Four Strong Winds, Inc. v. Lyngholm

• Decision Date: 16 January 1992
• Docket Number: No. 90CA1711,90CA1711
• Citation: 826 P.2d 414
• Parties: FOUR STRONG WINDS, INC., Plaintiff-Appellee, v. Odd LYNGHOLM, Third-Party Plaintiff and Defendant-Appellant, v. Michael CHAUSSEE, Third-Party Defendant-Appellee. . III
• Court: Colorado Court of Appeals

Page 414

826 P.2d 414

FOUR STRONG WINDS, INC., Plaintiff-Appellee, v. Odd LYNGHOLM, Third-Party Plaintiff and Defendant-Appellant, v. Michael CHAUSSEE, Third-Party Defendant-Appellee.

No. 90CA1711.

Colorado Court of Appeals Div. III.

Jan. 16, 1992.

Robert J. Mason, Colorado Springs, for plaintiff-appellee and third-party defendant-appellee.

Gorsuch, Kirgis, Campbell, Walker and Grover, Tammy W. Akers, Colorado Springs, for third-party plaintiff and defendant-appellant.

Opinion by Judge CRISWELL.

Plaintiff, Four Strong Winds, Inc., instituted suit against defendant, Odd Lyngholm, on two promissory notes signed by defendant. The trial court concluded that plaintiff's bid at a public trustee's foreclosure sale of property that secured payment of a third note was unconscionably low. Hence, it deducted certain sums from the balance due on the two notes sued upon and entered judgment for plaintiff for the balance. Plaintiff does not appeal from, or otherwise contest, the court's actions in making these deductions from the balances due. Defendant, however, appeals from the judgment entered against him, asserting that the trial court erred in not making further deductions. In light of the issues presented to us, we reverse and remand for reconsideration by the trial court of the amount of the judgment to be entered.

Defendant purchased a parcel of realty with improvements from plaintiff's assignor, Michael Chaussee, who is the sole stockholder of the plaintiff corporation. In conjunction with that transaction, defendant assumed a then existing first deed of trust that secured payment of an obligation to a third party and executed and delivered three promissory notes to the stockholder. Two of the notes, one in the amount of $148,000 and one for $100,000, were each secured by a separate deed of trust upon the property that was the subject of the transaction.

After defendant defaulted upon at least two of these notes, plaintiff's stockholder commenced foreclosure proceedings upon the deeds of trust securing both the $148,000 and the $100,000 promissory notes. Later, however, the request for foreclosure upon the deed of trust securing the $100,000 note was withdrawn, and a foreclosure sale was conducted with respect to the $148,000 note only.

While the public trustee's sale was pending, plaintiff's stockholder successfully petitioned the court for the appointment of a receiver to collect the rents and to maintain the property. Plaintiff's stockholder was appointed receiver and served in that capacity until after defendant's right of redemption had expired and an order discharging him as such receiver was entered.

Thereafter, the stockholder assigned his interest in the $100,000 note and the third note in the face amount of $42,000 to plaintiff, and it instituted suit against defendant to collect the amounts due under the terms of those two notes. In defending against plaintiff's claims, defendant joined plaintiff's stockholder as a third-party defendant and asserted, among other things, that (1) the stockholder had canceled the obligation represented by the $42,000 note, (2) the stockholder in his capacity as receiver had committed various violations of the fiduciary obligation owed to defendant, and (3) the method and manner selected by the stockholder to foreclose upon the deeds of trust were unconscionable.

After a bench trial, the court determined that the $42,000 note had not been canceled. It also concluded that defendant had failed to establish grounds to reopen the receivership proceeding so as to permit the vacation of the order discharging the receiver and the assertion of the claims described in defendant's third-party complaint against the stockholder. Nevertheless, it sustained defendant's claim of unconscionability, at least in part, and reduced the amount due on the two notes in the manner described below.

I.

Defendant first argues that the trial court erred in refusing to entertain his claim that the stockholder, when acting in his capacity as a receiver, took various actions which violated the fiduciary obligation that he owed to all parties interested in the property, including defendant. We disagree.

Colorado statutes authorize the appointment of a receiver for property which is being foreclosed upon, but the procedure to be used in asserting claims against the appointed receiver is not specifically delineated in those statutes. See §§ 38-39-112 and 38-39-113, C.R.S. (1982 Repl.Vol. 16A). Accordingly, common law principles govern the parties' rights and obligations, as well as the court's authority, with respect to such claims.

At the common law, a party could not institute an independent suit against a receiver without first obtaining permission to do so from the receiver's supervising court. Baker v. Denver Tramway Co., 72 Colo. 233, 210 P. 845 (1922). And, the supervising court could refuse such permission and require any claim to be submitted to it. See Logsdon v. Quiat, 102 Colo. 560, 81 P.2d 770 (1938).

Hence, a claim based upon the receiver's alleged breach of his fiduciary obligation may be asserted in the receivership proceedings. See Zeligman v. Juergens, 762 P.2d 783 (Colo.App.1988).

The supervising court retains jurisdiction over a fiduciary until an order discharging the fiduciary is entered. At that point, the order of discharge constitutes a final judgment, subject to appellate review. Valley Federal Savings & Loan Ass'n v. Aspen Accommodations, Inc., 716 P.2d 483 (Colo.App.1986).

Here, when plaintiff's stockholder filed his final report as receiver and sought his discharge from such position, he asserted that defendant owed funds to the receivership because of defendant's receipt and use of rental proceeds from the property after the receiver was appointed. In addition, defendant filed various objections to the receiver's final report, contesting certain expenditures and asserting that the receiver had damaged certain items of personalty that had been left on the premises.

After a trial before the supervising court of these claims and objections, that court entered a written order disposing of all such claims and objections and discharging the receiver. No appeal from that order was taken by either party.

In the instant proceedings, defendant sought to assert further claims against the stockholder for actions taken or omitted by him during the course of the receivership and in alleged violation of his obligations as receiver. After a full evidentiary hearing, however, the trial court here concluded that defendant had shown no basis to reopen the receivership proceedings and, therefore, denied defendant's claims asserted against the stockholder. We conclude that such action was proper.

As we have noted, an order discharging a fiduciary is a final judgment. Therefore, if a party interested in receivership proceedings is provided with notice of those proceedings and of the receiver's application for discharge, any claim based upon the receiver's mis- or mal-feasance must be presented in those proceedings at that time. After an order discharging the receiver is entered, such a claim may be asserted only to the extent that C.R.C.P. 60 would authorize the vacation of the order discharging the receiver.

To relieve a party of the effect of a final judgment, that party must demonstrate the existence of some reason justifying such action, such as excusable neglect, lack of jurisdiction, fraud, or other equitable consideration. See C.R.C.P. 60(b); Cortvriendt v. Cortvriendt, 146 Colo. 387, 361 P.2d 767 (1961). However, the trial court here found no such basis for vacating the order of discharge, and defendant does not argue that that finding is not supported by the record. Hence, even if we assume that a claim against a discharged fiduciary may be pursued by means of an independent action outside the supervisory court, see C.R.C.P. 60(b), defendant failed to establish any basis to relieve him from the effect of that prior order of discharge.

II.

We also reject defendant's assertion that the trial court erred in refusing either to prohibit plaintiff from calling an expert witness, to limit that witness' testimony, or to grant a continuance of the trial so that defendant could secure another expert.

The purpose underlying the requirement of C.R.C.P. 16 for the pre-trial disclosure of witnesses is to prevent undue surprise and to allow all parties an opportunity for adequate preparation. See Conrad v. Imatani, 724 P.2d 89 (Colo.App.1986). Therefore, it generally rests within the sound discretion of the trial court to enforce this requirement and to determine whether any violation of this requirement merits the imposition of sanctions and, if so, the nature of the sanction to be imposed. See Daniels v. Rapco Foam, Inc., 762 P.2d 717 (Colo.App.1988); Murphy v. Colorado Aviation, Inc., 41 Colo.App. 237, 588 P.2d 877 (1978).

Here, both parties designated the same witness as an evaluation witness in their pre-trial disclosure statements, although it was apparently defendant who had initially contacted the witness to prepare an appraisal report upon the property. Later, plaintiff contacted the witness to have him produce an undated appraisal to determine the value of the property at a later date.

Defendant asserted that plaintiff did not provide information concerning this updated appraisal to him in a timely fashion, and it was this alleged tardiness upon which defendant grounded his request to prohibit or to limit this expert's testimony or to have the trial delayed so that he might secure...