MORTGAGE INVESTMENTS v. Battle Mountain, 02SC102.

• Citation: 70 P.3d 1176
• Decision Date: 12 May 2003
• Docket Number: No. 02SC102.,02SC102.
• Parties: MORTGAGE INVESTMENTS CORPORATION, a Colorado corporation, Petitioner, v. BATTLE MOUNTAIN CORPORATION; Anglo American Consolidated Corporation; Anglo America Consolidated Corporation; Conejos Advisors Co.; Sangre Consultants, Inc.; Apishapa Management, Inc.; Piney Lumber Co.; Pine Martin Mining Company; and Battle Mountain Limited Liability Co., Respondents.
• Court: Supreme Court of Colorado

70 P.3d 1176

MORTGAGE INVESTMENTS CORPORATION, a Colorado corporation, Petitioner, v. BATTLE MOUNTAIN CORPORATION; Anglo American Consolidated Corporation; Anglo America Consolidated Corporation; Conejos Advisors Co.; Sangre Consultants, Inc.; Apishapa Management, Inc.; Piney Lumber Co.; Pine Martin Mining Company; and Battle Mountain Limited Liability Co., Respondents.

No. 02SC102.

Supreme Court of Colorado, En Banc.

May 12, 2003.

As Modified on Denial of Rehearing June 9, 2003.

Netzorg McKeever Koclanes & Bernhardt LLC, Gordan W. Netzorg, J. Nicholas McKeever, Jr., Susan Bernhardt, Denver, CO, Attorneys for Petitioner.

Appel & Lucas, PC, Garry R. Appel, Denver, CO, Attorney for Respondent. Hall & Evans, L.L.C., Alan Epstein, Denver, CO, Murray Franke Greenhouse List & Lippitt L.L.P., Paul R. Franke, III, Attorneys for Amicus Curiae for Colorado Mortgage Lenders.

Justice HOBBS delivered the Opinion of the Court.

We granted certiorari in this case¹ to review the court of appeals decision in Mortgage Invs. Corp. v. Battle Mountain Corp., 56 P.3d 1104 (Colo.App.2001). This is a C.R.C.P. 105 action brought by petitioner Mortgage Investments Corporation (MIC) to foreclose on a lien of a deed of trust. The trial court ruled that the respondent Battle Mountain parties had no legal interest in the real property and, therefore, struck their pleadings.² The court of appeals reversed, holding that the Battle Mountain parties had standing to assert the statute of limitations defense and that MIC's foreclosure was barred by the six-year statute of limitations contained in section 13-80-103.5, 5 C.R.S. (2002).

We disagree with the court of appeals' application of the six-year statute of limitations to this action. We hold that an action to foreclose on a deed of trust is governed by the fifteen-year limitations period contained in section 38-39-205, 10 C.R.S. (2002), when a party has commenced suit for default on the original promissory note within the six-year limitations period contained in section 13-80-103.5, 5 C.R.S. (2002), and thereafter has reduced the note to judgment. We reverse the court of appeals, order reinstatement of MIC's foreclosure action, and remand this case to the court of appeals. On remand, the court of appeals must resolve an issue it did not previously reach, whether Article 8 of Colorado's Uniform Commercial Code supports the trial court's dismissal of the claims and pleadings of the Battle Mountain parties because Jeff Tucker (Tucker) failed to acquire ownership of Battle Mountain Corporation (BMC), thereby resulting in no legal interest in the property.

I.

This case involves a C.R.C.P. 105 action brought by MIC in 1998 to foreclose on its lien of a deed of trust for real property (property) located in Eagle County, Colorado. The majority of the respondents appearing before us claim their interest through Tucker, as we discuss below. We refer to them as the Battle Mountain parties. They filed answers, counter claims, and cross claims alleging that they own the property in question, or have a security interest therein. AACC, Conejos Advisors Co., Sangre Consultants, and Apishapa Management, admitted in their answers that they no longer have any interest in the property. The trial court found that the interest held by Piney Lumber Company and Pine Martin Mining Company, if it exists, is through an independent chain of title that pre-dates MIC's deed and, therefore, is not affected by this foreclosure action.

In 1983, Battle Mountain Corporation (BMC), through its sole shareholder Thomas Nevis, signed a promissory note secured by a deed of trust on the property. The Federal Deposit Insurance Corporation (FDIC) eventually became the holder of the note. The FDIC sued for default on the note in 1990 and obtained a judgment in California for $7,485,907. In 1991, the California judgment was domesticated and recorded in Eagle County, Colorado. In 1993, the FDIC assigned the judgment and deed of trust to MIC. MIC brought a C.R.C.P. 105 proceeding to foreclose on the deed of trust in 1998.

In 1994, Nevis allegedly sold the "corpus" of BMC to Tucker. Tucker claimed that his lawyer sent a check for $1000 and a letter to Nevis offering to purchase the "corpus" of BMC. Tucker further claimed he became the sole shareholder of BMC when Nevis cashed the check. Tucker admitted, however, that he never received the BMC stock certificates, and he failed to produce any of BMC's records during the C.R.C.P. 105 proceeding. At the time of Tucker's alleged purchase, BMC was not in good standing with the secretary of state and the corporate name was no longer available. Consequently, Tucker changed BMC's name to Anglo American Consolidated Corporation (AACC).

In 1995, Nevis entered into a transaction with Miller in which Nevis sold all of his BMC shares to Miller and conveyed the property to him by quitclaim deed. Miller filed for bankruptcy in 1996. His assets included the BMC stock and property. The property became property of the bankruptcy estate, and the bankruptcy trustee waived all defenses to the MIC foreclosure action in 1998.

In 1996, AACC, through Tucker, granted 405 deeds of trust on the property to three of the Battle Mountain parties and conveyed parts of the property to three other Battle Mountain parties. Therefore, all of these interests are allegedly derived from Tucker's authority to convey the property. The trial court found, and the court of appeals agreed, that the 405 deeds of trust were invalid and void.

In 1998, MIC commenced a C.R.C.P. 105 foreclosure action against BMC based on the 1983 deed of trust. MIC served Tucker as "agent, manager and/or officer" of BMC. MIC also served Miller through his bankruptcy trustee.

In March of 1999, the Battle Mountain parties filed a motion for partial summary judgment with the trial court claiming that MIC's foreclosure action was time-barred. MIC opposed the motion and filed a motion to strike all pleadings filed by the Battle Mountain parties claiming an interest acquired through Tucker, including the summary judgment motion. MIC claimed that Tucker never acquired ownership of BMC, because he never received the corporate stock or the corporation's records and, therefore, he was without authority to file pleadings or act on BMC's behalf. In addition, MIC asserted that since Tucker never owned BMC, the Battle Mountain parties that based their interest in the property on conveyances from Tucker had no interest in the property and lacked standing.

At a motions hearing the trial court orally ruled that MIC's action was not time-barred because section 13-80-103.5, 5 C.R.S. (2002), the general six-year statute of limitations, did not apply. The trial court determined that section 38-39-205, 10 C.R.S. (2002), the fifteen-year statute of limitations, applied because it was more specific, the promissory note had been reduced to judgment, and the deed of trust had been extended. In the words of the trial court: "The judgment's been extended, the deed of trust has been extended, the action was brought before the deed of trust statute of limitations ran out."

On December 16, 1999, the trial court issued a written order on the parties' cross-motions for summary judgment, entering summary judgment in favor of MIC on its foreclosure action and striking Battle Mountain's pleadings:

Defendant Jeff Tucker never acquired ownership of the Battle Mountain Corporation and that the answer and motions filed by Battle Mountain Corporation were without authority. The Court therefore grants Plaintiff's motion to strike the Answer and Summary Judgment motions filed in the name of Battle Mountain Corporation.

The trial court provided no further explanation for its conclusion that Tucker had no interest in the property.

The court of appeals reversed. It held that under Colorado's ultra vires statute, MIC could not challenge Tucker's authority to act for BMC and the Battle Mountain parties had standing to raise the statute of limitations issue. The court of appeals then ruled that MIC's C.R.C.P. 105 foreclosure action was barred by the six-year statute of limitations under sections 13-80-103.5 and 13-52-102(1), 5 C.R.S. (2002).³

II.

The four potentially applicable statutes of limitations in this case are these. First, section 13-80-103.5, 5 C.R.S. (2002), is a general statute of limitations that requires a party to bring an action to enforce obligations under a promissory note within six years of default. Second, section 38-39-207, 10 C.R.S. (2002), extinguishes the lien of the deed of trust if an action to enforce the promissory note is not brought within six years of default; conversely, if an action to enforce the promissory note is brought within six years of default and a judgment is thereafter obtained, the lien of the deed of trust is not extinguished and remains in effect. Third, section 13-52-102, 5 C.R.S. (2002), bars execution on the judgment lien six years after the date of the judgment, unless the judgment is revived. Fourth, section 38-39-205, 10 C.R.S. (2002), provides for a fifteen-year limitations period for foreclosure on a lien of a deed of trust that has not been extinguished.

Accordingly, we hold that, when a creditor reduces a promissory note to judgment through an action brought within six years of default on the promissory note, section 13-80-103.5, 5 C.R.S. (2002), the creditor may enforce payment of the debt in two ways. The creditor may obtain payment of the debt through execution on the judgment lien by an action commenced within six years of the entry of the judgment, section 13-52-102, 5 C.R.S. (2002); and/or the creditor may commence an action to foreclose on the deed of trust within the applicable fifteen-year statute of limitations provision, section 38-39-205, 10 C.R.S. (2002).

Before we proceed with our statute of limitations analysis, we first address the court of appeals' ultra vires and standing discussion. Although we...