him.

The question of innocent purchaser is more difficult. The facts, alleged in the complaint, and, by a general finding, found by the court to be true, are that through 'inadvertent misunderstanding' Mrs. Rogers signed a request to the public trustee to execute the release, although the note had not been paid, and 'through fraud and misrepresentation on the part of some unknown parties the said public trustee was induced to release the said trust deed while the same was still due and owing.' The evidence was that Mrs. Hester came to the public trustee with the release bearing the signed request, and he signed the release, and later, it does not appear when, acknowledged it. The release without payment was enough to avoid the release as between the holder and the maker of the note, or the owner of the premises, but Conrad had no actual notice of these things, and so, unless there was something on record to put him on inquiry, they will not avoid the release as to him. Delta Co. L. & C. Co. v. Talcott, 17 Colo.App. 316, 68 P. 985; Stetler v. Winegar, 75 Colo. 500, 226 P. 858.

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